South Florida:
A Market Repricing
in Real Time.

The Risk-Free Rate Breaks 5%

One number reframes this entire issue. The 10-Year Treasury closed at 5.01% on September 18, its highest level since 2007, after U.S. crude crossed $100 per barrel. On September 16 the FOMC voted 12-0 to hike 25bps to 3.75 to 4.00%, and the accompanying dot plot showed 16 of 18 participants expecting at least one more increase, with four seeing two. In August we wrote that a range-bound 10Y and a fourth-quarter cut were setting up cap rate compression into 2027. That thesis is dead, and we are retiring it in print rather than quietly. Every model in this report has been re-run at a 5.00% risk-free rate, and we now treat that as a floor rather than a ceiling.

The consequence is arithmetic. Miami-Dade multifamily at a 5.00% cap no longer clears the risk-free rate at all: it now prices 1bp inside it. Broward and Palm Beach at 5.45% clear it by 44bps, against 110bps a month ago. Office at 6.00 to 6.75% clears by 99 to 174bps. Cap rates have not moved because sellers have not capitulated and there is almost no forced selling, so the adjustment is arriving through transaction volume instead of price. For a buyer with unlevered capital and a genuine operating edge, that gap between where sellers are marked and where the cost of capital sits is the entire opportunity of the next four quarters.

Underneath the rate shock, the residential picture is mixed and diverging. Palm Beach single family medians climbed to $700K (+11.8% YoY) on ultra-luxury acceleration, Miami-Dade decelerated to roughly $671K (+3.3% YoY) on the MIAMI REALTORS series, with Redfin's broader all-property-type measure showing an August median of $556K essentially flat at +0.2% YoY, and Broward remains soft near $480 to $500K. The luxury condo segment is leader-take-most: South Beach cleared $1,538/SF (+37% YoY) while the broader condo market sits at $310K (-1.6% YoY). Two revisions matter for the medium term: Florida net domestic migration has collapsed roughly 90% from its pandemic peak to about 22,000 a year, and property insurance has flipped from headwind to tailwind, with Citizens cutting rates 14.0% in Miami-Dade and 14.1% in Broward. Both are detailed below.

Regional Overview

The tri-county region presents a widened divergence this month. Palm Beach now leads on price appreciation (+11.8% YoY per MIAMI REALTORS mid-July release), powered by ultra-luxury demand on the Island and coastal Delray to Jupiter corridor. Miami-Dade has decelerated to +3.3% YoY on the single family median from the double-digit spring peak, still positive but no longer the leader. Broward remains the soft county with median prices in the $480 to $600K range depending on inclusion of condos versus SF only, five to six months of softness now behind it. The rate reversal since May has cooled buyer conviction below the $1M line more than above it.

Ultra-Prime Coastal Product Outperforms

The luxury condo market continues to benefit from a structural supply deficit in ultra-prime locations. Miami Beach and Bal Harbour see sustained demand from Latin American and European buyers hedging against geopolitical uncertainty. Coral Gables and Coconut Grove are outperforming on YoY growth (+8 to 9%) as domestic relocators from the Northeast target walkable, family-oriented submarkets with top-tier schools.

Submarket Performance

Residential performance varies significantly by submarket and buyer profile. Growth corridors like Wynwood/Midtown (+7.8%) and Edgewater (+6.1%) continue to attract young professionals and tech workers, while legacy luxury markets like Key Biscayne and Bal Harbour maintain premium pricing on the strength of constrained supply and international demand.

Strongest Risk-Adjusted Returns in the Region

The headline this month is not rent growth. It is that South Florida multifamily cap rates no longer clear the risk-free rate. With the 10Y at 5.01%, Miami-Dade product trading at a 5.00% cap carries a spread of negative 1bp. Broward and Palm Beach at 5.45% carry 44bps. A year ago those same assets cleared 110 to 120bps. Cap rates have not repriced because sellers have not capitulated and there is very little forced selling, but an institutional buyer is now being asked to take leasing, insurance, capex, and illiquidity risk for essentially no premium over a Treasury.

Fundamentals underneath are solid but decelerating in line with the migration revision. Miami-Dade asking rents reached $2,671 in June 2026, up only 1.3% YoY, and the submarket dispersion is extreme: Overtown asking rents rose 12.8% and Miami Beach 9.7% in May, while Brickell, Homestead, Opa-locka, and Little Haiti all posted declines. Vacancy remains in the 4.6 to 6.2% band depending on source and unit-count cutoff. Recent trades validate the value range rather than the pricing thesis: Mill Creek's 397-unit Modera Academical Village in Davie traded to a Goldman Sachs entity at $154.5M, or roughly $389K per unit, and the 269-unit Altavista Bay Pointe in Miami traded at $64.8M, roughly $241K per unit.

Flight to Quality Accelerates

Office is the one sector where the fundamentals improved this quarter. Miami-Dade posted 127,356 SF of positive net absorption in Q2 2026 and vacancy tightened to 10.8%, and MIAMI REALTORS reported in August that South Florida office rents have now overtaken New York. Overall asking rents reached $62.75 to $65.50 PSF full-service gross, with Class A at $70.01 to $73.37. Brickell is the outlier: average asking rents hit $92.51 PSF in Q2 with Class A running to $102.66. Coral Gables holds the tightest vacancy in the region at 8.0% with asking rents at $67.20, and high-credit tenants continue to expand into the super-suburbs, closing the historical credit and cap rate gap with the urban core.

