Several of Florida’s apartment markets are included in the top five U.S. markets for rent growth following the initial surge of COVID-19, with Tampa taking the top spot.

The Sunshine State's multifamily fundamentals have been positively impacted by tremendous population growth over the past several years. Florida was the top state for population growth between 2021 and 2022, increasing by 1.9%, or roughly 417,000 new residents. Hillsborough County, where Tampa is, was a top recipient of those new residents, adding nearly 29,000 people. The South Florida markets of Palm Beach, Fort Lauderdale and Miami recorded a combined population increase of nearly 30,000 residents.

For several quarters following the onset of the pandemic in early 2020, Tampa was among the top areas for rent growth. However, asking rent gains in the Tampa apartment market peaked in the latter half of 2021, when asking rents increased roughly 23% compared to 2020 figures. Since then, apartment landlords have pulled back on increasing asking rents here, with rates increasing just 1% year over year as of the second quarter of 2023.

This is due in large part to the influx of new multifamily units hitting the market, which has increased competition. Tampa is undergoing an apartment construction boom, with over 18,000 units currently in development. This is following the delivery of 7,600 units over the past 12 months.

The wave of new construction, coupled with muted renter demand, has pushed the market's vacancy rate to its highest level in five years. The elevated pipeline could further strain occupancy levels and, in turn, the market’s asking rents. CoStar is forecasting Tampa’s annual rent growth rate to remain below 2% over the next year.

Miami rent growth has moderated to 3.9% annually in the first quarter of 2023, after hitting gains of 17.9% in the first quarter of 2022. A similar story has played out in Fort Lauderdale and Palm Beach, where annual rent growth is growing at 2.8% and 0.9%, respectively, in the first quarter of 2023, after hitting gains of over 20% in the first quarter of 2022.

A tempering in demand throughout 2022 and early 2023, coupled with elevated deliveries of new units — averaging over 13,000 units completed per year since 2020 — has weakened multifamily fundamentals in the South Florida apartment markets.

Concessions have also begun to rise here as the over 18,400 new units to come online across the region in 2023 continue to expand apartment vacancies. Despite South Florida markets holding some of the lowest vacancy rates across the state, these have begun to rise from historic lows of 3.5% in 2021 to over 5.6% in the first quarter of 2023.

With four- and five-star units representing more than 80% of new construction activity in South Florida, by the end of 2023, unstabilized vacancies in these high-end and luxury properties are expected to rise to over 10%, while vacancies in low-end, workforce and mid-tier apartment properties are set to remain below 5%. Additionally, economic headwinds impacting the area's finance and tech sectors in 2023 will likely dampen luxury demand in the near term, while a recovering tourism economy should help drive demand toward more affordable units in one-, two- and three-star properties.

This supply pressure on upscale units will likely weigh on rent growth for this segment of the market, which is already slowing to around 0.6% annually in Miami and Fort Lauderdale and has begun contracting by 0.9% in Palm Beach.