There is a lot of “buzz” going on about commercial real estate in Miami. What’s the real story? Charts show commercial properties going down (See my chart @ FloridaCommercialTeam.com). Then you hear about old warehouses built in the 1960’s in Winwood selling for over $200 square foot. What gives? The short answer is that there is no short answer! Some areas of Miami are actually booming, with new apartment buildings, condominiums and big box retailers being built at the fastest pace in seven years. And yet some sections of Miami and its surrounds are still going down, or at best, stuck in the doldrums.
The best answer that I can come up with is that not only does the timeworn adage, location, location, location apply, but that the descriptive needs to go further. Not only is location a determining factor in affecting commercial real estate in Miami, but also the type and price point of the properties. While there may be a property that is as hot as a two dollar bill in one location, another type of property may not be hot.
The first half of the year has seen the strong resurgence in the purchase of small to mid-sized apartment buildings. Most of these sales have been for cash and the majority of them have been to foreign investors looking to take advantage of the final bottom in multifamily pricing and the sharp increase in rents. That increase in rents is being fueled by the tightening of mortgage credit requirements for marginal borrowers who are being placed back into the rental pool. Further, the fact that many of the newer high-rises in Miami that were thought to be investor driven purchases turned out not to be. They were purchased as second and third homes and are being kept as such, not rented. Fearful projections of a fifteen year supply of condos evaporated; it only took seven. Now we have an actual shortage of rentals, and where there are rentals, the renters pay dearly. Finally lenders are beginning to slowly loosen their purse strings and financeable multifamily purchases can take place although at a snail’s pace.
Land, the red haired stepchild of real estate, is finally on the mend, with a number of developers recognizing the bottom of the cycle and are again eagerly, if cautiously, acquiring development sites. Purchases are primarily in the East of I95 corridor as well as the few remaining oceanfront parcels for high-rises. There is still plenty of developable property to buy.
One big change commercial property that is coming, is to the Design District, where Dacra Development is readying itself to break ground on almost One Million square feet of a high end retail/office and condominium project. This project shows the optimism, as well as the developers due diligence, to confirm that South Florida’s real estate recovery has finally raised its head off the sickbed.
While other areas of South Florida may show signs of still lagging, the question of South Florida’s real estate recovery is no longer questioned as an “if” or “when” moment, but a how fast?
