Feeding into a record-breaking in demand real estate market, multifamily developers have enough work in the pipeline to last into 2024.
According to the Miami Association of Realtors’ Realtor Commercial Alliance, Miami’s commercial vacancy rates continue to rank among the lowest in Florida, leading to more local investment from global companies and investors.
Miami’s vacancy rates for office (14.9 percent), industrial (5.3 percent), retail (6.3 percent), and multifamily (4.4 percent) are the lowest among major cities in Florida, according to a May 2015 Commercial Outlook report from the National Association of Realtors (NAR) and Reis, Inc., a leading provider of commercial real estate market information. Each of Miami’s commercial sectors are performing better than the U.S. average, except for multifamily which is 0.1 percent lower. The national vacancy rates in May were 15.6 percent for office, 8.4 percent for industrial, 9.6 percent for retail and 4.3 percent for multifamily, according to NAR and Reis.
“One of the world’s top global cities, Miami has become a launching pad for new industries,” said Barbara Tria, the 2015 Miami Commercial Alliance President. “Technology companies and other businesses are moving to Miami largely because of the region’s top-tier cultural offerings, outdoor lifestyle, and affordability compared to other major cities around the globe.”
Miami Office Market
Miami’s 14.9 percent office vacancy rate in May ranks as the 21st lowest out of 82 major U.S. cities, according to the NAR and Reis report. New York leads the nation at 8.9 percent. Statewide, Miami’s office vacancy rate is performing better than Florida’s major cities. The Sunshine State’s other major metropolitans had the following rates: Fort Lauderdale (18.6 percent), Jacksonville (20.4 percent), Orlando (16.5), Palm Beach (16.5) and Tampa (19.7). The national average is 15.6.
South Florida’s growing, multilingual workforce is one reason for its low office vacancy rate. Miami-Dade County added 33,700 jobs across several sectors from April 2014 to April 2015, a 3.1 percent increase, according to job numbers released May 22. Miami had the third-largest job gain in Florida behind Orlando and Tampa. Miami’s unemployment rate from April 2014 to April 2015 decreased by 0.7 percentage points, to 6.2 percent from 6.9 percent.
Miami Industrial Market
Miami’s industrial vacancy rate of 5.3 percent is the third-lowest in the nation among the 82 major American cities studied by NAR and Reis. Only Orange County (Calif.) and Los Angeles performed better than Miami in the industrial sector in May, registering vacancy rates of 3.4 and 3.6 percent, respectively. Florida’s other major metropolitans had the following rates: Fort Lauderdale (8.2), Jacksonville (6.9), Orlando (10.3), Tampa/St. Petersburg (7.8), and Palm Beach (5.5). The national average is 8.4.
Miami International Airport and PortMiami are two of South Florida’s international trade successes. Miami International ranks as the top airport in the U.S. for international freight, and the ninth-best airport for foreign cargo in the world. In 2013, Miami International handled 2.1 million tons of total airfreight, of which 88 percent was international freight.
PortMiami is the top-ranked container cargo port in Florida with 900,000 TEUs handled each year. The port has an opportunity to expand its international business as it is deepening its channel from its current 42-foot depth to 50-52. When the deep dredge project is completed, PortMiami will be the only U.S. port south of Norfolk, Va. that can accommodate the new, mega cargo vessels that will pass through the expanded Panama Canal.
Miami Retail Market
Miami has the 15th lowest retail vacancy rate among U.S. major cities, according to the NAR and Reis report. Miami’s 6.3 percent rate is considerably lower than Florida’s other large metropolitans. Fort Lauderdale (9.3 percent), Jacksonville (12.9), Orlando (11.0), Palm Beach (9.5) and Tampa (10.6) are higher than Miami. The national average is 9.6.t”>
Miami’s tourism and multilingual employment base are just two reasons why major developers are bringing new retail ventures to the region. Earlier this year, the company that owns and runs the largest mall in America announced plans to build the nation’s largest shopping mall in northwestern Miami-Dade, a roughly 200-acre entertainment complex with submarines, a Legoland, sea lions and an artificial ski slope. American Dream Miami is projected to cost as much as $4 billion to build.
Brickell City Centre and The Mall at Miami World Center are two other significant Miami retail ventures. At Brickell City Centre, Hong Kong developer Swire Properties will deliver 500,000 square feet of retail space anchored by Saks Fifth Avenue by late 2016. The Mall at Miami Worldcenter, in the heart of downtown, will complete 765,000 square feet of restaurant, retail and entertainment space by 2017.
