Miami's condo boom falls short of expectations |
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By MATTHEW HAGGMAN - June 20, 2008
Miami's condo boom falls short of expectations
When the dust settles, the housing boom will have produced a record number of
new condos in Miami's city center, says a new report. But the building frenzy
is not as supersized as some thought.
So how big is Miami's downtown building boom ?
One new report puts a number on the scope of Miami's condo craze: 22,737 units built or
under construction since 2003 more than double the number in the previous 40 years.
That's a huge figure, but still less frothy than some predicted.
Just how many new condos will end up in downtown Miami has been the subject of much debate and speculation,
as it has important implications for the condo market's overall sales outlook.
Perhaps no corner of Florida has seen more building in recent years than Miami's urban core.
As bankers handed developers billions for building, cranes became a fixture on the city's skyline
and thousands of frenzied buyers bought units sight unseen.
Developers filed plans to build about 85,000 across the entire city, mainly downtown..
That was far too many, at prices that far outstripped demand, real estate analysts warned.
They equated the Miami land rush to the tech stock bubble of the late '90s.
Since then, the housing market has turned cold, financing has slowed and inexperienced builders
have tripped up on rising construction costs or plain mismanagement.
Many of the proposed projects have been scratched.
Now, Miami's downtown condo binge is starting to come into focus.
"It's not as big as we all thought it would be," said Jack McCabe, a Deerfield Beach real estate
analyst who has long warned that way too many condos were going up than
current market conditions could support.
"Less than half of all announced projects are actually being built.
Two years ago, it looked like everything would get funded."
To be sure, many observers, including McCabe, say it doesn't change their analysis:
The downtown market still has a vast surplus of condos.
"It's kind of a double-edged sword," said Peter Zalewski, a principal at CondoVultures.com,
which conducted the new survey. "On the one hand, it is not 50,000 or 80,000 new units, it is 22,000 new units.
But the bad part is that it is still 22,000 new units."
The report by CondoVultures.com, a Bal Harbour brokerage and advisory firm that helps buyers
find condo bargains, examined the swath of land from the Julia Tuttle to Rickenbacker causeways
and from Interstate 95 to Biscayne Bay.
Four researchers went block by block and reviewed public filings to total the number of condo units.
Completing the study took four-and-a-half months.
The findings: an area where 11,517 condos were built between 1963 and 2002 will now have 34,254.
That's 73 new condo projects comprising 163 buildings, 2,672 floors and 22.5 million square feet
of livable space equivalent to 15 Dadelands going up in a 60-block area in less than a decade.
The results underline the region's ongoing transition from a sprawling,
suburban metropolitan area to a modern urban center.
But some parts of the picture remain fuzzy namely, how quickly all the units will be occupied,
when prices will stabilize and even begin to rise again.
The broader South Florida housing market remains mired in a slump and the economy is sputtering.
Yet, the renewed desire for urban life and ongoing trend of road-weary suburbanites returning to
the city is getting an added kick: $4 gas prices give more incentive for living where the car is used less.
Miami's urban center is attracting more people, especially near Brickell Avenue.
Brickell area condos, Zalewski predicts, will rebound fastest with prices rising in three to five years.
Other areas, such as along Biscayne Boulevard north of the Performing Arts Center,
could take longer than seven years, he said.
"The issue is, have we made this a more livable downtown and the answer is absolutely yes," said Jorge Perez,
chairman of condo builder Related Group. "Will, within a certain period of time 22,000 units be consumed? Yes"
Despite the current market pain, few observers deny Miami's long-term prospects are bright predicting
that over the long haul the current condo surge will be subsumed by even more development said Perez,
who is behind a dozen downtown condo towers.
"If we are ever to have a viable, 24-hour downtown, this is a minimal amount of units," he said.
"What is 22,000? It is nothing."
Thus far, says Miami real estate analyst Michael Cannon, 13,430 units in greater downtown Miami
have been completed; of them 74 percent have closed. But the analyst, who said the CondoVultures.com
total downtown condo count is similar to his own tally, cautioned against looking
at the greater downtown as a whole.
Cannon predicts there will be significant differences from project to project and neighborhood to neighborhood.
Variables include quality of a building and whether a neighborhood already has restaurants or shops.
"You have successful buildings next door to troubled projects that should never have been built," said Cannon,
managing director of Integra Realty Resources. "And, more broadly, we know Brickell is a successful market,
but we don't know what type of person buys in the central business district, or in Midtown. The jury is out."
