In this newsletter we are analyzing the Apartment Market in Florida. Led by the collapse of the apartment to condo conversion trend, the apartment market was the first commercial property category to crash during the real estate bubble. However, it was also the first to begin to recover, although values are still a long way from the market peak. Market fundamentals are strong as vacancy rates continue to decline and effective rents increase. Capitalization rates, which had plunged to boom time low levels have remained relatively constant over the past year.
The major change in the market is the significant increase in construction activity. Banks are finally comfortable lending on new apartment construction. While there is a concern that too many units may be delivered, we believe there is a significant pent up demand for new Class A product. During the boom, entitled multi-family land was being bought for condo and townhouse development, at prices apartments could not support, with the result being very little new apartment construction after 2003. In addition the newer construction apartment projects were low hanging fruit for condo conversion and many were successfully converted early in the cycle. Thus there has been virtually no product built in the last ten years in the rental pool.
To date most of the projects are being constructed in urban infill locations or near primary demand generators such as universities or large employment centers.
Click Here for Florida Apartment Market 4Q 2013 Newsletter.