Fort Lauderdale Multifamily Market Update
Fort Lauderdale’s multifamily market is making significant strides in 2024, with a remarkable absorption of over 1,500 units in the first quarter alone. This figure surpasses the five-year quarterly average of around 900 units, marking a strong rebound after a period of softening demand since 2022. For the first time in a year, absorption has outpaced new supply, with annual absorption projected to reach 3,800 units by Q3 2024, exceeding the five-year annual average of 3,400 units.
Demand and Vacancy Trends
While this resurgence has stabilized the vacancy expansion that began in 2021, developers are poised to introduce elevated levels of new apartments in the coming year. As of Q2 2024, Fort Lauderdale boasts the fourth-largest apartment inventory pipeline among Florida metros, with new projects accounting for 6.7% of existing supply—the largest surge since CoStar began tracking the market. The influx of luxury apartments through 2025 is expected to exert downward pressure on rent growth as vacancies in this segment expand. By the end of 2024, 4 & 5-star vacancies are projected to remain around 9%, while 1 & 2 and 3-star vacancies are set to stay below 7%.
Demand for 4 & 5-star apartments increased by 9.1% annually in Q4 2023, aligning with the five-year average growth rate of 9.0%. This trend highlights a growing preference among renters for newer luxury units. Over the past decade, approximately 90% of demand growth has been concentrated in 4 & 5-star units, despite these units renting at a premium of over 27% compared to 3-star units.
Affordable Housing and Rent Growth
The disparity between affordable housing supply and demand is likely to drive rent growth for 1 to 3-star units in the near term. Submarkets with lower asking rents, such as Oakland Park/Lauderhill, Hollywood/Dania Beach, and Pompano Beach/Deerfield Beach, have experienced strong annual rent gains as renters seek more affordable areas.
Conversely, the luxury apartment market has seen a rise in concessions to compete with newly delivered properties. Some properties now offer up to two months of free rent, softening the gains in luxury effective rents.
Sales and Investment Trends
Over the past 12 months, sales volume has totaled $1.5 billion, falling below the five-year average of $2.5 billion. Despite continued investor interest, rising interest rates and softening fundamentals are impacting pricing. Average annual transaction cap rates for 4 & 5-star properties have risen by over 100 basis points, from around 3.8% two years ago to 5.0% as of Q3 2024. Additionally, uncertainty in pricing, a slowing economy, and higher financing costs are weighing on transaction volumes and sizes, with institutional buyers remaining cautious.
Key Metrics (Q2 2024)
Availability & Rent
Vacancy Rate: 7.3%
Market Asking Rent/Unit: $2,281
Concession Rate: 1.1%
Sales
Market Sale Price/Unit: $279K
12 Mo Asking Sale Price/Unit: $296K
12 Mo Sales Volume: $1.4B
Inventory
Inventory Units: 141,549
Under Construction Units: 9,466
Demand
12 Mo Absorption Units: 3,758
Median Household Income: $74,254
Market Analysis
Fort Lauderdale's multifamily market is at a critical juncture. The luxury segment faces mounting pressure from new supply and rising vacancies, while affordable housing units are set for continued rent growth due to a persistent supply-demand mismatch. Economic headwinds and higher financing costs add complexity to the market, challenging investors and developers to navigate this evolving landscape. Keeping a close watch on absorption rates, vacancy trends, and economic indicators will be essential for making informed decisions in this dynamic market.
Original Post: https://phillipgrichardson.substack.com/p/fort-lauderdale-multifamily-market-9eb?r=48iden
