Over 6 billions dollars were poured into the region’s multifamily market this year with institutional, local and foreign investors bidding high and large for assets of all shapes and sizes.

A steady demand for rental homes has supported impressive rental rates, lower vacancies and top-dollar trades across all product types.

“There are people who this year decided, ‘I really need to focus on this. This is the next wave. This is the best way to get a deal done,’ ” said Vivian de las Cuevas-Diaz, a partner with Holland & Knight in Miami. “ And a little bit of it was being driven by financial institutions. Financial institutions got very excited by multifamily. Therefore, more people were looking into it.”

Institutional investors went several years without pocketing South Florida apartments because there were none built for nearly a decade, said Brad Capas, founder of CapasGroup Realty Advisors in Fort Lauderdale.

When the construction boom spilled over to the apartment market, all eyes were on South Florida.

“Multifamily continues to be one of the most favored investment types,” Capas said. “The interest in southeast Florida as an investment market is stronger than ever. Going forward, you’ll probably see more new properties trade for no other reason than the fact that the development cycle is maturing and these properties are now at the point where they’re able to be sold.”

The Broward County market was fueled by a greater-than-expected employment boost this year. Businesses will hire 38,800 new workers by the end of the year, a nearly 5 percent jump in total employment countywide. Coupled with the high price of single-family homes, the county is seeing higher rents and lower vacancy rates across all multifamily products.

About 7,300 apartment units are under construction in Broward, with 2,750 units due for delivery by year-end, according to Cushman & Wakefield’s third-quarter report.

Cushman reported sales velocity surged 49 percent in the year ended in June. Intense trading pushed average pricing up to $149,400 per unit, a 13 percent increase in a year.

Capas said there has been no significant slide in transaction volume or investor appetite this year across the county’s various submarkets.

“Over the last 24 months, a lot of the new product has been trading,” said Robert Given, vice chairman of Cushman & Wakefield in South Florida. “We have strong institutional interest in almost all the product sectors.”

He brokered the sale of a newly developed apartment complex in the Miramar Town Center, part of a 54-acre master-planned community with office, retail and civic buildings. Kuwait-based KFH Capital paid $120 million for the 487 townhouses and apartments in a deal that broke down to $246,407 per unit.

“We’ve seen an increasing interest of foreign capital,” Given said. The Miramar trade closed Dec. 31, setting the stage for many deals to come.

Busiest Year

Investor appetite expanded north this year to Palm Beach County, where transaction volume was up 50 percent in the year ended in June for the busiest 12-month period seen in the past decade, according to Cushman & Wakefield. Apartments traded at an average of $168,100 per unit for a cycle high with 5,700 more under construction.

Deerfield Beach-based Rosemurgy Properties kicked off the year by selling three student housing communities in a deal valued at $105 million. The portfolio centerpiece, the $70 million University Park, marked the highest price per unit for multifamily and the highest price per bedroom for student housing in the state, according to the sellers.

The buyer was Bahrain-based asset manager Investcorp, another example of foreign capital flowing into South Florida.

Boca Raton quickly surfaced as the county’s crown jewel of investment with multifamily assets trading for over $238,000 per unit, the highest seen nationally.

Investors have flocked to the submarket for several reasons: Vacancy dropped to 3.8 percent following an active year of leasing. Nearly 1,000 units were absorbed from June 2015 to June 2016, according to Cushman. High enrollment rates at Florida Atlantic University also fueled demand for rentals and a subsequent rental rate increase of 4.8 percent.

The Boca Raton market was particularly active at mid-year.

In a value-add play, Dallas-based Mill Creek Residential Trust purchased a 1988-built apartment complex for $71 million in May. The developer plans to fully upgrade the 448-unit community.

In June, JRK Property Holdings pocketed an 18-building apartment complex for $77 million. The Los Angeles-based company paid nearly $214,000 per unit for the 360-unit luxury complex.

“Hot spots remain the urban core, anything that is transit-oriented and suburban assets in key submarkets that support easy access to strong employment,” said Charles Foschini, senior managing director with Berkadia in Miami.

He added that product located near transit stations will become the most competitive across all three counties, especially in Miami-Dade County, whose urban cores are becoming increasingly dense.

Nearly 10,000 units are under construction in Miami-Dade County with completion dates stretching into 2019, according to Cushman.

“We’re starting to hear the investment community express a little bit of concern about it, but I don’t think there are any major red flags yet,” said Capas, the founder of CapasGroup Realty Advisors. “Players in the market seem to be more conscious of the supply than they have been in the past.”

Developers wanting to break ground on new projects are either pausing or looking for ways to differentiate themselves from their surroundings. On the planning side, builders are shrinking units, inflating amenities and maneuvering around traditional parking requirements to keep rents high and building costs down in today’s pricey construction market.

With construction costs at an all-time high and heavy inventory waiting to hit the market, Art Falcone said lenders are pulling back in response. He is CEO and chairman of the Falcone Group and a principal of Miami Worldcenter Associates, which is developing a sprawling mixed-use project in downtown Miami.

“I will tell you that capital providers have pulled back dramatically so, on the condo side, that is drying up very quickly,” he said last month during the fifth annual Florida Multifamily Summit in Hollywood.

Miami real estate attorney Suzanne Amaducci-Adams agrees it’s become more difficult for multifamily developers to secure construction loans with so much in the pipeline.

“Construction financing is a riskier type of financing, so we’re seeing some of the money-center banks pull back,” the Bilzin Sumberg partner said.

And while community banks became active in the lending market after the downturn, several are now hitting their internal limits.

“Other lenders are a little bit more worried about the multifamily business because there’s been so much multifamily product built,” Amaducci-Adams said.

Banks are closely monitoring the new condo market, knowing that much of the new supply may be flipped onto the rental market.

But there are still financing deals closing for the right product in the right location. Amaducci-Adams noted her team will close well over $1 billion in construction debt by year-end across all real estate sectors.

“That’s a lot of construction financing,” she said.

Richard Bezold, a partner with Akerman in Miami, said investors and developers are turning to partnerships to bridge the financing gap.

“We’ve seen a lot more joint ventures for multifamily product than we’ve seen before the recession or through the recession,” Bezold said.

Because investors have to put a greater chunk of money down to qualify for a loan compared with the last cycle, a buyer will now partner with an equity investor to help raise that capital.

Miami developer Rey Melendi has good news for others in his field. He said the high-priced construction market will soon begin to let up.

The condo market has slowed considerably with no large projects breaking ground in the last quarter. Contractors are looking at fewer or smaller construction jobs over the next two to three quarters.

“The availability of contractors is not as stretched as it was over the last year,” Melendi said. “You’re already seeing a softening on the labor side of construction.”

Melendi’s development company 13th Floor Investments has found its niche in the market with transit-oriented development.

The company is building Motion at Dadeland, a mixed-use development comprised of a 25-story apartment tower next to the Dadeland North Metrorail station. 13th Floor will also lead the redevelopment of Douglas Station, a 15-year mixed-use project featuring office space, residences and possibly a grocery store.

The developer nabbed a $50 million construction loan for Motion at Dadeland in August from TD Bank and Banco Santander.

“There’s quite a bit of multifamily product coming online, and that’s always concerning,” Melendi said. That’s why 13th Floor has turned to transit-oriented projects, which he said is a unique sector that has yet to be fully penetrated.

“Millennials are looking for less car-dependent lifestyle, and we think that we fill that niche,” he said. “They’re looking at quality of life and being close to work. That’s the big inflection point. You’re seeing people move into the core of urban centers versus the suburbs.”