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South Florida Developers Are Selling Rentals to Meet Condo Demand

Florida developers are converting rentals into for-sale condos to meet the demand for modern homes while complying with strict regulations.

South Florida Developers Are Selling Rentals to Meet Condo Demand

Florida developers are converting rentals into for-sale condos to meet the demand for modern homes while complying with strict regulations.

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Good morning. Developers in South Florida are addressing the region’s affordable condo shortage by converting rental units into for-sale properties, meeting the demand for modern, safer homes while complying with stricter building regulations.

Editor's note: The CRE Daily staff will be off for Thanksgiving. We'll see you Friday—have a great holiday! 🦃🦃🦃

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Market Snapshot

S&P 500
GSPC
6,021.63
Pct Chg:
+0.57%
FTSE NAREIT
FNER
837.67
Pct Chg:
+1.33%
10Y Treasury
TNX
4.263%
Pct Chg:
-0.039
SOFR
30-DAY AVERAGE
4.844
Pct Chg:
0.0%

*Data as of 11/26/2024 market close.

MULTIFAMILY MOVES

South Florida Developers Selling Rental Condos to Meet Demand

In response to South Florida’s shortage of newer, affordable condos, more developers are converting rental properties into for-sale units.

Long-term problem: South Florida’s condo market faces several hurdles, like outdated inventory and few options for middle-income buyers. According to ISG World, only 3% of condos listed in Broward, Miami-Dade, and Palm Beach counties are less than 10 years old. Most new inventory is for luxury buyers, leaving a gap for affordable housing.

Closing the gap: Consequently, more South Florida developers are stepping in to fill this void by converting rental properties into for-sale condos. This helps meet the demand for safer, modern units while repurposing existing buildings.

Case studies: One high-profile example is Circ Residences, a 25-story rental tower in Hollywood, FL, now being sold as condos. Units are priced between $500K–$1.2M, and buyers are drawn to updated amenities and compliance with current safety standards. Elsewhere, S2 Development converted the garden-style Atlantica at Dania Beach into condos priced at $450K–$750K. The Elser Hotel & Residences in Miami also pivoted from rentals to condos, with 94% of its 646 units sold.

It all adds up: A “perfect storm” of factors is driving this condo conversion trend, including a new Florida law that mandates structural inspections and full reserve funding for condos older than 30 years, high unmet demand for safer housing with modern amenities (that’s still affordable), and a post-pandemic oversupply of rentals in the Sunshine State, which has softened rental demand.

➥ THE TAKEAWAY

Win-win situation: Condo conversions are helping address South Florida’s need for middle-market housing while meeting the state’s stricter building safety requirements. Developers benefit by bringing properties to market faster and more affordably than starting from scratch, while buyers gain access to modern, hurricane-compliant homes in sought-after areas.

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✍️ Editor’s Picks

  • Strategic stake: Blackstone (BX) expands its digital and energy infrastructure portfolio with a $1B stake in Santander’s (SAN) loan assets, reflecting growing PE interest in data centers.

  • Market distress: Mounting financial pressures in US CRE are hitting multifamily and office sectors hardest, driven by rising vacancies, high interest rates, and looming loan maturities.

  • Fraud fallout: Nightingale Properties CEO Elie Schwartz will finally face federal charges for allegedly misappropriating $54M from crowdfunding investors.

  • Expanding horizons: The US CRE investable universe has reached $27T, with $12T in institutional capital favoring alternative assets like self-storage and single-family rentals.

  • Inflation eases: The Fed’s preferred inflation measure rose 2.3% annually in October, aligning with expectations and reinforcing gradual rate cuts as inflation approaches the 2% target.

  • Higher limits: In 2025, Fannie Mae (FNMA) and Freddie Mac (FMCC) will back mortgages for homes costing nearly $1M, offering only marginal relief in an increasingly unaffordable housing market.

🏘️ MULTIFAMILY

  • Multifamily momentum: Nationwide apartment sales surged 18% YoY to $11B in October, driven by portfolio transactions, stabilizing prices, and robust investor interest in urban multifamily assets.

  • Strategic expansion: Bell Partners acquired the 349-unit Horizon at Miramar, now Bell Miramar Place, for $121M, highlighting Florida’s long-term rental demand despite regional rent declines.

  • Housing lag: While multifamily production surged 54% since 2005, housing shortages persist due to slow growth in middle housing, hindered by restrictive zoning and regulatory barriers.

  • Tenant settlement: Blackstone (BX) will pay $15M to settle rent overcharge claims at Parker Towers in Queens, marking one of NYC’s largest rent-stabilization settlements.

  • Reset expectations: Despite multifamily sales surpassing $4B in LA this year, experts caution investors shouldn’t hope for steep discounts but instead adapt to sustained higher interest rates.

  • Suburban shift: Equity Residential (EQR) acquired the Aventine Littleton apartments near Denver for $91M, part of a trend toward luxury multifamily investments in desirable suburban markets.

🏭 Industrial

  • Digital play: Blackstone (BX) acquired a stake in Santander’s (SAN) $1B digital infrastructure loan portfolio, advancing its focus on data centers, renewable assets, and European investments.

  • Charlotte entry: Stonelake Capital Partners entered the Charlotte market with a $51M acquisition of a 402.4 KSF Amazon-occupied industrial facility.

  • Chicago boom: Trammell Crow and Standard Real Estate sold the nearly full Woodridge Industrial Center near Chicago for $33.6M, highlighting the metro's robust industrial market.

🏬 RETAIL

  • Retail returns: Physical stores are essential to reverse logistics through Buy Online/Return In Store (BORIS) strategies, cutting return costs, boosting foot traffic, and driving additional sales.

  • Retail resurgence: Vestar reports its strongest retail leasing in 20 years, driven by resilient tenants, high demand for suburban open-air centers, and opportunities fueled by lower interest rates.

  • Tenant turmoil: Despite rising vacancies and negative absorption in Atlanta retail, landlords are holding firm on high rents, betting on stronger tenants and limited new supply.

  • Retail resilience: South Florida retail leasing slowed in Q3 due to limited space, but rents remain strong, with Miami leading regional growth and tight vacancies sustaining above-average pricing.

🏢 OFFICE

  • Apple expands: Apple (AAPL) added 61 KSF at Vornado’s (VNO) Penn 11, bumping its footprint to 460 KSF—a strong signal of NYC and Midtown South’s appeal as a premium office hub.

  • Distressed deal: Harmit Mann acquired a 198.2 KSF Oakland office complex for $13M ($65 PSF), a sharp 67% discount from its 2019 price, due to the crime-affected Hegenberger corridor.

  • Public pivot: Austin purchased the 386 KSF One and Two Barton Skyway for $108M, repurposing the office property into a public safety HQ while supporting Brandywine’s balance sheet strategy.

  • Doubling down: Brazil’s government expanded and renewed its lease to occupy 65 KSF at Midtown’s iconic Daily News Building, solidifying its diplomatic and financial presence in Manhattan.

🏨 HOSPITALITY

  • Business boost: US hotels saw strong weekday demand this fall, driven by business travel, but lagging leisure weekend stays and downgraded forecasts suggest 2025 may bring modest gains.

📈 CHART OF THE DAY

CBRE's latest Senior Housing & Care Investor Survey

CBRE's latest Senior Housing & Care Investor Survey revealed slight cap rate declines across most asset types but noted softer rent growth expectations for 2025, reflecting tempered investor optimism amid uncertain market trends.

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