Miami Maintains Top Hot Spot As Apartment Rental Market Remains Competitive

By ERIN FLYNN JAY

Driven by job opportunities and a favorable climate, Miami continues to maintain its position as the nation’s most competitive market for apartment renters, highlighting opportunities for investors in multifamily and commercial real estate.

Miami is a major economic center with a diverse economy, including finance, technology, healthcare, and tourism. The city’s population has remained strong through the pandemic as a result and according to a recent report by RentCafe, the apartment occupancy rate there is 96.5%

The lease renewal rate in Miami is at 73.6%. When they do come onto the market, average apartments stay vacant for 36 days and have 19 prospective renters, according to the report.

Doug Ressler, manager of business intelligence for Yardi Matrix, said in addition to the apartment sector, office and retail spaces in the city are also doing well.

“The presence of major corporations and a thriving business environment create a steady demand for office space, especially in business districts and tech corridors. The growing population supports a vibrant retail sector, particularly in mixed-use developments and suburban shopping centers,” Ressler said.

At the same time, Suburban Chicago rose from 10th place to become the second-most competitive rental market.

In Suburban Chicago, limited supply makes the market highly competitive, with 13 prospective renters vying for each available unit. The average apartment stays vacant for 44 days.

The occupancy rate for apartments in Suburban Chicago is at 95.2%. The lease renewal rate is at 68.7%.

“Under these tight circumstances, almost 70% of apartment dwellers renewed their leases at the kickstart of the rental season, which is a significant 1.2% increase year-over-year,” said Ressler. “Over half of Chicago households are rented, making it a rental hotspot. The surrounding areas of Chicagoland also offer higher ROI compared to many other parts of the country.”

To get these numbers, RentCafe’s research team analyzed Yardi Systems apartment data across 137 rental markets in the country. The data comes directly from market-rate large-scale multifamily properties of at least fifty units. Fully affordable multifamily properties were excluded.

“To calculate each market’s score, we ranked them according to five metrics and their averages for January through March 2024: apartment occupancy rate; average total days vacant; prospective renters per vacant unit; renewal lease rate, and share of new apartments completed during the same timeframe,” said Ressler.

Ressler said the national competitiveness score is 73.4 out of 100. Two-thirds of U.S. renters are renewing their leases.

So what does this mean for investors?

Ressler said understanding which cities offer the best commercial real estate investment opportunities requires a deep dive into economic trends, market stability, and specific asset classes.

He used Nashville and Charlotte as examples.

Nashville’s diverse economy has strong healthcare, education, and entertainment sectors. The city’s population has been growing rapidly, attracting both businesses and residents.

“Nashville’s population growth has driven demand for multifamily housing, particularly in downtown and suburban areas,” said Ressler. “The healthcare and education sectors create a stable demand for office space, especially in business districts and near major institutions. The city’s strategic location and transportation infrastructure make it an attractive market for industrial properties, including logistics and manufacturing facilities.”

Charlotte’s economy is diverse, with strong finance, technology, and healthcare sectors.

“Charlotte’s status as a financial hub creates a strong demand for office space, particularly in downtown and business districts,” said Ressler. “The influx of young professionals and families has driven demand for multifamily housing, especially in urban and suburban areas. The growing population supports a vibrant retail sector, particularly in mixed-use developments and suburban shopping centers. Charlotte’s cap rates for office space range from 6% to 7%, while multifamily properties offer cap rates around 5% to 6%. Retail properties typically have cap rates between 6% and 7%.”

Overall, Ressler said the rental market is likely to experience strong demand driven by immigration, along with a gradual stabilization of rents as supply increases. Investors and property managers should prepare for these changes by understanding local market conditions and the specific needs of immigrant populations.

Trends to watch in multifamily include:

Increased Rental Demand – Strong population growth due to immigration will likely increase the demand for rental housing.

Shifts in Migration Patterns – Ressler said there has been a shift in domestic household migration, with more moves occurring within the same metro area rather than between metro areas. This could result in less impact from out-of-town buyers and renters on home prices and rents in most metros.

Affordability Challenges – Ressler said many households may struggle to afford homes, leading to increased demand for rentals. This is particularly true in areas where home prices are high, and the cost of living is rising.

Market Thaw and Stabilization – The housing market is expected to gradually thaw, with mortgage rates slowly declining from their highs in 2023. This could lead to a stabilization of rents, which may more closely track inflation rates.

Supply and Development – An increase in purpose-built rental completions is anticipated due to the record number of projects started in recent years. However, Ressler said this increase might not fully meet the growing demand, which could keep rental prices elevated.

Ressler said that the United States remains a prime destination for foreign investment.

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