Miami’s sizzling commercial real estate sales run is fizzling, a recently released report shows.
In the first three months of this year, total sales volume hit $194 million, a whopping 80 percent drop compared to the same period of last year, when deal flow hit $977 million, according to Dwntwn Realty Advisors, led by Tony Arellano and Devlin Marinoff.
The report focused on all of Miami Beach and the Miami neighborhoods of Brickell, downtown, Overtown, the Arts & Entertainment District, Edgewater, Wynwood, Midtown Miami, Design District, Little Haiti, Little River and the Upper Eastside. And it covered commercial land, office, multifamily, industrial and retail deals.
The slowdown in sales volume reflects the Federal Reserve hiking interest rates at a fast clip since the second quarter of last year to combat inflation, the report states.
“The speed of these hikes effectively margin called all long-term assets, resulting in the current banking crisis and the credit crunch,” the report says. “This policy forced valuations on any long-term instruments such as treasuries, bonds, or real estate not being held to maturity to be devastated by the abrupt nature and confusing forecasting the Fed provided.”
The credit crunch means banks are not lending, resulting in a quiet period during the first quarter of this year, Marinoff told The Real Deal. “A lot of people have variable rate mortgages and bought at low cap rates,” he said. “Now those interest mortgage rates have gone up, and they are upside down. We are going to see some distress in this market.”
The office sector experienced the biggest drop-off with only $6 million in sales volume in the first quarter, a 97 percent decline compared to $226 million during the same period last year.
In the multifamily sector, sales volume hit $40.6 million in the first quarter, down 83 percent compared to $235 million in sales volume during the first quarter of last year, the report states.
Industrial sales volume dropped 89 percent to $7 million in the first three months of this year, compared to $66 million during the same period of last year.
In the first quarter, retail sales volume reached $58 million, land sales volume hit $55 million and hotel sales volume was $26.5 million, representing drops of 65 percent, 77 percent and 29 percent, respectively, compared to the same period last year, the report states.
Despite the sobering statistics, Marinoff insists it’s not doom-and-gloom time for Miami and Miami Beach. He noted continuing strong demand from out-of-state investors that don’t need financing.
“There is a lot of money coming from California and New York through 1031 exchange deals,” Marinoff said. “We had our best quarter signing contracts. There is very little debt on those purchases.”