With dwindling condominium inventory — but growing rental demand — in South Florida, developers are shifting to multi-family projects. While Jorge Perez and Related Group have been part of the new wave of condo construction in the region with projects like Miami’s MyBrickell and Hallandale’s Apogee Beach, the company is also making a significant multi-family drive.
The demand is a result of a variety of factors: falling homeownership, the aftermath of the foreclosure crisis leaving many with battered credit and the so-called echo boomers reaching prime rental ages.
“It’s sort of a perfect storm,” said Steve Patterson, president and CEO of Related Development, who is spearheading the company’s apartment push. “Those things all come together to create built-in demand without any economic rebound, so that’s a nice start.”
The developer says it has almost 4,000 multi-family units in development across eight new projects.
“I think production is definitely going to ramp up in the next year or two, but we don’t have any concerns about that,” Patterson told The Real Deal. “I honestly believe that the fundamentals supporting the need for new multi-family housing are stronger now than they’ve been in any of the prior three cycles.”
The latest Related venture is the Veranda II, in Plantation, modeled on the nearby Veranda I condominiums. Those come alongside several other projects, including Fontainebleau Lakes in Miami and Flagler Village in Fort Lauderdale.
With banks largely unwilling to finance new condominium projects, much of South Florida’s new condo inventory is being financed on the Latin American/European model — that is, where buyers pay much of the construction costs up front, along with high initial deposits, as The Real Deal previously reported.
But while banks are reluctant to fund condo projects, they are ready and willing to provide financing for new apartment projects, given the high level of rental demand in the tri-county area, according to Peter Zalewski, founder of brokerage and consultancy Condo Vultures.
And there’s a good reason for doing so.
“A developer who builds a rental tower today has to be thinking that, sometime in their future, their exit is to sell it off to a condo converter or to convert it himself into a condo,” he said.
As more projects rise, the line between multi-family and condominium is becoming ever so thin.
Indeed, many of the new rental projects are being developed on sites that would typically be associated with condominiums.
“Some rental towers going up are actually being developed on, not premier, but very attractive sites,” Zalewski said, pointing to Adler’s recently-announced venture. “The site where [Adler’s] project is going up is more apt for a condo than it is for a rental project.”