Although macroeconomic fundamentals point to a slowdown in property investment, South Florida’s multifamily sector continues to attract a high influx of capital. In the first half of the year, the region recorded nearly $5 billion in multifamily sales, the second highest six-month period in its history, Cushman & Wakefield research revealed, only outpaced by the second half of 2021.

While the region is not completely immune to the shaky economic outlook, and some deals have been repriced or pulled off the market, investors are betting on South Florida due to its record-setting rent increases, positive demographic trends, and steadily expanding job market.

In the first six months of the year, 367 assets changed hands across the three South Florida counties at an average price per unit of $345,000 in Miami-Dade, $300,000 in Broward, and $379,000 in Palm Beach, Cushman & Wakefield reported. At the same time, the average price for U.S. multifamily stood at $258,000 per unit, according to a Newmark report.

Effective rent growth was also strong in the region during the first half of the year, with Miami-Dade recording a 7.5% increase and Broward clocking in at 5.3%. Rents in Palm Beach County increased only by 0.3% rate during the same period. However, last year, the county recorded 32% rent growth, representing the largest single-year increase ever recorded in South Florida, Cushman & Wakefield highlighted.

Who’s Buying Now?

If rent growth and cash flow remain strong, investment in the multifamily sector will likely withstand the current market headwinds fueled by the rising cost of capital. Nonetheless, investors are confronted with the reversal of lending and cap rates, leading to more conservative underwriting standards and lower LTV requirements.

According to Cushman & Wakefield, agency loans are still easily available for stabilized assets, while local banks are more focused on finding quality deals, with higher competition for the right borrowers. The brokerage firm also predicts that opportunities with attractive, assumable loans will become highly sought after amid the current market conditions.

South Florida is seeing a lot of private capital coming in, especially from first-time buyers in the region. However, institutional investors and REITs are also deploying significant capital. These investors have predominantly targeted luxury properties: According to the brokerage, 38% of the sales volume traded during the first half of the year went toward Class A products built after 2015.