Like the San Francisco Bay Area, markets in South Florida and select secondary markets throughout the nation appear to represent locales where yield-chasing developers can justify late 2015 project starts that would deliver sometime in 2017.
Outside of Miami, the submarkets of West Palm Beach, Fort Lauderdale, Naples and Cape Coral present numbers that would suggest future deliveries will be absorbed. In Central Florida, Orlando and its submarket Deltona also seemed primed for future development.
West Palm Beach currently sports a 4.5 percent vacancy rate and witnessed 10.2 rent growth spanning April 2014 to April 2015. Fort Lauderdale has a similar vacancy rate, 4.2 percent, and saw 6.3 percent rent growth during the same period.
Naples and Cape Coral have some of the best vacancy rates in the nation, at 2.3 percent and 2.7 percent, respectively. Both also experienced recent double-digit, year-to-year rent growth – Naples, 11.1 percent, and Cape Coral, 10.2 percent.
To the north, Orlando remains a strong market with occupancy of 95.6 percent and 6.7 percent year-to-year rent growth. Its submarket, Deltona, sports a vacancy rate of 3.5 percent with a 9 percent escalation in rents.
Developers with upcoming or proposed starts lined up in these Florida markets include ZOM, American Land Ventures, Allen Morris Residential, Crescent Communities, Altman Companies and Jefferson Apartment Group.
Louisville (Kentucky), Raleigh-Durham (North Carolina) and Las Vegas comprise a trio of secondary markets that should peak developers’ interest moving forward.
Raleigh-Durham recently ranked as the No. 3 market in the nation for job growth and No. 5 in terms of return on investment (ROI). If the nearly 10,000 units that have been delivered during the last 12 months are absorbed, developers will push forward with new deals.
Developers that recently started or plan to start projects in Raleigh-Durham this year include NRP, Kane Realty, Crescent Communities, Proffitt Dixon Partners and Woodfield Investments. Most of these firms are merchant builders.
Louisville and Las Vegas recently ranked as the seventh and 10th best markets in the nation when it comes to providing a high ROI to investors. Both these markets have a minimal volume of 2015 deliveries. Some developers, like Calida Group and Fore Property Group, are lining up multiple deals in Las Vegas.