Apartment occupancy trends in South Florida have benefited more from a lack of single-family housing affordability than migration patterns lately. While the early post-pandemic period drove an influx of high-income households to the tri-county area, resulting in elevated demand and rising rents, recent migration patterns indicate a slowdown in these trends.

A moderating economic environment resulting in softer office-using job growth and slowing home sales is also impacting migration patterns. A recent report from placer.ai highlights these trends, with pandemic-related domestic migration patterns now in the rearview mirror. According to the report, seven out of the top ten metro areas that posted the largest increases in domestic migration from 2020 through 2023 are located in Florida, but this has dropped to only four since then.

More affordable metropolitan areas in central and northern Florida, like Daytona, continue to rank well in domestic migration. On the flip side, increasingly expensive geographies, like South Florida, have seen a down-tick in migration, with license exchange data in the chart above showing this trend.

Monthly license exchanges from other U.S. states into South Florida have fallen around 34% from peak levels experienced during the pandemic. The most concerning trend is the above-average slowdown in in-migration from high-income states like California, Massachusetts, New York and New Jersey, which have fallen over 40% relative to the pandemic peak.

According to IRS data, migration from these states brought a significant amount of new wealth to South Florida from 2019 through 2021. A significant slowdown in in-migration from this cohort poses a risk to luxury multifamily development, which continues to see a surge in new construction.

Although a recent pullback in asking rent growth and increasing concessions have driven a resurgence in multifamily absorption, demand remains well below pandemic highs and pre-pandemic trend levels from 2015 through 2019, as shown in the blue line above.

While demand continues to recover from a lull in late 2022, new multifamily construction has surged ahead. Over 39,700 apartment units are currently underway in South Florida, a historical record, with over 85% of units concentrated in the luxury segment of the market.

Construction trends from 2015 through 2019 would point to a total of around 32,000 units underway today, while the reality is that there are over 7,200 additional units underway, as indicated by the yellow line above.

This continued imbalance between demand and supply will drag forward some of the same dynamics we have seen in the past year. New properties will continue to take longer to lease, with new construction since 2023 taking over a year to fully stabilize relative to the three-quarter average it would take for properties built in 2021 and 2022. Additionally, concessions will remain a staple in the market for longer, with around a quarter of apartment properties now offering some sort of concession, up from less than 5% in 2022.

That said, while this supply overhang will likely be with us over the next few years, construction starts have contracted significantly over the last few quarters, reverting to a pre-pandemic trend. These point to a softer supply picture by 2026, helping bring demand and supply back into balance and resulting in an eventual acceleration in real rents.