The caution is the denominator. Office cap rates of 6.00 to 6.75% now clear the 10Y by only 104 to 179bps, down from 170 to 245bps in August. Leasing is strong, pricing is not yet reflecting the cost of capital, and any asset requiring a refinancing inside 24 months is exposed. Recent trades skew to owner-users and credit buyers rather than levered investors: Memorial Healthcare paid $69M, or $272 PSF, for the 254,000 SF Venture Center in Hollywood, and Baptist Health paid $53.5M, or $577 PSF, for a 92,700 SF Coconut Creek retail building.

The Two Sectors Still Clearing on Fundamentals

Industrial reversed its contraction in Q2 2026. Miami-Dade absorbed 782,677 SF, more than offsetting occupancy losses from the prior three quarters, though vacancy still rose 60bps to 7.7% as 769,100 SF delivered. Leasing ran 3.0M SF in the quarter and 7.4M SF year to date, with asking rents at $17.19 PSF NNN, up 1.5% YoY. Broward absorbed 136,663 SF, reversing a two-year contraction, held vacancy flat at 7.3%, and posted higher rents than Miami-Dade at $17.60 PSF NNN. The Broward construction pipeline has fallen to 885,000 SF, well below 2025 levels, which removes most of the forward supply risk in that county.

Retail is the tightest sector in the region and arguably in the country. Tri-county vacancy sits at 3.5% with 508,000 SF of positive net absorption and 2.8% annual rent growth on an average asking rent of $36.50 PSF. Miami-Dade leads at 3.0% vacancy with $42.50 PSF asking, up 2.6% on the quarter. Palm Beach improved to 4.0% vacancy at $30.14 PSF, up 3.4% YoY. Broward is the exception, giving back 102,436 SF and slipping to 4.3% vacancy. Scarcity, not demand growth, is what is holding these numbers.

What Actually Cleared

Marked-to-model cap rates are an opinion. Closed trades are a fact. Below are the most recent South Florida transactions of institutional size, with buyers, sellers, and unit economics. The pattern is worth noting: owner-users, health systems, and unlevered institutional capital are winning deals, while levered value-add buyers are increasingly absent. That is what a 5% risk-free rate does to a bid stack.

Economic Indicators

The macro backdrop repriced violently in the first two weeks of September, and in the opposite direction to the one we and most of the market were underwriting a month ago. The 10-Yr Treasury has broken out of its multi-quarter range to 5.01% on September 18, its highest level since 2007, after U.S. crude crossed $100 per barrel and revived inflation expectations. On September 16 the FOMC delivered the 25bp hike to 3.75 to 4.00% on a unanimous 12-0 vote, a complete reversal of the fourth-quarter cut that markets priced through the summer. The dot plot is the more consequential signal: 16 of 18 participants project at least one further increase this year, and four see two. Traders are already assigning meaningful odds to another hike in October.

Freddie Mac's 30-Yr fixed caught up to the long-end move and printed 6.95% the week of September 17, up 19bps in a single week and +69bps YoY against 6.26% a year ago. The domestic data underneath remains orderly: Florida unemployment at 4.7% and Miami area CPI at +3.4% YoY (both June 2026 BLS releases, down from the +9.6% spring peak) describe a normalizing economy, not a stressed one. That is precisely the problem. A resilient economy plus an oil shock removes the case for easing, and the long end is now the only variable that matters to our underwriting. We have re-run every open deal at a 5.00% risk-free rate, and we are writing this issue against that assumption rather than the compression thesis we carried into August.

Demographic Tailwinds

We are revising this section down, and we would rather say so plainly than keep quoting a number that has stopped being true. Florida still ranks second only to Texas in absolute population gain, adding 196,980 residents in 2025, but the composition has deteriorated sharply. Net domestic migration has fallen from roughly 208,000 a year at the pandemic peak to approximately 22,000 in 2025, and total migration-driven growth has slowed to about 551 people per day from roughly 1,640 per day in 2022. University of Florida and Census estimates both show the growth rotating to mid-sized inland counties such as Polk, Pasco, and Marion, while the Miami metro itself lost 0.1% of its population on negative net domestic migration and reduced international inflows. The tri-county demand engine is now driven by household formation, wealth concentration, and international capital rather than by raw headcount growth.

Two things have moved the other way. Insurance, our single largest operating-expense headwind for three years, has turned into a genuine tailwind: Citizens approved an 8.8% average statewide rate decrease for 2026, its largest in 24 years, with county-level cuts of 14.0% in Miami-Dade, 14.1% in Broward, and 11.9% in Palm Beach, and rates fell in 51 of Florida's 67 counties. The average Florida premium is now near $3,815. Separately, corporate relocations (Citadel, Elliott Management, Point72) continue to reshape the office landscape, and Brightline rail keeps pulling the I-95 corridor into commuting range. Net of all this, we are underwriting flat-to-modest population growth and taking our absorption assumptions down accordingly.

Key Convictions

The structure of the South Florida thesis has changed this month. Two of its three legs, migration and cheap capital, have weakened materially. The third, scarcity of developable coastal land, is intact and is now carrying more of the argument. Insurance has moved from the headwind column to the tailwind column. We would rather restate the convictions honestly than repeat last month's.

Key risks to monitor: whether the 10Y holds above 5% and for how long, the October FOMC and whether the Committee delivers the additional hike its dot plot signals, oil sustaining triple digits and re-anchoring inflation expectations, the durability of Florida insurance rate relief through the 2027 filings, continued deterioration in net domestic migration, tariff pass-through on steel and aluminum into 2027 construction budgets, and the 2026 through 2028 condo recertification cycle that could force distressed sales in aging Broward and Miami-Dade buildings.

Eight Views of the September 2026 Repricing

Numbers are easier to argue with when you can see the shape of them. These eight views condense the most consequential data from this report: ZHVI trajectories, cap-rate spreads, rent growth, inventory, permits, migration, and where Privé has deployed capital over the past 24 months. Hover any series for the underlying figure.