With half the business elite seemingly moving to Miami, South Florida’s residential developers are betting that migration momentum will overcome even the market’s significant supply glut.
They’re launching major condo towers set to bring thousands of new luxury units to the area, citing the spillover from booming single-family sales. That’s despite persistent questions about whether the market is deep enough to absorb all the high-end product being built.
Miami-based Related, often the first developer to kick-start a new condo cycle, teased its Baccarat-branded, three-tower luxury condo and hotel project in Brickell. Details leaked of E11even Hotel & Residences, PMG and E11even Partners’ proposed condo and hotel tower near downtown Miami. Next, PMG plans to launch the 100-story Waldorf Astoria Residences Miami, a skyscraper that would resemble a stack of cubes in downtown Miami.
Though inventory of single-family homes, especially luxury waterfront properties, is tight, there’s still an oversupply of condos.
“Anyone out there who’s reading all these stories, and reading the news and announcements, they should know they’re not crazy — the crazy ones are the developers,” said Peter Zalewski, a condo consultant and investor. “If you look at just basic supply and demand, there is still an oversupply of condominiums. There’s still concerns about living in a high-density situation, and there’s serious questions about the presales that need to be achieved.”
As of early March, Miami Beach had a 29-month supply of luxury condos, defined as units asking $1 million and up, according to an analysis of MLS data by Zalewski’s Condo Vultures Realty. That’s based on an inventory of 550 units as of March 6, and average sales of 19 units per month in 2020.
Plus, even as people move to Florida, others may be moving out. A report from Atlas Van Lines, tracking the interstate migration of household goods, found that in 2020 inbound migration totaled 3,856 households, while outbound migration totaled 3,216 households. And though a lot of the recent arrivals have touted South Florida’s amazing winter weather, they may be in for a rude awakening once they face the region’s humid summers and hurricane threats.
Among the most notable projects to come is Baccarat, with three buildings planned for 444 Brickell Avenue in Miami. Related, led by Jorge Pérez and his son, Jon Paul Pérez, launched the first phase earlier this year. The 75-story condo tower is expected to have more than 300 units and 40 riverfront villas priced in the $800 per-square-foot range.
Related acquired the property in 2013 for $104 million, and planned to build a project called One Brickell on the site, but never launched sales.
The first tower will feature Baccarat chandeliers, aged French oak floors, an art collection and interiors that are a mashup of 18th century Paris and 21st century Miami, according to Related.
The younger Pérez, Related’s president, said the developer sold much of its remaining inventory at Park Grove (a Coconut Grove development with Terra), Residences by Armani/Casa (a Sunny Isles Beach project with Dezer Development), and Hyde Beach House, during the pandemic.
“You started reading about single-family homes being sold, and we started seeing that [trend] in our existing projects,” he said. “Even with launching Solemar [a boutique condo building planned for Pompano Beach] in the middle of the pandemic, we already have 45 percent under contract.”
The buyers are mostly domestic, hailing from the Northeast, California and Chicago, he said.
The thought process is simple. Be the first developer to pick up on growing demand and launch sales. “It’s much easier to sell when it’s just you,” Pérez said.
Related, which has over 1,500 condos under development statewide, is buying sites in Brickell, mid-Miami Beach, Pompano Beach and West Palm Beach. That’s in addition to land it already owns in Hillsboro Beach and in Miami’s Arts & Entertainment district, north of downtown. The latter was previously planned as Auberge Residences & Spa Miami, which was canceled when the market started to slow in 2017.
Gil Dezer, president of Dezer Development, said that out of the 60-plus units remaining for sale at Armani/Casa when the developers hosted an opening party in March 2020, just 12 sponsor units remain.
“With this new demand, we’ll probably launch the majority of [our projects] this year or next,” Jon Paul Pérez said.
This time it’s different
Developers are increasingly seeing luxury lifestyle brands as an effective way to go to market.
After inking a deal with Waldorf Astoria in 2018, PMG and its partners are expected to soon launch sales of their 1,049-foot downtown Miami tower.
The ultra-high-end resort Aman, owned by billionaire developer Vlad Doronin, is also planning a 23-condo, 56-key hotel development at 3425 Collins Avenue, in the Faena District of Miami Beach.
The ultra-wealthy have continued to buy units at specific projects, including the Trump Group’s Estates at Acqualina. Developer Jules Trump — no relation to the former president — said the two-tower project has secured more than $375 million in sales since Christmas. Buyers, primarily with homes in the Northeast, are picking up larger units. He’s even selling three-car, air conditioned garages, marketed as “car vaults,” for up to $800,000.
“When Covid hit, everything died. Until virtually July, we did nothing,” Trump said. “Then, the third quarter was very good. The fourth quarter was OK. And then it took off from January.”
Terra’s David Martin, who launched sales in early 2020 and later broke ground on Mr. C Residences, a Cipriani-branded condo building in Coconut Grove, called it an “intellectual, sophisticated, educated and well-researched migration.” Terra and its partner Crescent Heights, led by developer Russell Galbut, will launch sales of condos at the mixed-use project at 500 Alton Road in Miami Beach.
Developers, as they tend to do, say this cycle will be different. They cited U.S. buyers as being the biggest force in the market, as opposed to South American speculators.
“You’re going to see continued demand for a local market that was never really seen before,” said the younger Perez, calling it a “permanent change.”
Brokers, eager to continue the boom-time narrative, are quick to agree.
“I’m hopeful we won’t have the same higher percentage of speculators we’ve had [in the past],” said Ron Shuffield, president of Berkshire Hathaway HomeServices EWM Realty.
Year to date, inventory of condos in Miami-Dade fell 24 percent, year-over-year, to 11,186 listings. During the same period, sales increased 31 percent, year-over-year, to nearly 3,300 closings, Shuffield said, citing MLS data. And though there’s still an oversupply of luxury units priced at more than $5 million, months of supply fell to 16 months in March from 81 months in March 2020.
Inventory could also have fallen, in part, because sellers took their condos off the market when the pandemic hit, not wanting to open up their units to strangers or unable to move out during lockdown.
Meanwhile, sales of luxury single-family homes have boomed. According to Shuffield, between January and March 2020, eight single-family homes sold at $5 million and up in Miami-Dade. In the same period this year, 56 such sales closed, an increase of 600 percent.
Condo sales in the same price range experienced a year-over-year increase of 360 percent, to 46 closings by the second week of March.
Not all developers are going big and pricey. Ugo Colombo’s CMC Group and Valerio Morabito’s Morabito Properties in early March began selling Onda, a boutique condo project in Bay Harbor Islands. It was the second small development to launch sales in the two-island town in a week. Prices at the 41-unit, eight-story development start at about $1.6 million.
Morabito said there’s not enough inventory to feed demand over the next two years. Zalewski, however, is more skeptical.
“I have no doubts that the friends and family will put their cash up and agree to [buy] 25 to 30 percent of the units, and agree to purchase them immediately,” he said. “I have serious doubts about the next wave of investors, representing 30 percent [of presales], putting up the cash.”