South Florida’s surprising condominium rebirth has generated enough sales — and interest — that developers have more than 25 condo projects either underway or in the planning stages. What it also means is another rebirth for the region’s construction industry. One project seeing interest is the $250 million Oceana on Key Biscayne, a development by Argentina-based Consultatio being built by Coastal Construction. To learn more about the new surge in South Florida construction, The Real Deal talked to Tom Murphy, the CEO of Coastal Construction, about the new condo boom and the future for South Florida’s recently dormant construction sector.
How would you describe South Florida’s construction industry compared to where it was a few years ago?
Activity — real activity! We were very fortunate to go into this whole mess with a very large backlog of about $1.5 billion. … This year, the activity is up the point where our pipeline is almost 50 percent larger than it was at the height of the madness, and our pipeline is just full of work.
Where is the funding coming for these projects?
A lot of it is self-funded. Some of it is funded from offshore, some of it is funded from the bond market, and some of it is traditionally funded, by strong developers with strong balance sheets. So in every sector, we’re experiencing the same effect.
Are there any sectors where you’re seeing more activity?
The only one that’s not is K-12 public schools. Higher education looks like it’s remaining strong and medical is [as well]. Of course, multi-family, especially rentals, are off the charts. We even see a little bit of activity in office and retail.
What is the sentiment today among South Florida developers?
I remember when I was a kid in the Keys, the way you could tell a really good developer was they knew when to build and they knew when to go fishing. And I think a lot of guys stopped fishing in more ways than one. There’s optimism. I think the money markets are not quite as frozen up as they were. I think the big change will be after the election [in 2012]. I think it doesn’t so much matter who wins as much as it matters that the markets understand who is there, who is going to be the leader. We’re seeing all of these good things in an election year, and that tells me that once the election is over, that the deep faucets are going to be wide open.
What’s the biggest challenge in South Florida construction right now, particularly with the number of new projects?
I think the two challenges we face as builders are making sure, as usual, that we find the best subcontractors, because quite a few of the generals have disappeared or just become mere skeletons. We’re in a good position of no debt and all cash, so we have a very strong balance sheet. So we’ve been able to take advantage the last few years, and we didn’t lose a person from our project executives. The second risk, and the biggest one, is gauging where prices are going to go. Because with all of this construction that I believe is going to happen, [the price of] materials will start going up more quickly than labor because there’s so much labor available. The industries that have fewer [suppliers] to go to like steel, where there are not monopolies but close to it, those prices will probably go up first. There’s been a lot of consolidation in the last two to four years, which means you don’t have as much competition, which means prices are going to go up.
Please talk about the Oceana project
We’re doing it with Eduardo Constantini and his group from Argentina, and they are a first-rate developer, the largest in Argentina. They’ve hired a great team, Arquitectonica. [Founder] Bernardo Fort-Brescia is involved personally. It’s going to be the highest quality and it’s been tremendously received already.
What’s your outlook for Miami’s construction market, which has struggled in recent years?
Miami will be the strongest market in the country except for New York, because of sheer size. As a percentage, I believe Miami will be the hottest construction market in the country. And I think you could see us build more in the next 10 years than in the previous 15 years. That’s what I believe is going to happen here. We’ve always had Latin America and I think New Yorkers have come back. Asia is the only real group we’re missing. That’s the only area of the world that could afford to be here of any size that’s not here, and my guess is if Genting builds the casino, that we’ll see that market.