miami dade 4q11 apt

8/3/2019 Miami Dade 4Q11 Apt

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M A R K E T R E P O R T

ApartmentResearch

Miami-Dade County Fourth Quarter 2011

Miami-Dade on Track for Solid Year; Investment Picks Up

Job growth continues to propel a sure and steady recovery in property operations in Miami-Dade County. Te vacancy rateremains on track to all to less than 5-percent this year, with a all to the mid-4 percent range projected by the middle o 2012.Property owners have started consistently raise rents on new leases and a period o more robust rent growth looms in the quartersahead as additional residents nd work and orm new households. Multiamily construction appears poised to increase, althoughthe delivery timeline o projects under way should not impair the progress o the recovery. Reported planned projects also remainminimal, but a recent increase in permitting indicates that some o these projects may soon be ready to proceed to groundbreak-ing. In addition to growth in rental stock, many condominium developments appear to be in the works. Several o these projects,however, may be targeted to a large pool o oreign buyers and not necessarily residents who currently occupy rentals.

Te investor pool in the market continues to shit. Institutional appetite or large complexes remains strong, but deal owhas been hindered by a lack o product available or sale. As a result, trades o large complexes continue to account or an increas-ingly smaller portion o all transactions, while sales in the $1 million to $5 million range have become more common. Investorsin this type o transaction, usually a smaller Class B or Class C complex, are typically small, private buyers. Cap rates or assetsselling rom $1 million to $5 million can vary widely depending on an assets location and recent perormance, but generally startat around 7 percent. A ew recent deals, however, indicate that some investors are making optimistic assumptions regarding rentgrowth over the next one to three years. In general, investor sentiment on near-term property perormance remains upbeat, asvacancy continues to improve and limited supply-side threats persist. Owners will continue to nd the current climate representsa good time to assess portolio mixes and determine where more protable opportunities exist in the county.

2011 Annual Apartment Forecast

Employment: Local employers will add 24,000 positions in 2011, representing a 2.4 percent in-crease in total employment. Approximately 5,200 jobs were created in 2010, ollowing an aggregateloss o 91,500 jobs in the preceding two years.

Construction: Builders will deliver 273 units in 2011, ollowing the completion o 664 units lastyear. An additional 550 rentals remain under construction and scheduled or delivery in 2012.

Vacancy: Minimal competition rom new supply and steady growth in demand will combine topush down the vacancy rate 80 basis points this year to 4.9 percent. Nearly 700 additional units

were occupied in 2010, reducing the vacancy rate 40 basis points.

Rents: Property owners are slowly gaining traction raising rents. Tis year, asking rents will rise 1.1percent to $1,080 per month and efective rents will advance 1.5 percent to $1,024 per month. In2010, asking rents rose 2.6 percent and efective rents registered a 4.1 percent gain.

2.4%increase in

totalemployment

273 unitswill be

completed

80 basispoint

decrease invacancy

1.1%increase in

askingrents


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*

Year-over-YearC

hange

Metro Area

United States

Employment Trends

* ForecastSources: Marcus & Millichap Research Services, BLS, Economy.com

08 09 1007 11*

*

*

* -

* -

-6%

-3%

0%

3%

6%

*

Metro Area

United States

*

MedianExistingHomePrice(Y-O-YChg.)

Home Price Trends

*

*

* -

* Trailing 12-Month PeriodSources: Marcus & Millichap Research Services, Economy.com, NAR

08 09 1007 11*-40%

-20%

0%

20%

40%

NumberofUnits(thousands)

Construction Trends

0

2

4

6

8

08 09 10 11*07* ForecastSources: Marcus & Millichap Research Services, U.S. Census Bureau

*

Apartment Completions

Multifamily Permits

*

*

* -

* -

Economy Following the addition o 4,600 positions in the third quarter, employers created

16,400 jobs in the rst nine months o 2011. During the nal nine months olast year, 4,100 jobs were created.

In the private sector, approximately 16,000 new hires were made during the pe

riod. Lower-paying employment sectors continue to perorm reasonably wellConstruction employment declined in the rst three quarters, but an increase inreight volume supported the addition o approximately 5,700 trade, transporta-tion and utilities jobs.

Job creation has reduced the unemployment rate in the county 90 basis pointsthis year to 12.2 percent. Additional declines in the rate will restore more resi-dents to the pool o potential renters. Te unemployment rate was 4.9 percent atthe start o the recession, when the apartment vacancy rate was 3.9 percent.

Outlook: Employers remain on track to add 24,000 positions in 2011, representing a 2.4 percent increase in total employment.

