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Front Page » Real Estate » Downtown condo rents may have peaked

Downtown condo rents may have peaked

Written by on April 15, 2015
Downtown condo rents may have peaked

Brokers say condo rental rates in Brickell and downtown are largely the same as six months ago and expect they will remain so or even trend down a bit as new units come on line.

The market is strong with a high concentration of young professionals ages 30 to 40 renting in this part of the city, said Jonathan Garcia, broker for ONE Sotheby’s International Realty.

However, he said, there’s a correlation between rental rates and affordability. What the average person earns in Miami is not moving up, especially compared with other major US cities, Mr. Garcia said. He says that certainly contributes to the condo rental prices being capped where they are now.

Sergio Mannarino, vice president of sales and operations for OneWorldProperties, agrees that rents in this part of the city can’t go much higher. “People can’t afford to pay any more than they are now,” he said. “We are not where we should be here in Miami with salaries.”

In the past five years, condo sales doubled or tripled and condo rental rates appreciated 35% to 45%, according to Duff Rubin, senior vice president of the Southeast region for Coldwell Banker Residential Real Estate. Demand for the rental units has also grown tremendously, he said, in large part because of the development the Brickell and downtown areas have seen in the last few years with more restaurants, shopping and entertainment available to young professionals.

“In 2010, the Epic had 30% to 40% occupancy,” Mr. Rubin said. “Today it’s at 90% or higher.”

Both Mr. Mannarino and Mr. Garcia say the downtown and Brickell market is strong and units rent fairly quickly. If priced correctly, Mr. Mannarino said, a one-bedroom unit in Brickell does not remain on the market more than two weeks.

Overall, Mr. Garcia said, the average condo rent has been approximately $2 per square for the past six months in Brickell and downtown.

Mr. Mannarino concentrates mainly on Brickell properties such as Icon Brickell, Infinity at Brickell, The Plaza at Brickell, 500 Brickell and 1060 Brickell. For those buildings, he said – on average – a studio (about 550 square feet) rents for $1,700 monthly; a one bedroom (between 750 and 800 square feet) between $2,000 and $2,400; and a two-bedroom (between 1,100 and 1,200 square feet) $2,700 to $3,200.

There are very few three-bedroom units, Mr. Mannarino said, but those on the market are renting for $3,500 to $4,500 (between 1,700 and 2,000 square feet).

Looking forward, Mr. Garcia said new inventory coming online will keep condo rental prices the same or the market might even witness a slight correction.

“Our equation has factors outside the US that other markets don’t have,” Mr. Garcia said. He said the condo market in Miami is strongly linked to foreign demand, with some 80% of the units purchased by foreign investors. He said changes in the currency exchange rate of countries like Brazil, where the currency has dropped 30% since October, will affect Miami.

In the next 2½ years, Mr. Garcia said, 40,000 new units will be coming online in South Florida, 20,000 of which will all be in the downtown market at the same time.

With so much new inventory coming online, renters will have more options, Mr. Mannarino said. “Asking prices have been increasing in Brickell, but that will likely change,” he said. “When you look at the new product [such as BrickellHouse and 1100 Millecento], other than amenities, they are not necessarily better than existing inventory but people want to explore new buildings.”

With so many new units hitting the market at once, Mr. Rubin said, renters will have that many more choices so prices will have to be more reasonable.

“Owners saw unrealistic appreciation, which is no longer sustainable,” he said. “Supply has caught up with demand.”

3 Responses to Downtown condo rents may have peaked

  1. Ben Grimm

    April 16, 2015 at 1:02 pm

    It’s funny because last month the Miami Herald on NPR had realtors talking about how cheaper it was to buy a house/condo than to rent. And now here we are saying the opposite. Realtors don’t know the market. They are reactionary creatures.

    PS: the median household income in Miami is approximately $32k. Our building boom isn’t about providing housing for “median households”.

  2. Sasha

    April 22, 2015 at 3:22 pm

    Ben, your arguments, most of them, are solid yet your tone contradicts them. This article is about rent’s current levels in downtown/brickell, inventory, and possible future outlook based on data you are confirming, ie: cheaper to buy than rent right now, median household income. Who’s renting? locals. what is the average household income for locals? exactly. People from Mars know who’s fueling the condo boom, certainly not the locals, so how much more could the current rent prices go up so that the locals can actually sustain it? Perhaps you meant to comment in a different article. Let’s not generalize all realtors. That would not be fair. Cheers to good communication!

    • Ben Grimm

      April 23, 2015 at 9:13 am

      You may be right. I think I did finish this comment at another similar article. Miami Today reads like a trade publication. So when they say that rents going up it’s a one-sided newsletter for whichever realtor the author decided to question. This publication doesn’t do in-depth reporting on the subjects it writes about.

      Though when I generalize realtors I may not be all that unfair. Realtors don’t contradict each other on market direction. They just go with the perceived trend and push deals in that direction.