Miami Market Overview
Multifamily Report
Apartment rents in the Miami market rose at a 9.8 percent annual rate in the fourth quarter of 2022 after increasing by 7.8 percent over the previous three years. There are currently 23,000 units under construction, representing the largest pipeline in over three years. Additionally, 21,000 units have been delivered to the market, representing a 13.6 percent increase in inventory. Vacancies in the metro were slightly lower than the 10-year average in the fourth quarter of 2022 but increased over the previous four quarters due to the number of units entering the market. The metro’s employment has recently increased at a 5.6 percent annual rate, or by approximately 66,000 jobs, boosting the need for more multifamily units.
Vacancy & Rent Fundamentals
The Market Rent Per Unit by bedroom graph displays a noticeable change in pricing at the end of 2020 and a steady incline in rent rates. This incline can be attributed to increased demand for living spaces across the state. Rent for a three-bedroom is currently about $3,100, $2,400 for a two-bedroom, $1,900 for one bedroom, and $1,700 for a studio. Daily asking rent is currently slightly above $2.50 per square foot, a notable increase from 2020, which was $2.00.
The Vacancy Rate graph displays a steep decline at the end of 2020, falling to three percent. The vacancy rate reached its lowest between 2021 and 2022. This rate coincides with the significant increase in market rent per unit by bedroom. Meager vacancy rates are favorable and show great signs for the future of Miami. Recent growth projections in the area indicate that Miami is a promising market for multifamily properties. The vacancy rate is expected to rise slightly and then plateau for the next four years.
Sales Volume
Sales by the numbers in the past 12 months
- Sales comparables: 463
- Average price per unit: $344,000
- Average price: $12,400,000
- Average Vacancy at Sale: 6.0%
Miami has one of the largest apartment inventories in the country, with approximately 460 market-rate multifamily transactions completed in the last year: a significant increase in sales activity over the previous five years. Over the last five years, annual sales volume has averaged $2.1 billion, with a 12-month high in investment volume of $5.3 billion. The previous year, $4.9 billion in multifamily assets were sold. Recent sales volume was led by Class A apartment buildings, which accounted for $3.4 billion in confirmed transaction volume. Miami’s price per unit has been slowly increasing over the years and is consistently higher than the national average. The market price, calculated by CoStar based on the estimated price movement of every market-rate multifamily community in the region, is currently around $340,000/unit. That price has increased by more than 10 percent since last year and is now significantly higher than the national average. Since last year, the market cap rate has decreased. It is the lowest cap rate seen in Miami in the previous five years, and the pace in the metro is structurally lower than the national average.
Miami’s cap rate has fallen to about 4.4 percent and is expected to rise slightly to 4.6 percent over the next four years. This lower cap rate indicates that investments in Miami are less risky compared to 2017.
Construction
Under Construction by the Numbers
- Properties under construction: 87
- # of Units: 23,273
- Percent of Inventory 12.9%:
- Average # of units: 268
There have been several construction projects over the years, especially throughout 2022. Several projects are in the works and forecasted to begin and be completed within the next four years. Some multifamily properties currently under construction include Miami River Apartments, 1 Southside Park Apartments, Modern Towers, and the Metro Parc Apartments. These properties are set to be finished between 2023 to 2025. These new developments are quite promising for the area and indicate exceptional growth over time.