Housing and Demographics An inux o ofshore buyers and oreclosure sales sparked a 4 percent increase in

sales o existing single-amily homes during the 12 months ending in the thirdquarter o this year. Velocity closely approximates the level recorded in late 2006and early 2007, beore the onset o the recession.

Te median price o an existing single-amily home continues to trend down-ward, alling 3 percent in the third quarter to $170,200. Measured year over yearthe median price declined 8.5 percent.

A household income o roughly $42,500 is required to qualiy or a mortgage topurchase a median-priced home in the county. Approximately 400,000 house

holds ail to meet that income threshold, representing more than 40 percent oall households in the county.

Outlook: Rental housing, including multiamily units, will remain the mostafordable housing option or many households and those employed in lower-paying service sectors such as trade, and leisure and hospitality.

Construction Developers have completed 183 units in the past 12 months, with all o the com

pletions coming in the third quarter. New additions to stock include the 80-uniStadium ower in the Miami submarket, and 103 rentals in the Sunshine Lakescomplex in the Opa-Locka/Brownsville submarket.

Work continues on an additional 640 units spread over ve projects. wo prop-erties consisting o an aggregate 90 rentals are slated or delivery in the ourthquarter this year.

Multiamily permit issuance, an indicator o uture construction, nearly doubledin the last year to 2,700 units. In addition, construction started on approximately1,800 units o multiamily housing during the rst three quarters o 2011.

Outlook: In 2011, builders will deliver projects containing 273 units. Last year664 rentals were brought online.

page 2 Marcus & MillichapuApartment Research Repor


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*

*

VacancyRa

te

Metro Area

United States

2%

4%

6%

8%

10%

Vacancy Rate Trends

* ForecastSources: Marcus & Millichap Research Services, Reis

08 09 1007 11*

*

* -

* -

*

*

Asking Rent

Effective Rent

*

Year-over-YearChange

Rent Trends

* ForecastSources: Marcus & Millichap Research Services, Reis

08 09 1007 11*

* -

* -

-8%

-4%

0%

4%

8%

*

* *

*

MedianPriceper

Unit(thousands)

Sales Trends

$40

$55

$70

$85

$100

08 09 10 11*07

* Trailing 12-Month PeriodSources: Marcus & Millichap Research Services, CoStar Group, Inc., RCA

* -

Vacancy Te vacancy rate ticked down 30 basis points in the third quarter to 5.1 percent,

the lowest level in the past three years. Tus ar in 2011, net absorption o morethan 1,100 rentals has reduced the vacancy rate 60 basis points.

In the Class B/C segment, the improving job market supported a 30-basis-point

drop in the vacancy rate to 5.2 percent in the third quarter. Over the rst threequarters, the vacancy rate in the markets lower-tier properties decreased 50 basispoints.

Demand or the limited supply o Class A apartments remains solid, as the va-cancy rate slipped 50 basis points in the rst nine months o 2011 to 5 percent.Net absorption during the period totaled more than 200 units, representing a 0.8percent rise in occupied units, or demand.

Outlook: Te vacancy rate in the county will all 80 basis points this year to 4.9percent, building on a 40-basis-point decrease in 2010.

Rents Average asking rents in the county ticked up 0.4 percent in the third quarter to$1,071 per month. Despite the increase, asking rents have risen only 0.3 percentthrough the rst three quarters, indicating that many property owners continueto ace challenges regaining pricing power.

A modest pullback in concessions is under way, as efective rents have increased0.5 percent year to date, to $1,014 per month. Most o the gain occurred in thethird quarter, when efective rents rose 0.4 percent.

Te Class B/C segment continues to drive rent growth; asking rents in the mar-kets lower tier were up 0.8 percent over the rst three quarters to $966 permonth. Competition rom shadow stock remains a actor in the Class A segment,

as asking rents at high-end apartments declined 0.6 percent in the rst threequarters to $1,368 per month.

Outlook: Tis year, asking rents in the county will advance 1.1 percent to $1,080per month and efective rents will gain 1.5 percent to $1,024 per month. Askingrents rose 2.6 percent in 2010 as property owners responded to a surge in demandthat initiated the recovery. Efective rents rose 4.1 percent last year.

Sales Trends** ransaction velocity increased more than 40 percent over the past 12 months.

Activity surged during the nal six months o the period, when 55 percent o allthe sales or the entire year occurred.

Te median price o properties sold decreased about 5 percent over the past 12months to $69,600 per unit. Te median price over the past 12 months is also 21percent less than the level recorded in 2007.

