Older multifamily complex sales in Florida have declined.

Updated building rules have reduced the frequency of transactions in Florida for multifamily homes built before 1992.

Trepp, a structured finance, commercial real estate, and banking research firm, reported this on January 21.

Changes in building rules following Hurricane Andrew in 1992, as well as modifications following the collapse of the Champlain Tower in 2021, have contributed to a recent decrease in sales activity for older structures, according to a recent article by Louis Llovio of Business Observer.

According to the research, total volume peaked at 116 transactions in 2021, totaling $1.14 billion. Last year, there were only two deals totaling $15.7 million.

While inflation and rising interest rates have contributed to the slowdown, the authors write that “as inspections reveal the scope 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 explanation for this is that structures built before Andrew frequently lack modern reinforcements, such as hurricane straps or impact-resistant glass.

According to the analysis, delaying critical repairs and using earlier design standards makes these buildings especially vulnerable to extreme weather and costly repairs under today’s tougher requirements.

Following Andrew, in 2002, the state established a building code that is regularly revised and contains obligations to handle issues such as wind resistance and flooding. Trepp describes these guidelines as “a new baseline for building resilience.”

Modern structures are now built to satisfy greater needs and regulations, making them more storm-resistant.

Trepp also discovered that older buildings have higher debt service coverage on average than newer ones.

Trepp explains that the data “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 developed after 2002 and meeting the new regulations look to be a safer investment.

This article originally appeared on Business Observer

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