The Real Deal Miami

Brickell condo resales benefit from surge in demand

Prices on rise as market awaits new high-rise construction

June 23, 2014 11:15AM
By Erik Bojnansky

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Icon Brickell (inset: Jonathan Mann)

Icon Brickell (inset: Jonathan Mann)

Jonathan Mann is testing the limits of the Brickell market.

Mann, a broker associate with Coldwell Banker Real Estate, listed two combined units in the 57-story Icon Brickell’s Tower One as a single residence for $2.9 million. According to Mann, it’s the most expensive listing ever for Icon Brickell, a three-tower 1793-unit complex completed in 2008. The previous high was the $2.3 million asking price for a 57th-floor penthouse in Tower One during last decade’s real estate boom.

The Icon Brickell listing represents a turning point for the area’s condo market, Mann told The Real Deal. Six years ago, the national real estate industry was slammed by the Great Recession. South Florida, particularly Downtown Miami and Brickell, was hit hard.

But now, investors from all over the world are clamoring for condos in Brickell, elevating prices beyond their height at the onset of the recession.

“It’s really simply remarkable,” Mann said. “Units that were selling for $300 per square foot are now [being listed] for $900 or $1000 a square foot.”

However, some real estate professionals believe that Brickell’s resale market is close to, or at, its pricing peak.

“Overall, it’s a buyer’s market, as there is simply too much inventory available,” said Peter Zalewski, a TRD contributor and principal of Condo Vultures.

Developers built 35,000 condominiums within the City of Miami between 2000 and 2010, according to the U.S. Census Bureau. Most of these units were located in Greater Downtown Miami within buildings that broke ground when the market was still red hot.

It was in this period of good times that Jorge Perez, president and CEO of The Related Group, built Icon Brickell, an opulent $1 billion project forged by prominent architecture firm Arquitectonica and interior designer Philippe Starck that features Easter Island-like columns by its entrances, a football field-sized infinity pool and a gigantic outdoor fireplace. During preconstruction, Icon Brickell condo units were selling for more than $600 per square foot.

But Icon Brickell was completed in 2008, the same year Lehman Brothers went bankrupt and the financial markets melted down, freezing lending all over the country. In May 2010, Perez surrendered 870 unsold units and three commercial spaces in Tower One and Tower Two to HSBC in a friendly foreclosure transaction. HSBC, in turn, was willing to sell the units at discounted prices.

Among the buyers who took advantage of the depressed market was Keila Ravelo, a partner in the New York anti-trust law firm Willkie Farr & Gallagher. Ravelo bought the 2,044-square-foot Apartment 4001 from HSBC for $943,130 in July 2010. Ten months later, Ravelo purchased Apartment 4002, a 1,433-square-foot unit, for $625,000. Ravelo’s total investment was $1.57 million or $451 per square foot. At Mann’s $2.9 million listing price, Ravelo would receive $834 per square foot.

Mann claims the $2.9 million price tag is a bargain. The two apartments have a combined five bedrooms and four-and-a-half bathrooms, with sweeping views of the city and Biscayne Bay.

“I would dare to say it has the nicest views in Brickell,” he said. “You can see all of the bay and the beach and everything west.”

The wall separating the two units was knocked down, so the residence is now among the few available large residential spaces in Brickell, according to Mann. There are only seven existing units larger than 3,000 square feet on the market for less than $3 million in the area, the broker said.

Brickell’s condo market remains hot, thanks to a steady stream of foreign cash buyers, Morningside Mortgage president Grant Stern told TRD.

But it isn’t just cash buyers who are snatching up condos, according to Stern. Home buyers are also able to obtain mortgages again.

“The [last] drop in condo prices was fueled by an absence of lending,” he said.

Metro 1 Properties president Tony Cho told TRD the surge in prices reflects affluent buyers from all over the world fueling the market for units in Miami’s downtown area. That is creating “an imbalance of supply and demand,” Cho said.

Just two months ago, Keller Williams broker Jose Fernandez sold a penthouse in the 57-story Tower Two for $1.8 million in cash—the current post-crash price record at Icon Brickell. Thanks to demand from European and South American investors, Fernandez said that condo prices in Brickell have climbed as much as 50 percent in the last three years. Foreign investors “see the U.S. as a stable, safe place to park their money,” Fernandez told TRD.

But Cho cautioned that climbing prices won’t last forever in Brickell, now that Miami is in the midst of yet another condo development boom. “When all the condos do get delivered to Brickell, I believe there will be stabilization in pricing,” Cho said.

There are 17,374 units proposed, planned, under construction or completed in the Greater Downtown Miami area, according to CraneSpotters.com. Within Brickell alone, 32 towers totaling 9,792 units are planned.

Condo resale prices aren’t rising as fast as they used to either, according to data analyzed by Zalewski. In 2013, the average price for a Brickell condo rose 22 percent, to $378 per square foot, from $309. In 2014, completed sales averaged $418 per square foot, an increase of just 11 percent from the year before. The average price for the pending sales of 175 Brickell units is $407 per square foot.

There’s already plenty of inventory in the Greater Downtown Miami area, allowing potential buyers to negotiate for lower prices, according to Zalewski. Greater Downtown Miami has about 13 months of inventory, while the Brickell area has 14 months. A healthy market is considered to have six months of inventory.

Mann maintained that Brickell residences — especially large units — are in high demand.

“We are starting to see these larger [Brickell] units selling very quickly,” Mann said. “To give you an idea, the penthouses at SLS Lux are selling at $1,200 a square foot at preconstruction with views that are inferior [to Icon Brickell.]”

Demand is even greater for existing condos. Buyers, Mann explained, are seeking “instant gratification.”

And Brickell is still a bargain — from an international perspective. Mann pointed out that prices in Miami are far lower than other booming real estate markets around the world, especially Brazil. Rio’s average condo price is $1,050 per square foot, the broker said, citing a survey by ECA International.

Brazilians, incidentally, are on the prowl for Brickell units, Mann said.

They “are drawn to Brickell/Downtown because they can rent the apartments quickly at good rents,” he said, “and also use them for leisure when [the units] are not renting.”

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