For years, condo has been king in South Florida’s real estate market. That title may now be in question, as multifamily apartments are rising in popularity, with more than 51,000 units under construction, in the planning stage, or proposed for development. With home sales continuing to slip and interest rates continuing to rise, many buyers are opting to rent rather than buy.
This shift may signal a major shakeup in the business, and CRE developers should be mindful of its potential consequences.
In the first quarter of 2019, Florida had four markets, the most of any state, in the nation’s top 15 for multifamily rent growth:
And the local South Florida market as a whole is seeing high demand and low vacancies.
Short-term rentals appeal to developers because they introduce a new kind of tenant who can broaden their potential market and bring down the possibility of vacancies. Thus, many condo owners have teamed up with short-term rental operators to attract renters and manage leases.
One flavor of new tenant is the tourist or business traveler, who, in cities like Nashville, encounter a dearth of traditional hotel rooms and a surplus of residential properties—hotel-style accommodations in a condo-size setting. In the Airbnb era, these travelers represent an essential market that is driving the multifamily rental boom and opening up a long-term solution for developers.
Traditionally, hotels want to provide amenities that compel their guests to stick around—health clubs, spas, coffee shops, restaurants—in order to maximize revenue. Short-term rentals have the opposite value proposition—residential properties are situated in real communities and encourage guests to venture out and support the local economy.
There are several markets at work in this transition to multifamily developments that include rentals.
Morris Southeast Group closely monitors these and other multifamily housing trends and their effect on South Florida’s market—and we will continue to do so. As one sector rises, another often dips, and things could turn around for the condo market as they did well after the “glut” of condos that preceded the real estate crash in 2006-2007.
For a free consultation on our commercial real estate investment or property management services, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at firstname.lastname@example.org.