Report: Sales of older multifamily complexes in Florida have fallen

A new report finds that sales of buildings built prior to Hurricane Andrew have seen a big drop as costs to repair them rise.


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Updated building codes have slowed the number of transactions of multifamily properties in Florida built before 1992. 

That’s the findings of a report issued Jan. 21 by the structured finance, commercial real estate and banking research firm Trepp.

According to the report’s authors, the evolution of building codes after Hurricane Andrew in 1992 and updates following the collapse of the Champlain Tower in 2021 have helped lead to a recent slowdown on the sales volume for older properties.

The report says total volume peaked at 116 transactions totaling $1.14 billion 2021. But last year, there were only two transactions, worth $15.7 million.

While inflation and high interest rates have contributed to the slow down, the authors say “as inspections reveal the scale of necessary repairs, aging multifamily properties face challenges similar to those of older condominiums.

“Deferred maintenance, combined with rising costs of compliance, has created a financial ‘cliff’ for many owners.”

One reason for this is structures built before Andrew often lack modern reinforcements, including hurricane straps or impact-resistant windows.

Putting off needed repairs and older design standards, the report says, leaves these buildings particularly vulnerable to extreme weather and costly repairs under today’s stricter regulations.

Following Andrew, in 2002, the state created a building code that is frequently updated and includes mandates to address issues like wind resistance and floods. Theses codes, Trepp says, set “a new baseline for building resilience.”

Modern buildings are now built to meet higher requirements and standards, better protecting them from storms.

Interestingly, Trepp also found that older buildings still have a higher debt service coverage on average than newer ones.

The data, Trepp says, “paints a complex picture.”

“Older, unrenovated multifamily properties may still perform well in some financial metrics, such as debt service coverage, but they face mounting pressure from deferred maintenance, stricter inspection requirements, and the rising cost of compliance.”

Still, properties built after 2002 with the updated standards appear to be a safer investment.

 

author

Louis Llovio

Louis Llovio is the deputy managing editor at the Business Observer. Before going to work at the Observer, the longtime business writer worked at the Richmond Times-Dispatch, Maryland Daily Record and for the Baltimore Sun Media Group. He lives in Tampa.

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