It was the second day of The Real Deal’s South Florida Forum, and a crowd of disciples had stayed till the very end to hear the good word from the man himself: Todd Glaser.
Glaser is a spec developer, a title that can conjure up unfortunate-looking, hastily built homes. But that’s not what Glaser does. He builds for billionaires, compounds and estates that span acres, with tennis courts, home gyms, theaters, salons and staff quarters. He sold DJ David Guetta an Indian Creek mansion asking $69 million. He sold the private island Tarpon Island in Palm Beach this year for $150 million, his biggest deal to date.
When you’re on a roll like that one, you build more — right?
But the bespectacled, gray-bearded Glaser delivered shocking news on stage: “I’m not building any new construction.”
It doesn’t seem to make sense. The homes Glaser builds have never been more in demand in South Florida. The pandemic instigated an unprecedented wealth migration to the tri-county region, sending demand and prices for luxury homes to previously unfathomable highs.
“The demand for high-caliber exclusive inventory is off the charts,” said top Compass agent Chad Carroll. Even Glaser will say he has no concerns about finding buyers for ultra-luxury homes.
The bottleneck isn’t a demand problem. It’s about supply. Soaring land, construction and borrowing costs, plus longer development timelines, make it so hard to build that luxury spec developers feel frozen in place. In turn, the lack of new high-end stock in South Florida is tweaking the whole market, putting a premium on homes that already exist and driving up prices throughout high-end residential.
Make it make cents
Matthew Martinez, president and founder of Beacon Hill Property Group in Coral Gables, recently listed a waterfront spec mansion in Coral Gables asking $19.8 million.
Like Glaser, he can count many reasons why he isn’t adding more to the supply.
Land costs are the first hurdle, he said.
Martinez bought the site for his Coral Gables project for $4 million in 2021. Now he says the same property would sell for $7 or $8 million. Across South Florida, pricing surged during the pandemic boom and has maintained its new footing in the years since. The median sale prices for single-family homes in Miami-Dade County are up 85 percent over the last five years, according to Redfin market data. In the same time frame, the median price for Palm Beach single-family homes rose 97 percent.
“If you’re not on top of your job site on a daily basis … then you can see how a month delay becomes a two-month delay becomes a 12-month delay.”
Construction costs remain stubbornly high as well. Pandemic supply chain difficulties led to a surge in materials costs that remains. Short supply of construction labor is also inflating prices, developers and agents say. The swell in development across asset classes in South Florida means most contractors are booked and busy.
“Construction costs have doubled, so they’re not penciling,” Martinez said. “You’re really looking at over $1,000 per square foot to build now, waterfront.”
Manny Angelo Varas, president of MV Group USA, estimated his latest waterfront spec project in Bal Harbour will cost $1,500 per square foot to build, and that’s after his investors spent $16.5 million on the half-acre lot.
Time is money
Aside from the hard costs, developers agree the timeline for new construction is growing longer, piling expenses onto already pricey projects.
“A house that I used to build in nine months is now taking me a year and a half, two years,” Glaser said at the South Florida Forum. Developers say city bureaucracy is causing significant planning-stage delays.
“[In] larger municipalities you get stuck in a lot of red tape,” Varas said, noting that he had one project in Coconut Grove stuck in the permitting process for 14 months. “Many of these smaller municipalities have been much more effective to keep in the timeline because they’re much more pro-development.”
But quick permitting in today’s environment is fairytale thinking.
“It’s still a year to get permits in Coral Gables,” Martinez said. All told, spec development “is a three-year process, and that’s if you’re good. If you’re not efficient in your decision-making and if you’re not on top of your job site on a daily basis … then you can see how a month delay becomes a two-month delay becomes a 12-month delay.”
It’s a dogpile. As a result, the pipeline of projects has thinned and demand for luxury homes isn’t being met. It’s in part because people like Glaser aren’t building and in part because the ultra-wealthy aren’t willing to endure the slog on their own time either. Building is brain damage, agents say. And their clients would rather avoid the suffering.
“They’re willing to pay a higher price than the neighbors to avoid the five-year process of building. The desire to not build is what’s fueling the very top end of the marketplace.”
“They’re willing to pay a higher price than the neighbors to avoid the five-year process of building,” said Dina Goldentayer, a top agent with Douglas Elliman. “The desire to not build is what’s fueling the very top end of the marketplace.”
Goldentayer, and pretty much every other luxury agent in Miami, will point to one deal to illustrate this point. Victoria and David Beckham’s $72.3 million purchase of a waterfront spec mansion set a price record for homes on North Bay Road in October, which equated to more than $5,000 per square foot. Luxe Living Realty agent Dora Puig brokered the deal. Buyers at this price point don’t care to waste time, and they’re willing to pay more to save it, Puig said.
“Time is a bigger currency to these high-net-worth individuals than money,” Puig added. “Actual life time on Earth has become more of a valuable currency than actual money for them.”
The Beckhams’ North Bay Road manse was a time-consuming project for its developer, Niklas de la Motte. Puig, who declined to comment on the identities of her clients, remembers selling him the property.
“I sold him the lot in 2018, it took him six years to get to TCO,” she said. According to Puig, “the time and the aggravation of building” is too much for wealthy buyers, even though the homes available are mostly not up to their standards.
Quality control
Quality is a defining issue for the current supply of homes in South Florida’s luxury market, agents say. Affluent buyers migrating from New York, Chicago and California have a more “sophisticated” set of expectations that many spec developers in the tri-county market don’t understand or cater to, they say.
“Spec development is not what that buyer wants,” Goldentayer said. “That buyer wants a house that was built at an extremely high price per foot, with finishes that an end user would pick.”
Luxury brokers and developers alike flinch at the term “spec,” which is associated with cookie-cutter designs and poor construction quality.
“The word ‘spec’ is almost like herpes, unfortunately,” Glaser said at the Forum. “But we don’t build spec homes that look like a spec home. We build custom homes. We build fabulous homes.”
At the ultra-luxury level, new construction goes beyond spec, Varas said, arguing it should be a category on its own. Building for billionaires requires achieving a heightened level of precision and detail compared to typical construction, he said.
“I had one billionaire client tell me the first thing he does is open the cabinets in the laundry room,” Varas said. “If you don’t have the same level of finishes in the laundry room [as the rest of the house], you know the builder cut corners.”
Building to the demands and expectations of the elite is an intensive effort in terms of resources, time, money and, perhaps, sanity. Not all developers are equipped to undertake it, contributing to the scarcity.
But some still take the plunge.
“The good builders continue to build,” said Martinez, who is currently focused on a marketing push for his Coral Gables listing. Efficiency and buying lots at the right price are crucial for getting projects vertical, he said. Others, like Glaser, are turning to renovations. In November, he sold a renovated waterfront Palm Beach mansion to billionaire inventor Herbert Wertheim for $38 million. He has another renovated listing in Palm Beach that just hit the market asking $12.4 million.
“It’s easier, we get to go a lot faster,” he said of renovating versus building new — but it’s a change. “It’s the first time in 35 years I haven’t had a project in for permit.”