Downtown Miami Condo Prices Soar 75% in Two Years as Current Development Wave Nears Midway Point (Mercado de Dinero)

Jueves, Julio 24 2014 14:30 | Escrito por Redacción

More than 4,600 new multifamily rental units are under construction or planned, with the bulk
of new inventory expected in the Brickell sub market.

Downtown Miami condominium prices are nearing pre-recession levels as buyers from around the world look to the market as a top-tier investment target, according to a new study by the Miami Downtown Development Authority (DDA). Prices for existing (prior cycle) resale condo units in downtown have increased 75 percent over the past two years, rising from an average of $230 per square foot to $400 per square foot. The bulk of this appreciation can be attributed to value recovery stemming from market stabilization and the launch of new projects since 2011.

All told, there were 8,700 condo units for sale or under development through June 2014. The bulk of this inventory is expected to deliver through 2017, indicating the market is in the early stages of mid-cycle development. Q2 2014 pre-construction pricing continues at $550 – $675 per square foot for current unsold inventory.

Downtown’s growing residential appeal is also driving rental demand. Between 400 and 450 leases have been completed in greater downtown each month over the past three years, with average monthly rents rising from $2,198 per unit in 2011 to $2,429 through Q2-2014. More than 4,600 new multifamily rental units are either under construction or planned, with the bulk of new inventory expected in the Brickell submarket.

The study, conducted by Integra Realty Resources (IRR), evaluated 24 current projects as well as existing supply in six submarkets comprising greater downtown Miami: Brickell, the Central Business District (CBD), Edgewater, the Arts & Entertainment District, Wynwood and Midtown. This report is a continuation of previous Miami DDA research focused on inventory from the last cycle, which was substantially absorbed by the close of 2012. The new study surveys projects that have launched this cycle through May 31, 2014 and provides a projection of future deliveries.

“Strong buyer demand, appreciating prices, and growing appeal among renters continue to fuel the downtown Miami condo market,” explains Anthony M. Graziano, Senior Managing Director for Integra Realty Resources in Miami. “While we expect price increases to slow with time, downtown is well positioned to absorb the new condo inventory currently under development should present-day buyer trends hold.”

While submarkets throughout Miami’s urban core are experiencing new development, the City’s Edgewaterneighborhood –just north of the CBD along the Biscayne Boulevard corridor–is the area’s fastest growing market. More than 1,900 new units are currently in development, representing a 67 percent increase in the submarket’s inventory.

New projects in Brickell, where more than 4,800 units are under construction, account for nearly 25 percent growth by comparison with the submarket’s existing condo inventory.

The largest newcomer is Brickell City Centre, which will include 780 condo units set amidst 5.4 million square feet of mixed-use development.

Another master-planned project, Miami World Center, will deliver a combined 2,000 units alongside retail, hotel and commercial uses in the CBD. Nearby, All Aboard Florida’s new Grand Central Miami station, will serve as a high speed rail hub connecting South and Central Florida.

The rise of new developments has placed a premium on developable properties, sending land prices to never-before-seen levels over the past three years. Multiple land transactions valued in excess of $100 million have been completed or are under contract in Brickell, the CBD and Midtown, creating a sizable barrier to entry for residential developers.

The introduction of the ‘South American Financing Model,’ whereby developers collect deposits valued at 50 percent or more of the purchase price – coupled with funding sources giving preference to experienced, well-capitalized developers – should help maintain a healthy market environment. “Elevated land costs, higher construction costs, increased market transparency, and the rise of a new, cash-heavy financing structure all stand as obstacles to the degree of oversupply that downtown Miami experienced during the last cycle,” added Graziano.

International buyers continue to dominate the downtown buyer base as Miami emerges as a global destination for business and finance, leisure travel, arts and culture. The study shows that foreign buyers account for approximately 90 percent of all sales, making Miami one of the few real estate markets in the world that enjoy the envious position of being an ‘export economy,’ meaning buyers import capital for the purpose of owning real estate.“Downtown Miami has long been viewed as a business hub, but we are quickly gaining a reputation for our lifestyle offerings, everything from the Adrienne Arsht Center for the Performing Arts and Pérez Art Museum Miami, to a growing number of high-end hotels and restaurants and the addition of luxury retail,” says Alyce Robertson, Executive Director of the Miami DDA. “Overseas buyers eyeing U.S. real estate are finding that downtown Miami has all the amenities of a major cosmopolitan city, along with competitive pricing and easy access to Latin America and Europe.”