Greater Miami is reclaiming its crown as king of U.S. apartment construction.
The area has 10.8% of its existing apartment inventory in development, the highest level in the nation, according to new CoStar data tracking metropolitan regions with populations of at least 1 million. In the spring, Miami had slipped behind Salt Lake City, which now is No. 2 at 9.4%.
South Florida was one of the first markets in the country to signal the start of the Great Recession a decade ago. Economists and analysts still monitor development patterns in the Miami area, even as the U.S. economy set a growth stretch record in July with 121 consecutive months of expansion.
Despite concerns that another economic slowdown might be looming, some analysts say it wouldn't be nearly as bad as the last one, so the amount of apartment construction in Miami and other big cities isn't worrisome.
After Miami and Salt Lake City, Boston ranks third with 9% of its existing apartment inventory under construction, according to the CoStar data through Dec. 4. The rest of the top 10: Charlotte, North Carolina at 7.3%; Fort Lauderdale, Florida's 7.2%; Nashville, Tennessee, with 7.1%; Seattle, Austin, Texas, and San Jose, California tied at 6.6%; and Kansas City with 6%.
Home prices in Miami have appreciated by about 50% in the past five years, forcing more people to become renters and prompting developers to build more apartments, said Christos Costandinides, director of market analytics for CoStar in Miami. And Miami household incomes are 20% below those in other major cities even though Miami’s cost of living is comparable, so buying and maintaining homes there is difficult, he added.
“While there’s been healthy income growth, it’s nowhere near enough,” Costandinides said in an interview. “So renting is the new thing.”
In the past year, 80% of all residential building permits issued in the Miami area were for apartments, with permits for single-family homes accounting for the remaining 20%, according to Costandinides, who noted the ratio was almost even in 2009.
About 20,000 units have been completed in Miami since 2014, but the vacancy rate has mostly remained below the national average, he said.
The neighborhoods of greater downtown Miami, Miami Springs/Doral and Coral Gables are picking up the vast majority of the new rentals in the Miami area, according to CoStar.
While a lack of home affordability is driving apartment growth in Miami and other cities, plenty of millennials prefer the flexibility of renting and have higher incomes and accumulated savings to afford increasingly pricey rents, added Brad Hunter, managing director of RCLCO, a market research company based in Bethesda, Maryland.
“The market has arrived to meet them,” said Hunter, a longtime Florida analyst.
To capture that group of renters, developers have launched “an amenities arms race,” offering an array of building perks that include package drop-off privileges and dog spas, he explained.
“Apartment complexes in 2019 and 2020 look far different than what was built in the middle of the recession or the housing boom,” Hunter said.
