The major multifamily markets in Florida have recorded significant rent growth over the past five years, with Palm Beach and Tampa ranking among the top three in the country after posting average apartment rent increases of more than 30% since the fourth quarter of 2019.

Both regions and Florida, as a whole, saw a swift uptick in population growth, pushing multifamily vacancies to near all-time lows in 2021. As a result, multifamily landlords were able to push asking rates, especially in 2021 and early 2022, by as much as 20% to 30% above previous year’s rent as tenants were forced to compete for scarce rental units.

Emboldened by the relentless rent growth and population growth, developers accelerated the construction pipeline to levels never seen before across the Florida markets.

Since then, market dynamics have shifted. New supply is vastly outpacing renter demand, and multifamily vacancy rates are now hovering around all-time highs. Thousands of units have come online over the past few years as state-to-state migration patterns have returned to pre-pandemic norms, according to recent analysis by a location analytics firm.

Across Florida, several markets are expected to have a record year for apartment completions in 2024, further increasing the competition for renters. Multifamily landlords have had to shift pricing strategies to chase occupancy rather than push rents. As a result, rents have been declining for over a year, and a sizable number of properties are offering concessions.

More than 37,000 units are underway in South Florida, with the vast majority concentrated in luxury properties in Miami, which has the largest apartment construction pipeline among all Florida markets. New development is concentrated in downtown areas, with Downtown Miami, Central Fort Lauderdale, and West Palm Beach combining for over 50% of the incoming supply.

The bulk of new supply is expected to hit over the next two years, though its impact is already apparent in luxury apartment rents, which have been flat since 2023, specifically in Palm Beach and Fort Lauderdale. Robust renter demand in Miami has driven some rent gains in this market over the last year, though these gains remain well below historical averages.

Luxury apartment vacancy rates have risen by an average of more than 10% across South Florida over the last year and are expected to remain elevated. This increase in rents has occurred even as newly delivered and existing properties compete for a limited pool of income-qualified renters and lease-up periods for newly delivered apartments have increased from less than a year to over 15 months.

Apartment managers are competing for renters by offering significant concessions of over two months of free rent and have been holding asking rents flat for over a year now. Around a quarter of multifamily properties in the market now offer some sort of concession, a far cry from the less than 5% offering concessions a few years ago when demand was vastly outpacing new supply.

These concessions, along with flat asking rents, have resulted in a contraction in effective rents for luxury apartments over the last year, specifically in areas with the largest imbalance between supply and demand.

Florida apartment markets in Palm Beach and Tampa have seen a significant widening between new demand and supply growth over the last year relative to the time period from the fourth quarter of 2019 through the second quarter of 2023, shown in the red bars.

While new supply is expected to moderate by 2026, competition for qualified renters in these markets with a significant widening of supply and demand will remain for some time, keeping a lid on rent gains.

In 2021, Tampa was consistently among the top multifamily markets in the country, not only for rent growth but also renter demand. The region recorded a peak annual rent growth rate of 20% in 2021, more than five times the average over the six preceding years.

In the same year, Tampa absorbed more than 9,000 units, the net change in occupancy, besting the market's previous record set in 2020 by roughly 2,000 units. The strong demand for apartments in Tampa brought the region’s vacancy rate down to an all-time low of 4.5%, making it one of the tightest multifamily markets in the country.

However, multifamily asking rents hit an inflection point in 2022 after hitting around $1,800 per month as new construction completions picked up in 2022 and the supply of new apartments has outpaced renter demand in nine of the past 10 quarters.

This has eroded landlords’ ability to increase rents in the Tampa market. Asking rents have decreased on an annual basis for four consecutive quarters and are currently down 1.4% from this time last year to $1,770 per month.

Rent concessions have also been on the rise, especially for new apartment properties still in the lease-up phase. At the end of June, 40% of Tampa’s multifamily properties were offering concessions compared to just 6% in the same month of 2021. June 2024 was one of only two months in the past four years that 40% or more multifamily properties were offering concessions.

For new multifamily properties completed over the past year and a half, the percentage offering concessions has jumped to nearly 90%. Many are offering one to two months of free rent or are waiving various fees. Overall, the propensity to provide concessions in Tampa has caused effective rents to decrease by nearly 2% from this time last year.

While renter demand has accelerated, it still has not kept pace with new supply. Roughly 3,400 units were absorbed in the first half of 2024, more than double the absorption seen in the second half of 2023, but the year is on pace to see a record amount of new supply, with 4,700 units completed in the first quarter alone. Tampa’s multifamily vacancy rate is now above 10% for the first time in more than 15 years.

Thousands more units are expected to come online across the Tampa region over the coming quarters, and vacancy is expected to remain in the double digits for years to come. The supply and demand environment will make it difficult for landlords to increase rents over the near term, and concessions will likely keep effective rents down.