When the dust settles, the housing boom will have produced a record number of
new condos in Miami's city center, says a new report. But the building frenzy
is not as supersized as some thought.
So how big is Miami's downtown building boom ?
One new report puts a number on the scope of Miami's condo craze: 22,737 units built or
under construction since 2003 more than double the number in the previous 40 years.
That's a huge figure, but still less frothy than some predicted.
Just how many new condos will end up in downtown Miami has been the subject of much debate and speculation,
as it has important implications for the condo market's overall sales outlook.
Perhaps no corner of Florida has seen more building in recent years than Miami's urban core.
As bankers handed developers billions for building, cranes became a fixture on the city's skyline
and thousands of frenzied buyers bought units sight unseen.
Developers filed plans to build about 85,000 across the entire city, mainly downtown..
That was far too many, at prices that far outstripped demand, real estate analysts warned.
They equated the Miami land rush to the tech stock bubble of the late '90s.
Since then, the housing market has turned cold, financing has slowed and inexperienced builders
have tripped up on rising construction costs or plain mismanagement.
Many of the proposed projects have been scratched.
Now, Miami's downtown condo binge is starting to come into focus.
"It's not as big as we all thought it would be," said Jack McCabe, a Deerfield Beach real estate
analyst who has long warned that way too many condos were going up than
current market conditions could support.
"Less than half of all announced projects are actually being built.
Two years ago, it looked like everything would get funded."
To be sure, many observers, including McCabe, say it doesn't change their analysis:
The downtown market still has a vast surplus of condos.
"It's kind of a double-edged sword," said Peter Zalewski, a principal at CondoVultures.com,
which conducted the new survey. "On the one hand, it is not 50,000 or 80,000 new units, it is 22,000 new units.
But the bad part is that it is still 22,000 new units."
The report by CondoVultures.com, a Bal Harbour brokerage and advisory firm that helps buyers
find condo bargains, examined the swath of land from the Julia Tuttle to Rickenbacker causeways
and from Interstate 95 to Biscayne Bay.
Four researchers went block by block and reviewed public filings to total the number of condo units.
Completing the study took four-and-a-half months.
The findings: an area where 11,517 condos were built between 1963 and 2002 will now have 34,254.
That's 73 new condo projects comprising 163 buildings, 2,672 floors and 22.5 million square feet
of livable space equivalent to 15 Dadelands going up in a 60-block area in less than a decade.
The results underline the region's ongoing transition from a sprawling,
suburban metropolitan area to a modern urban center.
But some parts of the picture remain fuzzy namely, how quickly all the units will be occupied,
when prices will stabilize and even begin to rise again.
The broader South Florida housing market remains mired in a slump and the economy is sputtering.
Yet, the renewed desire for urban life and ongoing trend of road-weary suburbanites returning to
the city is getting an added kick: $4 gas prices give more incentive for living where the car is used less.
Miami's urban center is attracting more people, especially near Brickell Avenue.
Brickell area condos, Zalewski predicts, will rebound fastest with prices rising in three to five years.
Other areas, such as along Biscayne Boulevard north of the Performing Arts Center,
could take longer than seven years, he said.
"The issue is, have we made this a more livable downtown and the answer is absolutely yes," said Jorge Perez,
chairman of condo builder Related Group. "Will, within a certain period of time 22,000 units be consumed? Yes"
Despite the current market pain, few observers deny Miami's long-term prospects are bright predicting
that over the long haul the current condo surge will be subsumed by even more development said Perez,
who is behind a dozen downtown condo towers.
"If we are ever to have a viable, 24-hour downtown, this is a minimal amount of units," he said.
"What is 22,000? It is nothing."
Thus far, says Miami real estate analyst Michael Cannon, 13,430 units in greater downtown Miami
have been completed; of them 74 percent have closed. But the analyst, who said the CondoVultures.com
total downtown condo count is similar to his own tally, cautioned against looking
at the greater downtown as a whole.
Cannon predicts there will be significant differences from project to project and neighborhood to neighborhood.
Variables include quality of a building and whether a neighborhood already has restaurants or shops.
"You have successful buildings next door to troubled projects that should never have been built," said Cannon,
managing director of Integra Realty Resources. "And, more broadly, we know Brickell is a successful market,
but we don't know what type of person buys in the central business district, or in Midtown. The jury is out."
