Strength persists. Strong demand, riding on positive job growth, positive population growth, and factors in the ownership sectors, has continued to drive the vacancy rate downward and to support formidable growth in rents. Reis puts the second-quarter vacancy at 4.2%, down 20 basis points for the period, down 120 year-over-year, and a return to the range that prevailed prior to the recession. While July closed at the same rate, vacancy should be running under 4.0% by the end of the year as demand stays strong and construction completion totals remain modest.
Net absorption through the first half of the year was 531 units—not a spectacular performance but formidable nonetheless alongside the lack of new supply. July brought another 30 units of positive net absorption. The tightness of the market and its strong fundamentals, meanwhile, have opened the way to increased development. Reis’ September 17 report on individual construction projects counts 1,006 market-rate units under way in seven properties, 390 of which, in four projects, will make up the 2012 completion total. The largest of these (and the largest project under way) is the 270-unit Residences at Lakehouse, due online in December in Miami Lakes. Construction began in August 2011. Planning for future development is heaviest in the South Beach/Miami Bayshore submarket.
Miami was one of the nation’s top areas for condominium development and conversion during the condo boom period that preceded the recession. The recession wreaked havoc on that sector. Condos, however, are making a rebound more quickly than was expected. (See Special Real Estate Factors for information on the condo boom.) In addition, the conversion of condos to apartments—a reversal of the pre-recession “conversion” trend—is adding units to the rental pool over and above what new construction provides. It seems likely that this is a factor contributing to the relative restraint suggested by current apartment construction numbers. Meanwhile, Reis reports 2,452 condo and townhome units under construction as of September, more than twice the total reported in June. Numerous others are in planning and proposal phases.
A strong rent growth trend is emerging. At $1,113 and $1,063 per month, second-quarter asking and effective averages were up 0.7% and 0.9% for the quarter alone, following similar gains the quarter before. Gains of a dollar followed for both rates in July.
Reis expects vacancy to end the year at 3.8% and to decline additionally in 2013; vacancy rates in the vicinity of 3.5% are expected for an extended period. Rent growth rates for 2012 all told are forecast at 3.4% and 4.2%, respectively, for the asking and effective averages. Substantial gains should follow thereafter as well. The revival under way in the condo market bears watching.