Miami Multifamily Market
The vacancy rate for Miami’s multifamily market is tied for 38th among 82 major U.S. metros, according to the NAR and Reis report. Miami’s 4.4 percent multifamily vacancy rate is the lowest in the state. Fort Lauderdale (5.2 percent), Jacksonville (7.0), Orlando (6.1), Palm Beach (5.6), and Tampa (5.0) all have higher rates. The national average is 4.3 percent.
It’s the newest residential development to go vertical in Downtown Miami—and it tackles two of the biggest challenges in the city’s recovering housing market.
Brickell View Terrace addresses the lack of market-rate rental apartments and the shortage of affordable housing options within the urban core. The multifamily tower is a joint venture between Pinnacle Housing Group and East Little Havana Community Development Corporation. Located at 940 Southwest 1st Avenue, the 23-story apartment building will combine 76 traditional multifamily units and 100 affordable housing units within a single building.
The project marks the first mixed-income multifamily building to be developed in Miami. Miami, ranked as the nation’s least affordable major city according to the Center for Housing Policy, becomes the latest US market to adopt the mixed-income model, which has proven effective in cities from New York to San Francisco.
“Just as Miami’s luxury condo market garners headlines around the world, there’s a growing need for safe, affordable, well-located places to live,” says Mitchell Friedman, partner with Pinnacle. “Brickell View Terrace will offer residents all the conveniences of urban living within close proximity of public transportation links and Miami’s major employment hubs.”
Set for completion in late 2015, the construction of Brickell View Terrace is getting under way just as an amendment to the City’s Miami 21 zoning code passes. The amendment aims to encourage residential development combining market-rate and affordable units.
“The strongest urban cores in the nation are home to a healthy mix of housing types catering to residents from all points of the economic spectrum,” says Pinnacle partner David O. Deutch. “With funding for traditional affordable housing development in Florida becoming increasingly scarce, mixed-income projects are a viable method for meeting demand and getting worthy projects built.”
Brickell View Terrace will offer community rooms, a cyber cafe, two fitness centers, and a picnic area with outdoor game tables, car care area, electric car charging stations, and a park with gazebo. The multifamily project is next to Miami’s Brickell Metro Rail Station, just west of Mary Brickell Village on Southwest 1st Avenue between Southwest 9th street and Southwest 10th Street. Brickell View Terrace will offer one-, two- and three-bedroom apartments.
Younger renters have long been the prized demographic for apartment owners, but there’s some indication that an older demographic is going to be an increasingly important segment for landlords in the coming decade, according to a research note published recently by the National Multi Housing Council. That is, the aging baby boom demographic might make itself felt in the rental market as its members downsize from home ownership.
The baby boom generation remains the demographic bulge that it’s been since U.S. birth rates, which dropped precipitously during the Depression in the 1930s, spiked during the prosperity of the 1950s. After another trough in the 1970s, the number of U.S. births has roughly stabilized at around 4 million a year.
Thus, the number of births has varied much less in the past 25 years than it has in the prior 50 years, which means that—projecting forward—the number of young people entering the housing market, which usually means as renters, should vary little over the next 20 years. By contrast, the size of the baby boom generation (the youngest of which are about the turn 50) carries with it the potential for a large number of people transitioning to rental housing.
Sheer generational size, however, isn’t the only variable. Household formation is critical. The number of U.S. households increased by 11.2 million between 2003 and 2013; more than half (58 percent) of that increase came among householders from 55-64 years of age. Over the next 10 years, however, that age group will make up only 12 percent of the increase in households.
The bulk (72 percent) of the increase in households from 2013-2023 will instead occur among householders in the two oldest groups combined (65-74 and over 75 years of age), estimates the NMHC research note. The share of household growth among the youngest two age groups (15-24 and 25-34 years of age) will be slightly higher in the next 10 years than in the previous decade, but both shares will remain relatively small.
How many of these new, older households will be renters? Based on the 2013 Current Population Survey rentership rates, the 25-34 age group will make up 31 percent of the renter increase going forward, the largest of any single age group. However, the 65-74 and over 75 groups will make up a combined 52 percent of the growth in renter households. By contrast, the growth in renter households in the 55-64 age group will be slightly more than offset by the decline in renters in the 45-54 age group between 2013 and 2023.
In short, a relatively large number of a relatively large demographic group will become renters in the next 10 years. Younger renters will remain important, but it will probably be their elders who provide some oomph to the demand for apartments over the next decade.
Ven-American Real Estate, Inc. established in 1991, is a full service commercial and residential real estate firm offering brokerage and property management services.
Ven-American Real Estate, Inc.
2401 SW 145th Avenue, Ste 407
Miramar, FL 33027
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