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<\/p>\nDespite being one of the nation\u2019s most expensive multifamily markets and a magnet for wealthy domestic migrants, Miami isn\u2019t immune to the broader trends of a supply overhang, and investors are noticing.<\/p>\n
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\n Bisnow\/Chloe Gallivan\n <\/p>\n
\n Miami’s multifamily sector faces a supply overhang, putting downward pressure on rents.\n <\/p>\n
After years of growth and development coming out of the pandemic, South Florida\u2019s apartment market is starting to cool. A flood of new construction is creating pressure on rents and\u00a0making investors\u00a0second-guess new\u00a0equity investments, panelists said Thursday at Bisnow\u2019s South Florida Capital Markets Forum.<\/p>\n
But developers are still doing what they do best \u2014 building \u2014 even if the numbers might indicate holding off is a better play.<\/p>\n
\u201cYou have a flat rent roll, maybe up a little bit, but if you’re a developer, you have no renewals to keep your rents high. Everything’s a new lease, which means they’re trending down,\u201d\u00a0TruAmerica Multifamily co-Chief Investment Officer Matt Ferrari said onstage at The Gale Miami.\u00a0\u201cI don’t know how they have the confidence to put a shovel in the ground.<\/p>\n
\u201c\u200b\u200bI think I’m an eternal optimist, but, like, the data is just in front of you.\u201d\u00a0<\/p>\n
It\u2019s been a tough\u00a0year for the multifamily sector, where rents have\u00a0softened across the board<\/a>\u00a0amid macroeconomic uncertainty, a slowdown in leasing and a record wave of new construction.<\/p>\n Apartments are the only property type where values have fallen this year \u2014\u00a0office, industrial, retail and commercial\u00a0prices are all on the upswing, according to MSCI’s Commercial Property Price Index.<\/p>\n Miami-Dade has the most construction activity among 90 major markets, adding 18% to existing inventory, according to\u00a0Cushman\u00a0& Wakefield data analyzed by Miami Realtors<\/a>.<\/p>\n The county has led the nation in multifamily units under construction for\u00a0at least a year<\/a>, and as of August, Miami-Dade had more than 23,000 units under construction.<\/p>\n \u201cThere may be a pause now,\u201d GTIS Partners Managing Director of Capital Markets Sharon Liss said. \u201c[There\u2019s] a lot of cranes in the sky and a lot of construction, and I think people need to digest what they have before diving back in.\u201d<\/p>\n Fort Lauderdale has 9,797 units under construction, set to add 9% to the existing inventory, and Palm Beach has 3,311 units under construction, adding 5% to the existing inventory, according to the report.<\/p>\n All the new buildings mean concessions like free rent may be on the\u00a0rise despite strong fundamentals and absorption, PGIM Real Estate Executive Director Shaunak Tanna said.<\/p>\n \n Bisnow\/Chloe Gallivan\n <\/p>\n \n Anchin Block & Anchin\u2019s Robert Gilman, PGIM Real Estate\u2019s Shaunak Tanna, GAIA Real Estate\u2019s Danny Fishman, GTIS Partners\u2019 Sharon Liss, Peachtree Group\u2019s Greg Friedman and TruAmerica Multifamily\u2019s Matt Ferrari.\n <\/p>\n Miami is among the nation\u2019s most expensive apartment markets, with median rent for a one-bedroom apartment at $2,250,\u00a0according to an October Zumper report<\/a>. But the city\u2019s asking rents\u00a0have decreased by almost 6% over the past year, according to the report.<\/p>\n The risk that rents might not grow high enough to cover rising construction costs has led to equity in the market drying\u00a0up \u2014 a nationwide dynamic\u00a0driven by passive investors\u00a0looking for less risk and more guarantee<\/a>\u00a0on returns.<\/p>\n GAIA Real Estate<\/a>\u00a0CEO Danny Fishman said that when his team evaluates new development projects, the rents they assume are about 8% to 10% lower than what developers expect.<\/p>\n \u201c[They] don’t quite make sense for the equity,\u201d Fishman said. \u201cThey’re still positive. They’re not losing money \u2014 the equity is losing money. We don’t want to do those deals. In our underwriting scenario, they’re not making enough money for the equity risk, in our view.\u201d<\/p>\n Many investors would rather buy an apartment than build, with sales volumes up 13% year-over-year. That is a more appealing prospect amid high interest rates, with distressed property sales\u00a0up 20% year-over-year in the third quarter, Multifamily Dive reported<\/a>.<\/p>\n \n Bisnow\/Chloe Gallivan\n <\/p>\n \n Citrin Cooperman’s Louis Hillman, Vaster\u2019s Zack Simkins, North Development\u2019s Arturo Vidal, Naftali Group\u2019s David Hochfelder, Torose Equities\u2019 Scott Sherman, Mast Capital\u2019s Jordan Kornberg and W5 Group\u2019s Ryan Munoz.\n <\/p>\n There was more hope at the beginning of 2025, when U.S. apartment demand was\u00a0holding up and supply began to slow down nationwide. Effective rents grew 1.1% in March \u2014 the highest reading since June 2023,\u00a0according to RealPage<\/a>.<\/p>\n But\u00a0new developments in\u00a0the Sun Belt markets, which have led the nation\u2019s multifamily construction for years, are\u00a0still in the process of leasing up units, putting downward pressure on rents.<\/p>\n Out of the more than 35,000 units under construction in South Florida, only about 21% of the incoming inventory is in the preleasing or lease-up phase, according to a third-quarter\u00a0construction pipeline report<\/a>\u00a0by MMG.<\/p>\n<\/p>\n<\/p>\n