Is the Rental Market in Miami Crashing???
While Sales get all the attention, we wanted to talk about the Rental Market in Miami. We have noticed a shift in the Rental Market the last few months and felt we needed to dive a bit deeper. In most areas, we have been seeing a bit more inventory and days on market increasing causing prices to adjust accordingly.
Over the least few years as interest rates were at all time lows it was the the perfect time for developers to not only build condos but also get loans to build rental apartment building's. Those apartment towers have been opening up and have started to flood the market with thousands of rental units. There are two areas we feel we need to highlight within the Miami Real Estate Market.
They are Downtown Miami specifically zip code 33132, and Coral Gables specifically South Gables, 33146 right by the Douglas Road Metrorail Station. In these two areas, in just the last few years you have thousands of rental units that have hit the market. Let's go into the details as to how this happened. In early 2019 Miami-Dade County approved a motion to allow larger buildings along current and future transit routes, part of a plan to get more people to live closer to bus and rail service and not need cars.
They revised Miami-Dade’s development rules to allow for more density in the corridors that make up the Strategic Miami Area Rapid Transit Plan — best known as the SMART Plan. They also approved a special tax zone for this area along the Metrorail tracks which stretched out half a mile on either side of the corridors which became known as a Transit Oriented Development (TOD).
This new zoning increase came at a perfect time for apartment developers as shortly thereafter interest rates started their descent to historic low levels. This combo was the start of a massive development boom of these rental communities. As a result, we are now starting to feel it's effects on the real estate market. Most of these rental communities attract new tenants by offering great incentives such as 1 month free rent, a low security deposit, a plethora of amenities, they also add retail components to the project including restaurants, shops some even add supermarkets including Whole Foods, Trader Joes, etc. and of course everyone likes "new" as it makes it more attractive.
Let's look at the Downtown Miami area which includes the Central Business District, Bayside, Miami World Center and the catalyst to all this is the Government Center Metrorail and Metromover Station which has been there for years and because of this we now have the Tri-Rail commuter train and more recently the Brightline Train.
In this area, we counted 8 New Projects some with 2-towers on site for a total of over 4,000 Rental Apartments in the last few years, in an area that is 1 Square Mile with still more towers to be completed in 2024. This doesn't even take into account if you look a couple blocks north in the "Arts District" on 14th Street, you already have over 2,000 rental units built by the same developer. Which brings the total to over 6,000 rental units in a small area of town. The interesting thing is that we found most of these towers have smaller type units starting with studios and 1 and 2 bedrooms while only having very little inventory of 3 bedrooms for rent.
Obviously this allows the developer's to squeeze in more apartments in their project and meet their ROI or what's known as Return on Investment. Let's jump into the next map to show you Coral Gables... Over the last few years in South Gables, 33146 next to the Douglas Road Metrorail Station which is on 37th Avenue and US-1 there have been over 2,000 rental apartments built over a handful of projects in an area that is roughly half a square mile.
You will even find the tallest tower south of Brickell here at 37-Stories called the Cascade in Coral Gables which truly is an indication of the TOD which allowed developers to build such a tall tower in an area with mostly low to midrise buildings. In summary. We can see thousands of rental units have been delivered over the last few years in these areas, mostly are Studios, 1 and 2 Bedrooms.
So if you have a condo you are planning on renting out especially near these areas keep in mind that you now have increased competition and will need to price it accordingly. As mentioned, the larger type condos of 3 bedrooms plus and single family homes we feel still command a premium as demand for rentals is still strong as is demand for housing in Miami so from the demand side all is well.
It is the supply side that is being affected right now as you can see so we will keep our eyes on this segment of the market for you. I'm Jose Laya and I was born and raised in Miami. I've been in the Real Estate business for 18 years.
We do a lot of research and put in a lot of work behind the scenes to be able to provide value and give clients the best advice for them.
Thank you for watching. Talk soon.