Florida’s multifamily developers are shrinking units, inflating amenities and maneuvering around traditionally accepted parking requirements to keep rents high and building costs down in today’s pricey construction market.
“Units will get smaller,” said William Hamilton, executive vice president of Boston-based Winthrop Management. “And they have to be sexy.”
The major players shaping Florida’s multifamily arena gathered Thursday to forecast what’s in store for the rental realm over the next year. About 700 attendees were expected at the fifth annual Florida Multifamily Summit in Hollywood.
With construction costs at an all-time high and thousands of apartments under construction in South Florida, Art Falcone said lenders are pulling back in response. He is CEO and chairman of the Falcone Group and a principal of Miami Worldcenter Associates, which is developing a sprawling mixed-use project in downtown Miami.
“I will tell you that capital providers have pulled back dramatically so, on the condo side, that is drying up very quickly,” he said.
But the spigot is not completely off. Coincidentally, Boca Raton-based Banyan Commercial Capital LLC on Thursday announced the closing of a $38.8 million construction loan for the 250-unit Aura Seaside on the Intracoastal Waterway at 1400 Dixie Highway in Lantana by a subsidiary of Dallas-based Trinsic Residential Group L.P. The loan came from a bank group led by TD Bank N.A.
Banyan principal Michael Brown said the challenge in securing the loan was the timing. “Most construction lenders have reached their multifamily quotas for the cycle,” he said in a news release.
The statewide rental market, however, shows no signs of overbuilding, said Casey Cummings, CEO of Palm Beach Gardens-based Ram Realty Services. Most of the homes are under development in response to demand. Overall occupancy rates, especially in South Florida downtown markets, now stand at 95 percent to 96 percent, Cummings said.
While occupancy rates prove apartment demand is strong, rental growth is expected to slow over the next year, he said. Rents could rise 2 percent to 3 percent rather than the 5 percent to 8 percent annual hike seen over the last couple of years.
Peaking rental rates have catalyzed vigorous investment in South Florida’s apartment communities. Investors have poured nearly $4 billion into Miami-Dade County’s multifamily market over the last 12 months.
“Only recently did apartments become the darling of institutional capital,” Cummings said. “It wasn’t like that 15 years ago. It was office buildings and shopping centers. It feels good to be in this spot.”
The buyer pool for completed apartment assets has shrunk, however. Cummings characterized the next year as a “light chop with eight knots out of the east” in response to the title of the panel, “Stormy Water or Calm Seas?”
Falcone said South Florida is considered a top-tier market around the world.
“We’ll continue to be the safety deposit box for the world,” he said.