MARKET SNAPSHOT: Absorption Takes Off in Miami Amidst Strong Job Growth and Limited Construction
By Philip Shea, Associate Editor
The pace of hiring is expected to pick up across Miami-Dade County over the next year, this after 14,400 positions were created last year. Describing the local economic climate as a “solid recovery,” Marcus & Millichap notes that demand for apartments has been strong enough to fill 11,000 rentals over the past three years—and more absorption is expected in the near term.
As certain sectors strengthen their ties to international markets and recovery in the housing market takes shape, Marcus & Millichap expects 22,300 jobs to be added to the metro in 2013—representing a 2.2 percent increase. The leisure and hospitality sector will account for a large portion of the increase, as the peak tourism season approaches. Over the past year, however, the job gains occurred primarily in the trade, transportation and utilities sectors.
Meanwhile, construction is expected to remain modest, with rental stock rising by 0.9 percent—or 2,000 units—this year. Permitting activity, however, will pick up, this after developers pulled permits for more than 3,500 units in 2012—nearly doubling the number issued in the previous 12 months.
For now, however, current stock remains at a level conducive to vacancy contraction, and Marcus & Millichap expects the overall vacancy rate to fall 20 basis points to 2.9 percent in 2013. The Downtown Miami/South Beach area continues to the tightest submarket with a rate of 1.9 percent, while the Homestead/South Dade County area posting the highest rate at 5.1 percent.
With occupancy in all property types rising, rents are expected to follow suit. While average countywide rents rose a mere 1.1 percent over the past year, Marcus & Millichap expects a 3 percent rise to $1,169 per month in 2013. Additionally, only 7 percent of all properties across the county are offering concessions, down from more than 18 percent in last year and nearly 40 percent three years ago.
The greatest rent increases were seen in the West Miami/Doral submarket, which saw its average rate rise 4.3 percent—from $1,313 per month to $1,370 per month. Meanwhile, the Downtown Miami/South Beach area actually saw a slight contraction in rents—from $1,663 to $1,654 per month—while still retaining the highest rents overall.
Marcus & Millichap notes the wide array of investors in the metro—ranging from local to out-of-state to foreign—that are tapping into opportunities in high-value submarkets, some of which are reporting first-year returns in the 5 to 6 percent range.
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