Properties pricing rom $1 million to $5 million, which account or an increas-ingly signicant portion o all transactions, generally trade at cap rates varyingrom the low-7-percent range to 8.5 percent, depending upon the assets location.

Outlook: Opportunities to purchase assets at prices much lower than beore therecession will enable local investors to expand portolios and position or a periodo more robust economic growth.

Marcus & Millichapu Apartment Research Report

** Data reect a ull 12-month period, calculated oa trailing 12-month basis by quarter


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Capital MarketsBy WILLIAM E. HUGHES, Senior Vice President, Marcus & Millichap Capital Corporation

Increased Fed intervention, such as Operation wist, should keep interest rates relatively low through the end o the year. As o late-October, the yield on the 10-yearreasury was hovering around 2.3 percent, approximately 175 basis points below the10-year average.

Apartment mortgage originations more than doubled in the rst hal o 2011 whencompared with the same period last year, driven largely by agency lenders FannieMae and Freddie Mac, lie insurance companies and local/regional banks. Whileagency originations increased over past year, the re-emergence o lie companies andbanks caused their market share to drop rom 62 percent in 2010 to 44 percent inthe rst hal.

Lenders view apartments as preerred assets and are moving down the quality chainto nance Class B properties in strong locations, encouraged by healthy occupancygains and rming values. Nonetheless, nancing lower-tier properties in secondaryand tertiary markets remains a challenge.

Portolio lenders generally originate new loans at 55 percent to 75 percent LVs,while agency lenders provide up to 80 percent leverage on high-quality assets in coremetros. All-in rates or $3 million-plus mortgages start around 3.75 percent or ave-year term, with seven-year loans pricing in the low- to mid-4-percent range, and10-year notes averaging 4.5 percent to 5.0 percent. All-in rates or smaller loans aretypically 10 to 25 basis points higher.

Submarket Overview Projects under construction and slated or delivery in 2012 include the 250-unit

Gables Ponce in Coral Gables. In addition, the 270-unit Residences at Lakehousein Miami Lakes is scheduled to come online in the nal quarter o next year.

In addition to 3,100 planned rentals, approximately 5,500 condos are planned inthe market, primarily in areas such as South Beach and North Miami Beach. Tetotal represents a slight increase rom midyear, and additional projects will enterthe pipeline as developers continue to respond to strong demand rom interna-tional buyers.

Some nancial services rms have announced layofs. Wells Fargo will cut morethan 250 jobs at its location in Doral, while announced layofs by Bank o Amer-ica may afect employment at locations throughout South Florida.

Submarket Vacancy RankingVacancy Y-O-Y Basis Effective Y-O-Y

Rank Submarket Rate Point Change Rents % Change

1 Kendall West 3.6% -180 $995 2.5%

2 South Beach/Miami Bayshore 3.6% -40 $1,413 3.4%

3 Miami 3.8% -60 $884 1.3%

4 Miami Lakes 4.1% -130 $979 1.5%

5 Kendall East/Coral Gables 4.3% -60 $1,194 0.8%

6 North Miami/Bayshore 4.4% -30 $773 0.5%

7 Hialeah 4.6% -100 $843 2.4%

8 N. Miami Bch./Bal Harbour 5.2% -60 $1,232 2.7%

9 Kendall Lakes/Hammond 5.6% -120 $989 2.3%

10 Opa-Locka/Brownsville 5.6% -540 $578 1.2%

Te inormation contained in this report was obtained rom sources deemed to be reliable. Every eort was made to obtain accurate and complete inormation; however, no representation, warranty or guarantee, express or implied, may be made as tthe accuracy or reliability o the inormation contained herein. Note: Metro-level employment growth is calculated using seasonally adjusted quarterly averages. Sales data includes transactions valued at $500,000 and greater unless otherwise notedSources: Marcus & Millichap Research Services, Bureau o Labor Statistics, CoStar Group, Inc., Economy.com, National Association o Realtors, Real Capital Analytics, Reis, WR/Dodge Pipeline, U.S. Census Bureau.

Visit www.NationalMultiHousingGroup.com or call:

John SebreeNational DirectorNational Multi Housing Groupel: (925) 953-1700

[email protected]

Prepared and edited byArt Gering

Senior Market AnalystResearch Services

For inormation on nationalapartment trends, contact

John ChangVice President, Research Services

el: (602) 687-6700 ext. [email protected]

Miami Ofce:Kirk Felici

Regional [email protected]

5201 Blue Lagoon DriveSuite 100

Miami, Florida 33126

el: (786) 522-7000Fax: (786) 522-7010

Price: $150

Marcus & Millichap 2010www.MarcusMillichap.com

miami dade 4q11 apt

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