The business-to-business real estate leader BisNow regularly hosts regional real estate summits in North America and the British Isles. One of the summits held this past summer was the BisNow South Florida Deal Flow and Investment Strategies Summit, which examined the market trends and conditions around the region. M Patrick Carroll was among the speakers who addressed developers, investors, brokers, and economists in attendance.
Birds-Eye View of the South Florida Real Estate Market
Speakers noticed broad trends in the regional market, which coincide with many economic trends throughout the United States.
As expected, hospitality properties were the worst performers and actually due to the Covid-19 pandemic. Mid-performers were the retail and office sectors, which both saw improvement but face challenges specific to them.
The greatest growth occurred in the industrial and multifamily sectors, with the latter doing particularly well. Multifamily housing was the sector that Carroll spoke on.
Multifamily Housing Trends in South Florida
In his summit address, Carroll observed a positive recent history and a potential imminent downturn.
Real estate investor M Patrick Carroll first noted the positive real estate market that South Florida has seen over the past year. The region has received an unprecedented amount of investment throughout 2020 and 2021, raising values for investors who already owned properties and providing near-immediate returns for those who purchased properties during this time. As mentioned, the multifamily housing sector grew the most over this time.
Carroll warned that such growth can’t be sustained indefinitely, however. In his words, “Things don’t go up forever.” Carroll and other speakers noted three specific issues that could lead to a less active market.
First, there could be a coming downturn in the real estate market at large. While such a downturn would affect different sectors differently, multifamily housing would almost certainly be impacted. In fact, it might be more affected than some other sectors (e.g. hospitality) given multifamily housing’s recent accelerated growth.
Second, high property insurance rates throughout the region might deter some investors who would prefer properties with lower overhead costs. Jeff Nelson explained that insurance has historically been very cheap in the region. In some cases, it’s tripled in price over the past few years. Even where such an increase hasn’t occurred yet, rates still aren’t as low as they once were.
Third, the increase in property values — especially in multifamily housing and industrial — will create lower capitalization rates for investors. This will likely make properties elsewhere more attractive opportunities for new investors and those seeking to buy new properties.
Warnings to Heed From M Patrick Carroll
Given that these potential negative projections are coming from M Patrick Carroll, they are warnings that investors in the region should heed. M Patrick Carroll is one of the most established real estate moguls in South Florida, managing no less than 30,000 units in multifamily housing complexes.