For “the first time ever” the average price for a Class C apartment building averaged $150,000 a unit, according to a recent report on the South Florida multifamily market from Franklin Street, a Tampa-headquartered commercial and insurance brokerage.
But it isn’t just Class C apartment buildings — classified as multifamily structures more than 30 years old and in fair-to-poor condition — that are rising in value. Prices, rents, and vacancies for Class A apartments and Class B apartments are also becoming more expensive for investors in Miami-Dade, Broward, and Palm Beach counties.
Dan Dratch, a director at Franklin Street, said the upward trend for apartment buildings is due to an influx of people moving from the Northeast, West Coast, and other parts of the nation to South Florida.
“Frankly, what we are seeing in South Florida is as strong a market as we’ve ever seen,” he said.
According to the Franklin Street report, rents per square foot increased 23% year-over-year in the third quarter in Palm Beach County, 16.7% in Broward County, and 11.6% in Miami-Dade County. Miami-Dade still had the highest rents for Class A and Class C buildings, however, with Class As running an average of $2.42 a square foot and Class Cs at $1.57 a square foot. Palm Beach County had the highest rents for Class B buildings, which averaged $1.85 a square foot.
Dratch said people living elsewhere in the U.S. are attracted to South Florida due to the state’s lack of income taxes. An added attraction for people who can work remotely is that the rents are still cheaper in South Florida than in other major metropolitan areas such as New York and Los Angeles, Dratch pointed out.
As a result of its popularity, South Florida is luring more multifamily building investors, too. Sales volume was highest for Class As in all three South Florida counties, which totaled $1.6 billion in the third quarter. However, the largest segment in Class A sales volume came from Palm Beach County, which amounted to about $675.2 million. That’s because a lot of executives are moving to Palm Beach County, “especially Boca Raton and Delray Beach, and especially from the Northeast,” Dratch said. Class C multifamily buildings had the second-highest volume, totaling $586.5 million in all three counties. The sales volume for Class Bs in South Florida was $508.8 million.
“Close to five or six years ago, in this same market, Class C units were selling for less than $100,000. It speaks to what has been happening across the board,” he said.
It is also an indication that multifamily prices, and rents, will continue to rise.
“Because of the popularity of South Florida and the migration of people [going there], apartments are coveted,” Dratch said. “They need a place to live, which is different than retail. Some mom and pop stores went dark because they were not dong business. That just adds to the multifamily play in South Florida.”