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MIAMI-With the vacancy rate in the South Florida apartment market on the rise, nearly 15,000 new units will be added this year and next, according to Marcus & Millichap’s July 2003 Apartment Research Report just released.

The report covers the Miami-Dade, Fort Lauderdale and West Palm Beach metropolitan service areas.

The vacancy rate increased from 4.7% mid-year 2002 to 6.9% after the second quarter of this year, according to the report. And the vacancy rate is expected to continue climbing at least another year, to 7.7% in the middle of 2004. In the last 12 months, demand decreased because attractive mortgage rates encouraged home ownership and because of economic uncertainty. However, the rise in vacancy rates isn’t expected to last, due to increased employment.

Miami, with the weakest employment in the area, had a significant vacancy hike in the last year, according to the report. The vacancy rate rose from 4.1% in mid-2002 to 6.9% a year later.

The apartment vacancy rate in West Palm Beach also increased, from 5.6% last year to 8.8% this year. In that city, unit completions were not totally absorbed by the market. In Fort Lauderdale, the vacancy rate rose from 5% to 5.8% for the same period.

Despite the increases in vacancy, the South Florida area plans to add 8,900 units in 2003 and another 6,000 units in 2004. This year, West Palm Beach will see the most new units, at 3,750. Fort Lauderdale will get 2,650 units this year and Miami will receive 2,500 units.

Next year, Miami and West Palm Beach each will see 2,500 new units, with the remaining 1,000 in Fort Lauderdale.

Although 2003 is a strong year for new construction, South Florida area land for multifamily development is limited.

The report also states sales for the first half of this year were down–although buyers looked for multifamily assets, owners were hesitant to sell; capitalization rates dropped from 8.5% in mid-year 2002 to 8% this year; the median price per unit sold in South Florida in the first half of this year increased to $57,700 from $53,500 a year earlier; and monthly asking rents in South Florida increased from $922 in mid-year 2002 to $944 a year later, although effective rents increased less, 0.3% from $882 a month to $885 a month, in the last year.

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