Some six years after the South Florida condo market first collapsed, developers are proposing at least 100 new condo towers with more than 14,500 units in the tri-county coastal region of Miami-Dade, Broward and Palm Beach.
The number of proposed condo towers is expected to increase as several approved development sites from the last construction boom have traded in recent months to investors scouring South Florida for vacant land that permits high-density residential projects.
A factor contributing to the newest wave of proposed South Florida condo projects is the shrinking unsold new condo inventory. Less than 6 percent of the nearly 49,000 coastal units created in South Florida during the last boom remain unsold as of 2012.
The clearest example of the reduced developer inventory is in Greater Downtown Miami — the epicenter of Florida’s vertical condo crash — where about 850 new condo units are unsold out of pool of more than 22,200 units as of 2012.
At the current sales pace, South Florida’s remaining new condo inventory could be sold out by 2014.
Industry optimism about the prospect of selling out of the new condo oversupply — conceived in some cases about a decade ago — is spurring local developers and even more builders from outside of South Florida to intensify their efforts to construct condo towers.
As was the situation during the last South Florida condo boom, Greater Downtown Miami is attracting the most attention from developers focused on building condo high rises.
As of January 2013, Greater Downtown Miami is home to nearly 20 new condo towers with more than 6,400 units. An additional five towers with a combined 550 units are proposed for sites just north and south of Greater Downtown Miami.
The Hollywood and Hallandale Beach market in Southeast Broward County ranks second in South Florida with 10 new condo towers proposed with nearly 1,400 units. The Hollywood and Hallandale Beach market was the first of South Florida’s largest coastal condo market to sell out of boom-era inventory, doing so in 2011.
Sunny Isles Beach in Northeast Miami-Dade County ranks third with nearly a dozen new towers and 1,200 units proposed for the barrier island city.
Ranking fourth on the list of the most proposed condo unit is the tri-city region of Bal Harbour, Surfside and Bay Harbor Islands, where developers are proposing 13 new condo towers with more than 1,000 units in an area located south of Sunny Isles Beach.
Rounding out the top five most active markets for proposed condo towers is Downtown West Palm Beach, where developers are proposing at least six new condo towers with nearly 1,000 units.
Developers are also proposing new condo towers in at least a dozen South Florida cities, including Aventura, Coral Gables, Delray Beach, Fort Lauderdale, Juno Beach, Key Biscayne, Pompano Beach and North Palm Beach.
As of this month, developers have completed one condo tower and launched construction on an additional 15 towers in South Florida.
In a sign that more construction could soon be starting in South Florida, the necessary paperwork — known as the Declaration of Condominium that formally establishes a new project — has been recorded with government officials for at least six additional proposed towers.
Lender opinions are gradually changing about condo construction financing but at this time many banks are still hesitant to fund new towers. Consequently, developers are being forced to collect hefty deposits from preconstruction buyers in order to build.
The bulk of the preconstruction condo buyers have reportedly come from overseas with a high concentration of Latin American investors.
A combination of factors — ranging from advantageous currency exchange rates to flight capital seeking a stable destination, strengthening condo prices to rising rental rates — have contributed to international buyer interest in preconstruction condo projects that are not scheduled to be completed for at least two years.
Domestic buyers, however, have reportedly abstained from South Florida’s latest preconstruction condo wave. A variety of factors are reportedly contributing to the lack of participation by domestic buyers, including concerns about recovering preconstruction deposits if proposed projects are not completed.
Efforts are under way to create some form of condo deposit insurance for preconstruction buyers in an attempt to satisfy this concern.
During the last South Florida condo construction boom, developers typically collected deposits of 20 percent of the contracted purchase price of units and did not require any additional buyer funds until the towers were completed.
This 20-percent-deposit structure is blamed for allowing some preconstruction condo buyers to forfeit a majority of their deposits rather than closing on units in a downward market.
Under the new preconstruction deposit schedule, buyers are required to commit to a series of payments — based on administrative and construction milestones — that equal about 50 percent of the purchase price. At least one project has requested an 80 percent deposit while another project has asked for 30 percent.
The new 50-percent-deposit structure is a strategy designed to increase the odds that preconstruction buyers ultimately close on their respective contracted units during this newest South Florida condo wave.
Going forward, the unanswered question for South Florida is whether developers, lenders, regulators and investors have instituted enough changes to their business models to lessen the chances of another condo boom-and-bust cycle like the one that has stifled the region since 2007.
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 .