Fueled by strong demand, Miami condo rents rise in double digits
By Marilyn Bowden
Strong demand and rapidly diminishing inventory is significantly boosting rental rates in Brickell's condos, brokers say.
"Rents have gone up by 12%-15%," said Edgardo Defortuna, president of Fortune International Realty. "In our luxury buildings, we used to rent for $1.85-$1.90 a foot. Now it's $2.20-$2.35 a foot."
In some properties such as Icon Brickell, he said, there's a waiting list for rentals. At the same time, units that were initially rented by their owners are being marketed for sale when leases expire.
"There are several rental markets going on," said Melanie Hyer, leader of the Revest Group at Keller Williams Miami Beach. "There are investors who purchased in the past four years and got wonderful deals. They will hold the unit for five to 10 years, renting them while they wait for really good appreciation.
"Then there are developers who have rented out some units until they can sell. They will enter them into the market a few at a time. Icon is a good example of that."
For one-bedroom units, said Alicia Cervera Lamadrid, managing partner of Cervera Real Estate, the median rent over May, June and July of this year was $1,650 — an increase of $100-$150 a month over the same period the year before.
The median rent for two-bedroom units from May-July 2011 was $2,200, up from $1,950-$2,000 in 2010.
The median time a Brickell condo stays on the rental market, Cervera's researchers find, is 30 days. Cervera's survey covers the whole of the Brickell area, from the south bank of the Miami River to the Rickenbacker Causeway.
Demand, Ms. Lamadrid said, continues to be extremely strong.
"Inventory is dropping dramatically, and rates are increasing," she said. "That's one of the first strong indicators that prices are going to move up, because there's a tipping point where renters become buyers. We are getting close to that point as it gets harder to find a nice rental unit."
Renters, she said, are typically young professionals who work in the downtown area, "and those tenants will grow up to be our buyers. Long term, they will give us a much more interesting city and a much more affordable base."
"We also have some foreigners who are looking into the area," Mr. Defortuna said, "and some people who were renting in Kendall, South Miami, West Dade and Broward and now find Brickell is much more convenient."
The trend for condo units to be occupied by renters, Mr. Defortuna said, is the opposite of the rage a few years ago to convert rental properties to condos.
Since cash is still king in the residential market, buyers tend to be Latin Americans looking for investments in a relatively stable economy.
"We see a big demand among international buyers," Ms. Hyer said, "some Europeans, but largely people from Brazil, Argentina, the Dominican Republic, Panama, Venezuela.
"Upper-class Latins love Brickell, and especially when they can buy foreclosed units as investments and then rent them out, it really makes sense. They can't buy this quality in their own countries at this price.
"These are people who still believe in the long-term future of Miami real estate."
About 75% of these buyers paid cash, Mr. Defortuna said, and are under no pressure to resell. "They're happy to keep them rented and generate cash flow," he said.
Ms. Hyer said the numbers of younger renters, many migrating from older and more expensive properties in South Beach, are not only eating up excess rental inventory but also changing Brickell's image.
"There are so many young professionals here now that it's become very cool," she said, "and more people want to live there. So while in 2008-'09, when a lot of new projects came on at the same time, there were so many beautiful units, all empty, and a lot of competition, now there's not so much rental inventory left."
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