The National Association of Realtors (NAR) and other industry analysts have examined a variety of indicators to determine the hottest real estate markets in 2022. According to the latest report from NAR (2021 Q4 Commercial Real Estate Metro Market Reports), Florida stands out as the nation’s most dynamic real estate market, with nine cities ranking among the top 15 in the United States.
The report’s conclusions are based on the Commercial Real Estate Index, which measures market trends across nearly 400 metropolitan areas throughout the U.S. This index takes into account a city’s economic and demographic conditions, along with key real estate market indicators such as absorption rates, vacancy rates, new housing deliveries, available inventory, sales volume, prices, and returns on investment.
For example, the Miami–Miami Beach–Kendall metropolitan area experienced a 17.4% increase in multifamily apartment rents over the past 12 months, compared to 11.3% nationally. Office property vacancy rates in this area are 20% lower than the national average, with over 643,000 square feet absorbed, even as the country saw more than 39 million square feet of office space emptied during the same period.
Similarly, industrial asset rents in Florida rose by 15.3%, significantly higher than the national increase of 8%, and retail properties have historically low vacancy rates at 3.4%, compared to 4.6% nationally. The tourism and leisure industries in Florida are also rebounding much faster than elsewhere in the country, with Miami, Fort Lauderdale, and West Palm Beach leading the way, joined by Naples and Jacksonville.
A “Remarkable” Year for Investors
According to John Chang, director of research at Marcus & Millichap, the economic and demographic fundamentals in Florida are “particularly strong.” The company’s latest report, the 2022 Multifamily Investment Forecast, indicates that vacancy rates are at their lowest in 30 years, and rental growth has reached record levels in many markets. Most investors believe that several years of growth lie ahead following the COVID-19 crisis.
However, the report notes a significant challenge: the difficulty of deploying capital due to a shortage of assets for sale, leading to a bidding system among potential buyers that can distort prices.
Multifamily sector financing is expected to rebound in 2022 as the market normalizes after the surge of the past 18 months. Government agencies Fannie Mae and Freddie Mac each have over $78 billion to deploy in 2022, with a focus on financing affordable housing.
One lingering uncertainty concerns the cost of capital, subject to Federal Reserve actions regarding interest rate hikes in the second half of 2022. Nonetheless, according to the broker’s report, “an increase in rates should not have a significant impact on commercial real estate, given the global capital active in the sector.”