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Market Report
Broward County
High Employment Growth Attracts Stronger Investment Interest
Broward multifamily market benefiting
from robust job market. Exceptional job
performance so far this year coupled with
a challenging single-family housing environment are driving more residents to the
multifamily market. Household formation
has reached its greatest momentum of the
current cycle, helping to absorb new stock
and supporting continued rent gains marketwide. Though the gap between monthly rent and a single-family home payment
is the narrowest compared with the rest of
South Florida, affordability remains a hurdle
for many, particularly as home prices outpace incomes in the county. These factors
have driven developers to add rental stock
in Broward County at a strong clip, especially to the west of Interstate 95, where large
mixed-use projects are drawing more residents to the area. A large push at the end of
this year will bring close to half of the units
slated for delivery in 2016 online in the last
quarter. This will increase the vacancy rate
in the short term as new stock is leased up.
Strong demand for these units marketwide
will lift the average effective rent for the seventh consecutive year.
Buyers look to capitalize on stability of
Broward rental market. Transaction volume maintained its upward trajectory over
the year ending in the third quarter as more
investors look to Broward County for a stable store of assets. While rent gains have
slowed, cap rates are holding steady with
Class C complexes trading in the mid-5 to
3,100 units
will be completed
50 basis point
increase in vacancy
4.6% increase
in effective rents
Employment:
Hiring will accelerate in 2016 with 38,800 new workers, a 4.8 percent increase. Last year employers created 24,300 positions, primarily in the construction, and professional and business
services sectors.
Construction:
After builders delivered 3,400 apartments in 2015, 3,100 rentals will be placed in service this
year, all of which will be conventional units. Developers are shifting their focus to the west of
Interstate 95, with the majority of construction in the areas of Sunrise/Lauderhill and Plantation/
Davie/Weston.
Vacancy:
Builders anticipate that roughly half of this years completions will be completed in the final quarter, pushing vacancy up 50 basis points to 4.1 percent this year. The vacancy rate compressed
60 basis points last year.
Rents:
In 2016, the average effective rent will advance 4.6 percent to $1,492 per month, a deceleration
from the 8.5 percent increase registered in 2015. Over the past five years, the average effective
rent grew 23.4 percent.
Economy
Employment Trends
Market
United States
6%
Vacancy Rate
Year-over-Year Change
8%
Job growth
so far this year has been led by the trade, transportation and
4%
utilities sector, which added 10,500 workers, a 5.8 percent increase. Over the
same 2%
time span last year, the sector grew 2.0 percent.
4%
2%
0%
12
13
14
15
16*
Bars, restaurants
and hotels created 3,900 jobs over the past year. The pro0%
fessional and
business
12
13 services
14 sector
15was one
16*of the greatest contributors
of jobs in Broward County during the period; these establishments created
8,000 jobs.
Outlook:
Trends
Housing and Rent
Demographics
Market
United States
Monthly Rent
Job growth contributed to a 2.7 percent rise in the median household income
12% per year. Over the same
from$1,600
one year ago to an all-time high of $55,200
span, the median price of an existing single-family residence climbed 5.3
9%
$1,450
percent to $280,500, pricing many out of ownership and extending tenures
in the
rental market.
6%
$1,300
Monthly Effective Rent
32%
Year-over-Year Change
16%
0%
-16%
-32%
12
13
14
15
16**
12
13
14
15
16*
Strong rent growth in the last year has closed the gap between the monthly
cost of owning versus renting, though the heavy burden of a downpayment
still keeps many residents in the rental pool.
Outlook:
A substantial influx of new apartments and the rising cost of single-family housing will maintain rental units as the preferred affordable option for
many households in Broward.
Construction Trends
Multifamily Permits
Construction
Sales Trends
So far
this year 1,590 rentals have been completed across the county, con$160
tributing to a year-over-year supply increase of 2,150 units. More than 3,900
units$140
were delivered in the preceding 12 months.
Average Price per Unit (000s)
Completions
8
6
4
2
0
12
13
* Forecast
** Trailing 12 months through 3Q
14
15
16*
$80
12
13
14
15 is the16**
The largest project
under
construction
Modera Port Royale in Fort Lauderdale. The 555-unit development is slated for completion in the third quarter 2017. The largest completion of this year will be the 417-unit market-rate
Portico in the Sunrise/Lauderhill submarket, coming online this quarter.
Outlook: Developers will complete 3,100 multifamily units across the county this
year, a modest decrease from last years production. The Plantation/Davie/Weston
submarket will receive approximately 700 units, the highest total in any submarket.
