At the 293-unit Elevate in Dania Beach, about 100 apartments remain vacant six months after the project was completed.
To entice renters, the property manager is offering two and a half months of free rent and up to a $500 move-in credit, the property’s website shows.
“We are getting some of those extra leases because of some of the extra concessions,” said Dan Kodsi, who developed Elevate.
Elevate is not an anomaly. Many multifamily properties completed in South Florida over the past year are throwing in a couple of months of free rent in a bid to snatch prospective tenants from competing buildings. Soleste NoMi Beach in North Miami Beach is offering two months of free rent. Society Wynwood is offering the same incentive, plus an extra sweetener for those who lease on the same day they tour the property: a $1,000 moving costs credit and no application fees, the property’s website shows.
Slower lease-ups and resulting concessions follow South Florida’s multifamily boom of recent years. The tri-county region became a magnet for out-of-staters from late 2020 through 2022, prompting unprecedented demand and record rental growth.
Developers seized on this with a flurry of projects. Now, they are dealing with the aftermath.
“The concessions are a little higher than what we wanted to probably give.”
A record 18,600 apartments were completed last year, outpacing 15,000 net new leases signed, CoStar data shows. Deliveries came on the heels of three years of hefty additions to the tri-county region, with 15,300 units completed in 2023; 11,200 in 2022 and 10,700 in 2021.
“We have a little bit of a hangover right now from those landlords who started to build multifamily like crazy,” said Juan Arias, South Florida market analytics director at CoStar Group. “It is taking longer for newer communities to reach stabilization. This is indicative of the supply overhang the market is dealing with right now.”
Most new units are at higher-end projects with the priciest rents in city downtowns and Miami’s Wynwood, according to Arias. Few new apartments are affordable or workforce housing, where leaseups are ensured due to high demand for below-market rentals.
Kodsi, CEO of Miami-based Royal Palm Companies, steered clear of building high-rises in urban cores, a costlier endeavor than building a mid-rise building in a suburban city such as Dania Beach.
But Kodsi’s Dania Beach bet also wasn’t bulletproof: Elevate was completed among hefty new deliveries in Dania Beach, slowing the building’s leasing, Kodsi said.
“It’s just slightly slower,” Kodsi said, “and the concessions are a little higher than what we wanted to probably give.”
In the thick of it
The 23-story, 367-unit Soleste NoMi Beach, completed last April in North Miami Beach, is about 87 percent leased, according to Robert Suris, managing principal of project developer Estate Companies.
“We are stabilized, but it did take [about] four to six months longer than we thought it would take,” said Suris, adding that Estate’s ongoing construction of an adjacent rental tower could have dissuaded prospective tenants. “Too much noise and dust.”
When developers will be able to scrap concessions and start raising rents –– which have slightly dropped –– remains in question. Some analysts and developers say it will be this year. Others say it will take longer for new supply to be absorbed, meaning it won’t be a landlords’ market again until at least next year.
A confluence of factors are at play.
Working against landlords: The influx of out-of-staters has dropped. Last year, 20,909 people moved to Miami-Dade County. That’s 3 percent less than in 2023, 2 percent less than in 2022 and 12.6 percent less than in 2021, according to a Miami Association of Realtors report, which based its analysis on driver’s license exchanges. The county’s in-migration last year still was 16.8 percent more than pre-pandemic 2019.
In Broward County, 18,527 residents traded their out-of-state driver’s licenses last year. That’s 16 percent less than in 2023; and 22.6 percent less than in 2022. It is also 20 percent less than in 2021 and 7.5 percent less than in 2019, the report shows. In Palm Beach County, 23,074 residents traded their licenses last year. That’s 12.8 percent less than in 2023, 26.5 percent less than in 2022, 22.6 percent less than in 2021 and 3 percent less than in 2019.
New York, New Jersey, California and Texas are the biggest feeder states, according to the report.
