Evan Kristol (Melanie Bell)
Broward County’s apartment market is bustling, with rising rents and growing demand driving construction of more than 15,000 units.
About 4,000 will come to market this year—more than double last year’s number—as developers expect newly employed workers to fill thousands of units.
“In Broward, what’s being built is rental,” said Philip Spiegelman, principal at Aventura-based International Sales Group LLC. “There’s been tremendous demand both from residents and investors.”
Rents are on the rise, too, expected to grow 3 percent this year to an average $1,277 per month, according to a new report by Marcus & Millichap Real Estate Investment Services.
But analysts say rising costs are leading developers away from affordable housing, bypassing tax incentives, and building market-rate and luxury properties as investors seek higher yields.
“Most of what’s being built is Class A,” said Evan Kristol, a specialist in multifamily markets and senior vice president of investments at Marcus & Millichap’s Fort Lauderdale office. “With the cost of construction today, you have to get much higher rents to make the numbers work. If you’re going to pay a pretty healthy rate for the ground, you’ll need a similarly healthy rate for the rent.”
But the job market will support the price hike, analysts say. The employment forecast includes 23,500 new jobs compared to the 21,000 created in the county last year, and a 3.1 percent payroll expansion.
Most of these jobs are in the health care, retail and hospitality sectors—key industries that drove rentals last year and brought the vacancy rate to 4 percent at the end of last year.
Loosening lending criteria made it easier for borrowers to leverage cash at cheaper rates, encouraging investment.
“In the worst of times if you could get a loan, it was at 65 percent loan-to-value, best case,” Kristol said. “Now it’s at the point where you can borrow up to 80 percent. And although interest rates have moved a little bit, they’re still very low.”
Borrowers can still secure 10-year loans at 5 percent, and shorter ones at rates around 4 percent.
The result: Dozens of developers have projects underway across the county, with nearly 6,400 apartments in the construction phase, more than 1,100 in permitting and more than 7,600 in various planning stages.
In Fort Lauderdale, The Related Group is building 390 apartments and retail space near Flagler Village. In Pompano Beach, Shoal Creek Properties’ garden development will add 249 units, while the Jefferson Apartment Group is building 252 rentals in Cooper City.
“It’s still cheap equity so people are building,” Kristol said. “The outlook is favorable.”