Vacancy
The Fort Lauderdale submarket posted the largest vacancy increase, 190 basis
6%
points over the year ending in the third quarter to 4.5 percent. Class A rentals
drove the rise, jumping 460 basis
4% points to 7.8 percent behind the completion
of 433 units in the third quarter. Pompano Beach/Deerfield Beach ended the
third quarter with the tightest rate
2% in the county at 2.3 percent, unchanged from
one year earlier.
United States
8%
Vacancy Rate
Year-over-Year Change
6%
4%
2%
0%
0%
12
13
14
15
16*
Outlook: Following the largest increase to supply since 2014, the vacancy rate
will increase 50 basis points to a still-tight 4.1 percent at the end of 2016. Last
year, a 60-basis-point drop was registered.
Rent Trends
United States
32%
year,
16%
The average rent increased 2.4 percent over the past year in the city of Fort
Lauderdale to $1,592 per month,
tapering from last years 11.1 percent
0%
climb. Class C properties fueled the gain, rising 7.2 percent during the yearlong period.
-16%
Class B complexes led rent gains countywide, climbing 4.4 percent annually in
-32%
the third quarter to $1,448 per month while Class C units posted an increase of
12
13
14
15
16**
2.1 percent to $1,043 per month. For Class A apartments, concessions were
employed in only 2.3 percent of units and averaged an 8.3 percent discount.
Monthly rent of this type was $1,780 in September, up 0.8 percent.
Monthly Rent
$1,600
12%
$1,450
9%
$1,300
6%
$1,150
3%
0%
$1,000
12
13
14
15
Year-over-Year Change
Rents
16*
Outlook: The average effective rent of $1,492 per month at the end of this year
marks an increase of 4.6 percent from year-end 2015. A climb of 8.5 percent was
posted last year.
Sales Trends
Construction Trends
Sales Trends
Multifamily Permits
Outlook: Transaction velocity will remain heightened and widespread as investors look to deploy capital in return for stable cash flows. Buyers in search of
value-add plays will find more assets with a vacancy component in the Sunrise/
Lauderhill and Plantation/Davie/Weston submarkets.
Completions
$160
$140
$120
$100
$80
12
13
14
15
16**
* Forecast
** Trailing 12 months through 3Q
Sources: CoStar Group, Inc.; Real Capital Analytics
Capital Markets
National Multi Housing Group
Visit www.NationalMultiHousingGroup.com
John Sebree
By WILLIAM E. HUGHES, Senior Vice President, Marcus & Millichap Capital Corporation
The initial reading of third quarter GDP of 2.9 percent and consistent growth
in employment are fanning expectations that the Federal Reserve will raise its
benchmark short-term lending rate at its December meeting. Other economic
data showing steady improvement in the housing market and the stabilization of
oil prices around $50 per barrel offer signals that the U.S. economy is growing at
a sustainable pace.
Increasing rental housing demand underpinned a decline in the U.S. apartment
vacancy rate of 60 basis points to 3.5 percent year to date through the third
quarter, the lowest level this cycle. Apartment builders have responded to growing demand and favorable demographic trends by ramping up construction.
Completions will rise to 320,000 units this year and peak in 2017.
Capital markets remain highly competitive, offering an assortment of fixed-rate
products available through commercial banks, life-insurance companies, CMBS
and agency lenders. Fannie Mae and Freddie Mac are underwriting loans of 10
years at maximum leverage of 80 percent. Rates will typically reside in the high-3
to low-4 percent range, depending on underwriting criteria. Portfolio lenders will
also price in this vicinity but will typically require loan-to-value ratios in the 65 to
75 percent band. Floating-rate bridge loans and financing for asset repositioning
are typically underwritten with LTVs 70 to 75 percent of stabilized value (80 to 85
percent of cost) and price 300 basis points above Libor for recourse deals and
extending to 450 basis points above Libor for non-recourse transactions.
Local Highlights
Michael Murphy
John Chang
Price: $250
Marcus & Millichap 2016 | www.MarcusMillichap.com
The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete information; however, no
representation, warranty or guarantee, express or implied, may be made as to the accuracy or reliability of the information contained herein. Note: Metro-level employment
growth is calculated based on the last month of the quarter/year. Sales data includes transactions valued at $1,000,000 and greater unless otherwise noted. Sources: Marcus
& Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Moodys Analytics; National Association of Realtors; Real Capital Analytics; MPF Research;
TWR/Dodge Pipeline; U.S. Census Bureau.