GlobeSt.com UPDATE: South Florida Apartment Demand Lowest Since 1993

The 268,403-unit Miami-Dade County market was hit hardest at year end with 2,460 net moveouts. Broward had 230 vacancies out of a total 135,761 existing units and saw occupancy dip to 95.5% from 97.8% at year end 2000. Palm Beach, with 68,979 apartments, was the only area showing positive tenant growth with occupancy falling only 1.9 points to 95.4%.

"Just over 5,000 more apartments were vacated than were leased in Dade County during the past 12 months," M/PF research director Greg Willett tells GlobeSt.com. "Despite these (occupancy) declines, average occupancy remained well above the essentially full level in all three South Florida metros."

A total 8,414 new units surfaced in all of South Florida in 2001 with a negative demand of 2,460 units, the worst demand performance since 1993. That scenario is "part of a larger, national trend toward diminished apartment demand," Willett says. "The kind of anemic renter demand that we are seeing in Dade and Broward Counties is not restricted to the South Florida region but is part of an overall economic sluggishness."

Among the factors limiting demand in South Florida and in many metro areas across the country are the economy; a doubling-up among potential renters into roommate arrangements; and low mortgage interest rates. "The low mortgage rates have made home ownership particularly affordable for renters or potential renters who feel secure in their jobs," Willett says.

In Miami particularly, the researcher says, the "poor demand performance was likely tied to affordability constraints." For example, affluent communities in Miami Beach, on Brickell Avenue and in Doral neighborhoods "command substantial rent premiums over many of their northern neighbors," Willett points out. "As renters attempt to cut costs during times of economic uncertainty, luxury properties are increasingly vulnerable to negative absorption."

New apartment units in Dade last year totaled 1,266, modest compared to 2,870 units delivered in neighboring Broward. That number "helped to keep absorption from sliding too far into negative territory," Willett says. In Palm Beach County, 4,278 new units surfaced but only 2,850 of them were rented.

Rent concessions were common throughout the South Florida region in late 2001, causing rent growth to flounder. Measured on a same-store basis, South Florida rental rates grew an average 2% in the past 12 months. Broward showed the healthiest rent growth with Fort Lauderdale leading the way with 2.3% increases in effective rents. Dade was up 2.2%; Palm Beach, 1.1%. The average quoted monthly rent in the three counties was $901, representing an annual growth rate drop of 2%

"While South's Florida's apartment outlook appears basically solid, ongoing construction in North Palm Beach County and Dade County will likely place considerable pressure on select submarkets," Willetts predicts. "New supply during 2002 is expected to significantly outpace market demand."

That means occupancy rates should ease during this year, particularly in northeast Dade and north Palm Beach County, "creating more competitive leasing conditions across South Florida, the researcher says.

(Please see related story on the Orlando page).