S. Fla. Apartment Market Thriving

MIAMI-Every indicator of the South Florida apartment market showed signs of growth through the first quarter of this year. In a newly released survey, the South Florida offices of Grubb & Ellis Co. estimates average occupancy rate for large rental communities in the three-county region averaged around 97.5%. Regional rental rates increased by 1.1%. The annual projected rental rate is now estimated to grow at 4.4% for 2001.

All indicators also point toward Palm Beach County as the leading growth market, primarily because of increasing scarcity of property in Broward and Miami-Dade counties suitable for apartment development.

“There is not a lot of land available in Miami-Dade or Broward,” Richard F. Davis, a Grubb & Ellis senior vice president, tells GlobeSt.com. “As a consequence of that, over the past 18 months or so a lot of developers have been coming to Palm Beach County. We have a lot of projects proposed here.”

It is estimated there are about 9,956 units in leaseup or up for development review in Palm Beach, with several large institutional investors backing much of the development.

“More and more institutional investors are starting to realize the apartment market is not as cyclical as the office market,” Davis says. “It’s a more conservative play from an investment perspective. You do have turnover in tenants, but it’s not as risky as leasing to, say, a retail tenant, since this is about having a home and roof over their head.”

Because of the increased interest, Davis says, market prices for apartment properties are responding in a fairly predictable manner. “There are more buyers and not as much available product on the market,” he says.

The average price for class A apartment properties in Palm Beach County through the first quarter this year was at a regional market high of $105,676 per unit. That compares with an estimate of $82,821 per unit in Broward County. There are no comparables for Miami-Dade, since that market did not record any sales of class A properties during the survey period.

All this activity has Davis and his associates asking whether the region, especially in Palm Beach County, can sustain the growth, considering current overall US market conditions. The market should retain these growth characteristics, Davis says, so long as the current market slowdown doesn’t extend into 2002. All indicators point toward increased population and job growth, especially in Palm Beach County.

“We think, with the caveat being the economy and that we come out of this softness in the third or fourth quarter this year, we’ll be okay in Palm Beach County,” Davis says. “If there’s any weakness, that is the one market that could be affected because there is much more new product than being built in Broward or Miami-Dade.”

Even if the market softens, Davis adds, Palm Beach may benefit from a reluctance of possible first-time homebuyers delaying a market purchase and continuing to rent space.

“The slowdown in the economy is double-edged,” he says. “Tenants who may be thinking of moving out may not because they fear they might lose their jobs.”