Putting 2022 into Perspective
How did Multifamily Stats in 2022 compare to the years prior to the pandemic in South Florida?
*opinions are my own—NOT Berkadia’s or my partners.*
2022 into perspective
The Miami multifamily scene started in 2022 as hot as we had ever seen it, yet it ended much colder than most expected.
Why?
Well, we had the federal funds rate go from 0.25% to 4.75% in 12 months.
We all felt the repercussions of these rate hikes in one form or another.
Let’s dive into what this meant for the South Florida Multifamily scene in 2022, and, more importantly, how 2022 compared to the years prior to the pandemic.
If you’re like me, you’ll stare at that table for a while to come up with a number of takeaways.
Here are some of mine:
Multifamily Sales Volume averaged $3-4 billion/year prior to the pandemic. After a 4.5x surge in 2021 to $13.2 billion, my guess is 2024 and beyond will see +/- $6 billion/year in transaction volume after a very sluggish 2023.
Average Price Per Unit saw a 70% increase from ~$215K/door prior to the pandemic to $365K/door in 2022.
Aside from lower cap rates, this was due to rents growing about +40% from an average of $1,700/month ($1.70 PSF) in 2019 to $2,420/month ($2.45 PSF) in 2022.
Units Delivered, Units Absorbed, and Rent Growth:
South Florida was consistently seeing between 10,000 to 13,000 multifamily units delivered per year—supply of which resulted in 3-6% rent growth prior to the pandemic.
In 2021, the pandemic migration translated into a 3x increase in the multifamily units absorbed from 10,616 in 2020 to 29,769 in 2021.
As you would expect, demand (units absorbed) far outpacing supply (units delivered) translated into rent growth going from 3-6% prior to the pandemic to 27% in 2021 and 13% in 2022.
The million dollar question is how that will look like going forward…
Well, lets go back to the basics: Supply & Demand.
Supply in 2023 and beyond..
By my calculations, which certainly aren’t perfect but are pretty damn close, we will see about 13,200 units being delivered in South Florida in 2023 and about 13,800 units in 2024.
This is in line with the 13,000 units we saw in 2020 & 2021, and it isn’t too far off the pre-pandemic high of 12,300 we saw in 2017.
Demand in 2023 and beyond..
Now let’s talk about demand. Will the migration trends we saw in 2021 and 2022 prove to be a fad, or the beginning of a generational shift in consumer behavior?
I’d bet on the latter, and ill give you two reasons why.
Reason #1: Network Effects.
The more people move to Florida, the more people want to move to Florida.
We all suffer from FOMO and tiktok, instagram, and twitter aren’t making it any easier for anyone.
When your boss moves to Palm Beach, your parents to Boca Raton, and your friends to Miami, lets guess what you’ll do next.
Reason #2: Data.
Year End 2022 Census Bureau data is in. The trends are accelerating:
This chart below is the most impressive trend in my opinion. Its from a WSJ article from June 2022. Although Texas and Florida see similar population growth, its mind blowing to see that 4x more income flows into Florida than Texas.
The difficulties in the capital market environment are a global event that are out of your control—they’ll work themselves out sooner or later.
Figuring out where to make bets in locations that will see growth continue to outpace supply is more in your control.
My bet remains South Florida.
P.S. - If you would like the South Florida Multifamily Sales Data table above broken down even further between Miami Dade County, Broward County, and Palm Beach County, shoot me an email at Omar.Morales@Berkadia.com . Interestingly, Miami Dade had the lowest Price Per Unit in 2017 but the highest Price Per Unit in 2022.
Active Listings:
We are currently marketing for sale a 1970s, Value Add, Two-Property Portfolio totaling 268 units for ~$200K/door in Broward County.
We will soon be listing for sale three different ~1-acre development sites.
One near Miracle Mile in Coral Gables
One on the bay in North Miami
One on the ocean by Surfside
Lastly, we will soon be listing a ~250 unit, brand new, 3-story surface-parked multifamily asset in Miami Dade County for sale.
Shoot me an email if any of these are of interest.
Happy hunting !
- Omar Morales