Strong condo sales topping $750 million in year one at the newly opened St. Regis Bal Harbour Resort & Residences are spurring a development boom in Bal Harbour and the neighboring barrier island cities of Surfside and Bay Harbor Islands in Northeast Miami-Dade County.
Inspired by an average new condo sales price of nearly $1,450 per square foot at the St. Regis Bal Harbour at 9701 Collins Ave. since November 2011, developers are rushing forward with proposals for more than 10 new condo towers with nearly 800 units — and counting — on a series of sites within walking distance of the major intersection of Collins Avenue and 96th Street, which passes through the cities of Bal Harbour, Surfside and Bay Harbor Islands.
Developers of the newly proposed projects are attempting to capture some of the sales success being realized at the St. Regis Bal Harbour, where buyers have purchased more than 200 units — a combination of condos and condo-hotels — out of a pool of nearly 500 units at prices ranging from $1.35 million to $13.5 million, according to Miami-Dade County records.
The developers — a combination of local and international firms coming from countries including Argentina and Turkey — are independently proceeding with the permit process in hopes of building a series of condo projects, ranging from the proposed 20-unit Harbor Park condo tower on the Intracoastal Waterway to more than 260 units on the oceanfront site of the Bal Harbour Beach Club.
The proposed condo projects in the Bal Harbour-Surfside-Bay Harbor Islands area are at various stages of obtaining governmental approval. Many of the proposed condo towers are anticipated to launch presales in 2013, begin construction in 2014, and be completed in or before 2015.
The surge in new condo projects in the Bal Harbour-Surfside-Bay Harbor Islands area comes as South Florida is experiencing the makings of another building boom.
Nearly 100 new condo towers with more than 14,200 units have been announced for the coastal region of Miami-Dade, Broward and Palm Beach counties as of Dec. 15. Of the proposed condo projects, one tower has already been completed and 14 additional towers are under construction with the most recent groundbreaking occurring on Dec. 6 for the proposed 35-story Chateau Beach just north of Bal Harbour in the city of Sunny Isles Beach.
As condo construction financing remains a challenge for developers to obtain in South Florida, most of the newly proposed condo towers are being sold to international buyers who commit to make a series of deposits — based on construction milestones being reached — that account for as much as 80 percent of the contracted purchase prices prior to the completion of the units. Typically, only a portion of the deposits cannot be used by the developers for construction.
The current pay-along-the-way funding model for preconstruction condo buyers varies dramatically from South Florida’s last condo boom — and subsequent bust — when speculators were typically only required to deposit 20 percent of the contracted purchase price.
Early in this newest South Florida condo construction cycle, the speculators are reportedly limited given the rich buyer-deposit requirements.
In addition to limiting the potential of a similar speculator-driven condo crash, the current deposit requirements for preconstruction projects is arguably firming up resales of existing condo units in the Bal Harbour-Surfside-Bay Harbor Island area. In the first 11 months of 2012, buyers acquired nearly 270 condo units — many in older projects — at a median price of $260 per square foot compared to 285 units at a median price of about $243 per square foot during the same January through November period of 2011, according to the Southeast Florida MLXchange.
A year earlier in 2010, buyers acquired less than 260 condo unit resales in the Bal Harbour-Surfside-Bay Harbor Islands area at a median price of about $226 per square.
By comparison in the last year of the South Florida condo boom in 2006, buyers acquired less than 140 condo unit resales in the Bal Harbour-Surfside-Bay Harbor Islands area at a median price of nearly $345 per square foot between January and November.
Going forward, the Bal Harbour-Surfside-Bay Harbor Islands area appears poised for a condo construction boom based on the number of new projects being proposed. The unknown is whether buyers will buy preconstruction condo units under a pay-along-the-way model in projects that do not bear the St. Regis moniker.
Peter Zalewski is a principal with the Miami real estate consultancy Condo Vultures. Zalewski, a licensed Florida real estate professional since 1995 and founder of CVR Realty and Condo Vultures Realty LLC, advises developers, lenders and institutional investors.