In landlords’ favor: Homebuying remains out of reach for many, which continues to drive rentals. The housing market was supercharged from the influx of newcomers that pushed prices to new records. (The median listed home price in South Florida was $522,500 in December, 30.7 percent more than in December 2019, according to Realtor.com.) Also, mortgage interest rates are still relatively high, despite the Federal Reserve cutting the benchmark rate three times last year.
The Los Angeles fires that burned through residential real estate this month could prompt demand for South Florida rentals, experts said.
“With the fires happening in California, this is probably the last shoe to drop [for people to say], ‘I am done with the way [California] is managed,’” said Eli Beracha, a professor at Florida International University’s Tibor and Sheila Hollo School of Real Estate who runs a consultancy.
Perhaps boding best for developers is that the construction pipeline has eased. The cost of building is higher, with financing more expensive. Insurance has skyrocketed, and materials and labor costs still are high.
At the end of last year, 16,446 apartments were under construction in South Florida, with 14,000 expected to be completed by this year-end, CoStar data shows. In 2026, deliveries are projected to drop to 9,400 units.
“With the slowdown in construction activity for multifamily right now, in 2026 and 2027 the market will come back into balance,” Arias said. “And landlords will have the power again.”
Except it may take a little longer for landlords in Miami’s urban core. The county’s current construction pipeline is 11,255 units, mostly in neighborhoods such as downtown Miami and Wynwood, according to Arias.
“It could take them until 2027 and 2028 for supply and demand to come back in line because [these] developers kept on developing,” he said. “They will still face a very competitive market in terms of supply for a little bit longer.”
Brian Koles, of Property Markets Group, which completed the 10-story, 318-unit Society Wynwood last March, isn’t worried, saying that Society Wynwood should be stabilized soon.
Sure, it’s not 2021, when 30 percent of a building would be preleased at completion with zero concessions. Still, lease-up within a year of completion is “a realistic goal,” allowing for future renewals to come up on a staggered basis, which is preferable, Koles said.
“[Tenants] are going where it is most affordable, not in the shiniest locations.”
Aside from substantial new supply giving prospective tenants the chance to shop around and negotiate, concession contagion is raging, he added.
“When one developer starts doing it, it can spread throughout the market,” said Koles, senior director of corporate development at PMG. “It’s a very competitive market, so people are offering the best incentives they can stomach to get the buildings full and still achieve the rents in their underwriting.”
It’s the worst of times. But it’s not that bad
Andrew Rahman, of property management firm Crown Residential, which leases apartments on behalf of landlords, witnessed South Florida’s multifamily demand yo-yo over the past four years.
In the boom times of 2021 and 2022, a newly built project averaged about 50 leases per month. That slowed in 2023 and last year, with an average of 25 leases per month for a new property, according to Rahman.
Demand rose to an average of 30 leases a month for a new property in recent months with some concessions, approaching pre-2020 activity, a benchmark for a normal market, Rahman said. “It’s getting there, but it’s not there yet,” he added.
Most tenants want apartments at $3 per square foot to $4.50 per square foot in rent, rather than $4.50 a square foot to more than $5 a square foot, analysts and developers said.
Tenants “are going where it is most affordable, not in the shiniest locations,” Rahman said. “$5.50 a foot versus maybe $3 a foot, that’s a big difference. I don’t know how they are going to” fill those more expensive buildings.
To get around the supply overhang, some developers opted to convert their apartment projects to condos. Others applied the Live Local Act retroactively. The state law grants density bonuses and property tax breaks if units are at affordable or workforce rents.
Still, not all apartments have the high-end finishes of condos, so conversions would be hard. And imposing below-market rents under the Live Local Act may not pencil out financially, because it means less revenue to pay off higher development costs, Arias said.
South Florida is experiencing the worst of its multifamily supply overhang, but the tri-county region’s worst is still more bearable and better than in highly saturated markets elsewhere in the Sun Belt, he added.
At Elevate, 94 percent of units should be rented by spring, with concessions ending this year and rent increases resuming next year, said Kodsi, the project’s developer.
That “is not bad,” he said. “It’s just not great.”
