☔ It's Raining Rentals!

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Happy Friday Highest & Best! Today we’re rolling in rentals. Lots and lots of them:

🏗 A record number of new apartments coming this year
📉 Rents are dropping
🏝 A Miami Beach office sells at a loss
👶 Private school waitlists include the not-yet-born

Also: Advertise with us! For inquiries, connect with me at [email protected].

Let’s get to it!

There’s Never Been This Many Newly Built Rentals

Let’s start with a record:

💥 By the end of this year, 23,863 newly built rental apartments will be added to the South Florida market — the most ever in data going back to 2002.

🔍To put that in perspective, the previous record was set in 2021, when 14,339 new units were delivered (nearly 10,000 fewer than are forecast for this year!), according to a report by commercial real estate firm Berkadia.

And: The record number of rentals expected to be complete in 2024 are only a portion of what’s actually being built. There are currently 34,934 units under construction 🏗 across the region, which includes Miami-Dade, Broward and Palm Beach Counties.

🤔 But here’s the interesting part: Most of that new supply will find takers, according to Berkadia.

🚚 So far this year, 10,856 more people have moved into apartments in South Florida than moved out. By the end of the year, it's expected that 25,870 more apartments will be filled than vacated.

“This significant level of absorption speaks to the type of elevated demand the apartment market is currently experiencing,” Berkadia said in its report.

💸 Migration of high-income residents from the U.S. Northeast and West Coast, coupled with the ever-climbing costs of homeownership, is keeping demand high for rental apartments in South Florida. So is the region’s labor market, which added 73,200 jobs in the 12 months through June, Berkadia said.

📉 But all that supply is pushing down rents — or at least cooling the insane rent growth of the past few years:

• The median asking rent in Miami-Dade County fell 4.2% in July from a year ago, while rents in Broward County were down 4.4%, according to the Miami Association of Realtors. Rents in Palm Beach County dropped 3.8%.

• Vacancy rates are climbing for apartment buildings that are NOT newly built and leasing up for the first time. The vacancy rate for such buildings was 6.2% in Miami-Dade and Broward Counties, and 6.4% in Palm Beach.

• Those are still lower vacancy rates than the U.S. average of 6.7%.
   

Of course, rent growth and declines get more granular based on location. Overall: rents are declining in the region’s pricier markets, but are still rising in locales where costs are relatively lower. Here’s the breakdown from the Miami Realtors’ July 2024 report:

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⏪ Catch up on recent Highest & Best issues:

• The Office Quarterback, August 2, 2024

• Florida’s Cold Feet Wave, July 26, 2024

• Tale of Two Condos, July 19, 2024

And More Apartments are Coming…..

The pipeline of planned new rentals is still flowing 🌊. Developers have proposed to build more than 73,000 new rentals in South Florida between 2026 and 2029, according to data from Yardi Matrix.

Here’s a couple of development proposals from recent months:

🎰 Live by the Casino: a development group paid $29 million in July to acquire a 12-acre site near the Harrah’s Pompano Casino in Pompano Beach. The partnership, which includes Northwestern Mutual Life Insurance, plans to build a 423-unit apartment complex that would span nine different low-slung buildings, according to property intel site Vizzda. The project, to be called Indigo, would consist largely of one and two bedroom apartments and include a pickleball court and dog park.

🚀 From Zero to 561: A parcel in North Miami that has been vacant for more than 15 years now has plans to become a 561-unit multifamily development. The 4-acre site 11400 Biscayne Blvd — which was bought in 2004 for a mere $3.2 million! —. would rise up to 15 stories and include a 723-car garage, Bisnow reported.

🏙 Another 2,200: The North Miami City Council approved the development of nearly 2,200 new apartments across eight 18-story buildings on the site of a public park. As part of the plan, the builder will renovate the park with a new amphitheater, public pool, splash pad, baseball field, and tennis courts.

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A Miami Beach Office Building Sells at a Loss

A Class-A office building in Miami Beach has just traded — at a 20% loss from what the seller paid for it just three years ago.

The six-story property, at 801 Arthur Godfrey Road was sold this week for $17.5 million, according to property records cited by data firm Vizzda. The seller, Fifteen Group, purchased the property in December 2021 for $22 million, according to property records.

Fifteen Group acquired the 52,000-square foot building in an off-market deal at a time when out-of-state firms were clamoring to set up outposts in Miami and scouring for appropriate — and limited — office space. Fifteen Group said it planned to renovate the 50-year old building with a new lobby, common areas and outdoor space, and seek out family offices and wealth management firms as tenants.

Renovation plans also included an espresso bar, covered parking and concierge service, according to the building’s brochure.

Demand for office space in Miami Beach has slowed this year with more space being vacated than leased, according to brokerage Colliers. In the three months through June, Miami Beach’s office market had a “negative absorption” of 70,161 square feet.

Private School Waiting Lists Include the Not-Yet-Born  

South Florida private school waitlists now include children who are not yet born.

The migration of high-income families to the state has swelled demand for private schooling beyond the available supply, and created lines for admission that take years to get off, the Palm Beach Post reported this week.

So some new parents are applying well ahead of when their babies might attend — in some cases before they’re even born.

More than a dozen fetuses are on the waitlist at the prestigious American Heritage School in Delray Beach, school leaders told the Post. A student joining American Heritage's list today would face about a two-year wait for admission.

A shortage of schools in South Florida could well hinder the region’s ability to grow, billionaire Barry Sternlicht said earlier this year.

While the region’s gain in wealth and population is far from over, it’s slower than it should be because there aren’t enough schools to accommodate it, Sternlicht, chairman and CEO of Starwood Capital Group, said in a Bloomberg Television interview.

“There are a lot of companies that would move down if they could get their employees’ kids into schools, which is impossible,” said Sternlicht, who moved himself and his firm to Miami Beach in 2018.

That’s it for today!

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