Property prices aren’t likely to level off any time soon. But rising construction costs could dampen the market, according to several high-profile developers who sized up the latest boom in Miami during a panel discussion at The Real Deal’s annual South Florida Real Estate Forum & Showcase.
“The cost of construction is the 800-pound gorilla in the room no one likes to talk about,” said Stephen Owens, president of Swire Properties, which is developing Brickell City Centre. “The challenge today is finding qualified contractors at a reasonable price.”
Owens, one of six developers who spoke at the event, said the cost of construction in Miami is seeing double-digit increases. “We lost about 30,000 construction workers during the recession,” Owens added.
Don Peebles, who broke into the Miami market in the 1990s by developing the first African-American-owned hotel in Miami Beach, agreed. “It’s difficult getting people to honor their commitment to build at the price they originally quoted,” Peebles said
Peebles did tell moderator Peter Zalweski, founder of Cranespotters.com, that he doesn’t see real estate prices in Miami peaking anytime soon. He noted that buyers are paying up to $3,000-a-square-foot for ultra-luxury units at his Miami Beach condominium project, Bath Club Estates. “The buyers setting the prices are New Yorkers,” he said. “They are not bargain shoppers.”
New York developer Richard LeFrak, whom Peebles described as the “Warren Buffett of real estate,” told the standing room only crowd he’s been bullish in south Florida since 2009, when he and a group of investors bought BankUnited and all of its real estate assets. The Manhattan real estate mogul also picked up the former Gannsevort Hotel at 2399 Collins Avenue in March and has rechristened it 1 Hotel & Homes South Beach.
LeFrak feels strongly enough about 1 Hotel & Homes – and Miami Beach in general – that he is keeping one of the penthouse units for either himself or his children.
“What woke me up is when I saw the aggressive behavior of foreign buyers in Miami,” he said. “I saw an opportunity to pick up additional assets.”