Question: A bunch of new rental apartments are being developed in Downtown Fort Lauderdale and the surrounding area. I am curious if the Downtown Fort Lauderdale market offers a substantial discount for young renters, who might be getting priced out of Brickell and Downtown Miami.
South Florida renters who are looking for an urban lifestyle at a cheaper price than Greater Downtown Miami may want to consider leasing a unit in the market of Downtown Fort Lauderdale and the Beach.
Leases in the Downtown Fort Lauderdale and Beach market – which stretches from Sunrise Boulevard south to State Road 84, and the Atlantic Ocean west to Northwest Seventh Avenue – were completed on a median basis for nearly 90 cents a square foot less per month than in Greater Downtown Miami in the first 10 months of this year, according to data from the Southeast Florida MLXchange.
In dollar terms, this means a lease for a 1,000-square-foot unit would cost about a $900 less to rent in the Downtown Fort Lauderdale and Beach market than in Greater Downtown Miami.
Generally speaking, smaller units achieve higher prices per square foot than larger units. As a result, a studio or one-bedroom apartment will typically rent for a higher monthly rent per square foot than a two- or three-bedroom unit in both urban areas.
This factor is key for those renters who have roommates contributing to the monthly rent.
Consider that in the first 10 months of this year, renters leased an average of 124 units monthly at a median price of $1.43 per square foot per month in the Downtown Fort Lauderdale and Beach market.
This year’s leasing activity in the Downtown Fort Lauderdale and Beach market is comparable to the same January through October period of 2013, when tenants leased an average of about 132 units monthly at a median price of $1.41 per square foot per month.
Some five years ago in the first 10 months of 2010, tenants leased an average of about 128 units monthly at a median price of nearly $1.20 per square foot per month.
This means the median rental rate in the Downtown Fort Lauderdale and Beach market has increased about 21 percent since 2010.
Now, compare this to the Greater Downtown Miami rental market, where tenants leased an average of more than 510 units monthly at a median rental rate of $2.31 per square foot monthly between January and October of this year.
The median rental rate in Greater Downtown Miami is up more than 7 percent from the same 10-month period in 2013, when tenants paid $2.15 per square foot monthly for a unit.
Back in 2010, renters paid a median rental rate of $1.66 per square foot monthly for a unit in Greater Downtown Miami between January and October.
This means rental rates in Greater Downtown Miami are up nearly 40 percent in the last five years.
Another point to consider is that about two months of rental inventory is currently available for lease in both markets of Downtown Fort Lauderdale and the Beach as well as Greater Downtown Miami.
A healthy market typically has about six months of available inventory. Fewer months of supply is a sign of a landlord’s market, while more months suggest a renter’s market.
Before writing off the Downtown Fort Lauderdale and Beach market as a viable place to live due to it not having the same number of restaurants and nightlife opportunities as Greater Downtown Miami, it is important to know that a new passenger rail service called All Aboard Florida is scheduled to begin frequent daily service next year that will connect the two urban areas.
It is also worth noting that developers have planned and are building several thousand new rental units in both markets of Downtown Fort Lauderdale and Beach as well as Greater Downtown Miami.
This new rental supply could create downward pressure on lease prices going forward.
The unanswered question going forward is whether South Florida renters are willing to pay about a $30 a day premium to live in Greater Downtown Miami when the Downtown Fort Lauderdale and Beach market is less than a 30-mile cab ride away.
Thought Of The Week: Single-Family Sale Commissions Outpace Preconstruction Condos
South Florida real estate brokers – who were negotiated down on commissions during the Great Recession – are suddenly feeling loved once again.
As competition for buyers intensifies in South Florida, a variety of developers have ratcheted up the commissions being offered to buyer brokers who sell preconstruction condos in their projects to between 5 percent and 8 percent of the presale contract price, according to the latest Developers Price Survey conducted by CraneSpotters.com.
(For disclosure purposes, my firm operates the website)
Compare this with the 3 percent commissions typically paid to buyer brokers for procuring transactions on resale condo units.
Not to be ignored, Miami-based homebuilder Lennar Corp. is now offering commissions of 10 percent in the month of November to buyer brokers who can bring in purchasers for new single-family houses that are “move-in ready,” according to marketing literature.
To qualify for the generous real estate commission, Lennar requires that the single-family house deals be completed before December.
Peter Zalewski is a real estate market consultant, non-practicing licensed real estate broker and columnist for The Real Deal who now answers reader questions about the South Florida real estate market in a new weekly Friday column. Questions and comments can be sent to southfloridanews@therealdeal.com. The TRD editors will choose which submissions will be addressed.