Peter Zalewski is a real estate market consultant, non-practicing licensed real estate broker and columnist for The Real Deal who now answers reader questions about the South Florida real estate market in a new weekly Friday column. Questions and comments can be sent to [email protected] The TRD editors will choose which submissions will be addressed.
Question: It has been a while since you have written about the preconstruction condo market in the South Miami Avenue corridor of the Brickell Avenue Area in Greater Downtown Miami. What’s the latest with the preconstruction pipeline on South Miami Avenue? Do you still see South Miami Avenue as being at risk of over-saturation?
History appears to be repeating itself in this latest South Florida preconstruction condo boom that began in 2011.
During the last boom-and-bust cycle that stretched from 2003 to 2010, developers created 245 new condo towers with 49,000 units east of I-95 in South Florida’s seven largest coastal markets, according to an analysis of government records in Miami-Dade, Broward and Palm Beach counties.
Of South Florida’s total number of new condos, Greater Downtown Miami represented the most active market, with 84 new towers and 22,200 units created in a 60-block stretch from the Julia Tuttle Causeway south to the Rickenbacker Causeway and Biscayne Bay west to I-95.
In the latest South Florida condo boom, developers are proposing 255 new condo towers with nearly 35,000 units located east of I-95 in Miami-Dade, Broward and Palm Beach counties, according to the preconstruction condo projects website CraneSpotters.com.
(For disclosure purposes, my firm operates the website.)
Once again, Greater Downtown Miami is the most active market for new construction, accounting for nearly 52 percent of the new condo units announced in coastal South Florida during this boom.
As of Thursday, nearly 18,000 new condo units – to be located within 60 towers – have been announced in Greater Downtown Miami, which is comprised of the three submarkets of the Brickell Avenue Area in the south, the Central Business District in the center and the Biscayne Boulevard Corridor in the north.
Based on the quantity of new units announced for Greater Downtown Miami, it is not unreasonable to assume this particular condo market faces the greatest “risk of over-saturation” if local real estate conditions were to suddenly deteriorate.
Before slapping a doomsday label on me, understand that I am not presently projecting a recalibration of the Greater Downtown Miami preconstruction condo market. At this point, the lack of bank financing for condo construction, combined with high presale deposit requirements for buyers, appear to be curbing any serious chance of an imminent crash.
Instead, I am pointing out the concentration of new condos proposed for Greater Downtown Miami is disproportionate to the amount of units proposed throughout the entire South Florida region during this latest boom.
Consider that if developers were to follow through – and questions remain whether this is possible – in constructing the units that have already been proposed, Greater Downtown Miami’s total condo inventory would increase by 50 percent from 34,000 units today to more than 50,000 units within the next few years.
Added to this, Greater Downtown Miami now has about 13 months of condo resale supply on the market available for purchase as of Thursday, according to the Southeast Florida MLXchange.
A healthy market typically has about six months of supply. Inventory levels higher than that usually indicate a buyer’s market.
For these supply-and-demand factors, it is worth understanding where the new condo units are slated to be developed.
In examining the preconstruction units announced for Greater Downtown Miami, the greatest number of new condos proposed is to be located in the Brickell Avenue Area, which stretches from the Rickenbacker Causeway north to the Miami River.
In the Brickell Avenue Area submarket, developers are proposing 32 new towers with nearly 9,750 units. This represents 54 percent of the total new condo units proposed for Greater Downtown Miami.
The Biscayne Boulevard Corridor that stretches from the MacArthur Causeway north to the Julia Tuttle Causeway is in the No. 2 position, accounting for nearly 40 percent of the total units proposed in Greater Downtown Miami.
This means developers have announced 22 new condo towers with more than 7,050 units in the Biscayne Boulevard Corridor submarket of Greater Downtown Miami.
The Central Business District stretching from the Miami River north to the MacArthur Causeway ranks third based on six new towers with nearly 1,100 units proposed. It accounts for 6 percent of the total number of units proposed in Greater Downtown Miami.
Drilling down deeper into the preconstruction condo projects announced, the 12-block stretch of South Miami Avenue from 15th Road north to Third Street represents the neighborhood with the highest concentration of proposed units in Greater Downtown Miami.
As of Thursday, developers – who are piggybacking on the $1.05 billion mixed-use Brickell City Centre project – have announced at least 16 new condo towers with nearly 5,350 units in this one-mile stretch of South Miami Avenue.
The South Miami Avenue neighborhood accounts for nearly 30 percent of all new condos announced in Greater Downtown Miami.
Additionally, at least six new condo towers with an unknown number of units on a number of vacant sites either on the market or recently acquired could be added to the mix on South Miami Avenue, based on press reports and conversations with industry watchers.
The neighborhood with the next-highest concentration of newly proposed condo units is Edgewater, which is located east of Biscayne Boulevard from Northeast 17th Terrace north to Northeast 36th Street in the Biscayne Boulevard Corridor.
Developers are proposing 13 new condo towers with nearly 3,800 units in the Edgewater neighborhood. This neighborhood represents about 21 percent of the total condo units proposed for Greater Downtown Miami.
The unanswered question going forward is whether buyers will to pay a premium to purchase preconstruction condo units in landlocked towers in the South Miami Avenue neighborhood when presale units with water views are available – often at cheaper prices – in other neighborhoods of Greater Downtown Miami, including Edgewater.
Thought Of The Week: Another airline cuts flights to Venezuela
Delta Air Lines announced on Monday it would be the latest carrier to cut service to Venezuela – a key source of foreign investors in the South Florida real estate market – due to currency control issues that restrict companies from “repatriating earnings” from the struggling South American country.
Beginning in August, Delta plans to replace its daily round-trip service between its expansive Atlanta hub and Caracas with a single round-trip weekend flight, according to the Palm Beach Post.
Delta’s announcement comes days after American Airlines instituted a 71 percent decrease in daily flights between Miami and Venezuela, as previously noted by TRD.
Buyers from Venezuela accounted for about 8 percent of the estimated $6.4 billion in international purchases in Florida last year, according to Florida Realtors. For Venezuelan buyers, Miami-Dade County is the location where 62 percent of their transactions occurred in 2013.
Venezuelan investors opted for condos and townhouses for 55 percent of their residential transactions in Florida.
Peter Zalewski is real estate columnist for The Real Deal who founded Condo Vultures LLC, a consultancy and publishing company, as well as Condo Vultures Realty LLC and CVR Realty brokerages and the Condo Ratings Agency, an analytics firm. The Condo Ratings Agency operates CraneSpotters.com, a preconstruction condo projects website, in conjunction with the Miami Association of Realtors.