With vacancy returning to pre-recession rates and demand continuing to run strong, the market is entering a new phase occasioned by the return of construction, which will begin to be felt in 2013 as new projects start arriving on line. While Reis expects no market-rate apartment units to complete construction all told in 2012, 1,516 were underway county-wide per the date of this report, 761 of which in four projects have broken ground since June. With more on the way, construction activity totals should rise in the near term. With no units delivering through the first half of 2012, market-rate net absorption was positive 380 units. July added 45 to the year-to-date total.
Two cases in point, components of major mixed-use developments as cited elsewhere in this report, include the 320 apartments planned for the first phase of the $200 million Atlantic Plaza II project in Delray Beach’s “Main & Main” area, the South Florida Business Journal reported in August. The developers expect the four-city-block development to be underway by year-end. Also included will be 130 condominium units, the pricing of which had not been determined per the date of the report. Reis expects an August 2014 finish for the rental component. Also in the pipeline are 300 “residences” planned for the $300 million Transit Village in West Palm Beach, reported the Journal in a separate August report. Reis puts planning at 300 units including 262 market-rate rental apartments. The largest projects currently underway are Alliance Residential’s 386-unit Broadstone at North Boca Village in Boca Raton, due on line in March 2013, and Wood Partners’ 369-unit Alta Congress in Delray Beach, scheduled to deliver in May.
Vacancy ended the second quarter at 6.0%, down 30 basis points for the quarter, down 130 for the year and the lowest rate reported by Reis for this market since 2005. July’s positive absorption activity lowered the rate to 5.9%. Rent growth, running moderately positive since 2010, has picked up. At $1,142 and $1,077 per month, asking and effective averages for second quarter were up 0.7% and 0.9% from the quarter before and were up 1.1% and 1.6% year-to-date—following gains of 1.4% and 1.7% through all of 2011. July followed with respective additional increases of 0.4% and 0.5%.
With no new supply delivering in 2012, vacancy is forecast to drop to 5.3% by year-end. With supply and demand swinging into rough equilibrium in 2013 and after, vacancy should level off in the vicinity of 5.0%, the rate typically considered ideal for apartments. Gains of 2.9% and 3.6% currently are projected for the mean asking and effective rents for 2012. Higher growth rates are forecast to follow.