With new projects continuing to enter the pipeline, South Florida condominium developers are well on their way toward matching a pace of construction last seen during the boom of 2003-06.
The difference this time is that the developers are relying less on bank financing and more on pre-construction deposits from buyers — sometimes 50 percent of the contract price. This, developers hope, will insulate them from the effects of any real estate crash in the coming years.
Earlier this month, South Florida surpassed the milestone of more than 35,000 proposed units to be built east of Interstate 95 in Miami-Dade, Broward and Palm Beach counties when a trio of development companies led by the Related Group revealed plans to build a new condo-hotel tower fronting the Intracoastal Waterway in Hollywood.
By comparison, according to CraneSpotters.com, developers created more than 49,000 units east of Interstate 95 in the region’s seven largest cities before the market crashed in 2007. (Full disclosure: My firm operates the website.)
Unlike the recent boom-and-bust cycle, the momentum for this condo construction rush is being fueled by developers building with buyer deposits of as much as 50 percent of the pre-sale contract price of units.
This dependence on buyer deposits rather than the bank financing model of the last cycle has many in the industry confident that South Florida can avoid a repeat of the events, including an oversupply of new residences, that contributed to the devastating crash of 2007.
Obviously, no one knows whether all of the new condos will ultimately be built or successfully sold, but what is clear is the desire by veteran and newbie developers alike to press ahead.
The Related Group — South Florida’s most prolific vertical residential developer — is leading the push, just as it did last time.
With the newly announced Hollywood project, the Related Group is involved with developing at least four new condo towers with more than a combined 1,050 units near the intersection of State Road A1A and Hallandale Beach Boulevard.
The Related Group’s first new condo tower in South Florida since the crash — the 24-story Apogee Beach with 49 units on an oceanfront site in Hollywood — was started in 2011 and completed in 2013.
A second condo tower — the planned Beachwalk project slated to stand 33 stories tall with 300 units — is under construction on a site fronting the Intracoastal Waterway in Hallandale Beach.
Presales for a third condo tower — the planned 41-story Hyde Resort And Residences with 407 units on an oceanfront site in Hollywood — are underway.
The Related Group recently announced that the Hollywood highrise is the 34th new condo tower — with a combined 8,400 units — that the Miami-based developer is involved with in South Florida since the current boom began in 2011.
By comparison, the Related Group created at least 24 condo towers with almost 9,150 units on locations east of Interstate 95 in the tri-county region during the last boom, according to an analysis of government records.
As veteran developers such as the Related Group proceed with their projects, a notable number of proposed units are being planned and built by developers that had not previously built condo towers independently in South Florida.
The pool of new-to-market condo developers now operating in the South Florida market includes a pair of ultra-luxury builders from Argentina: Consultatio Real Estate and the Faena Group.
Both developers are proposing a series of condo towers that rank as some of the highest-priced presale units on the market in South Florida.
The mix of developers attempting to build in South Florida may have different corporate names from the last boom, but the locations of their projects have not changed.
IN SOUTH FLORIDA
Miami-Dade County is home to almost 79 percent of all condo units proposed for South Florida. Greater downtown Miami accounts for almost 18,300 units while the barrier island in Miami-Dade represents more than 4,500 units.
During the previous boom, Miami-Dade represented about 70 percent of the new condo units. Greater downtown Miami accounted for more than 22,200 of them while Miami-Dade’s barrier island had an additional 12,000.
In Broward County, developers have proposed almost 4,450 units, with most of them — 3,250 — announced for sites in the Hollywood-Hallandale Beach market.
Back in the 2003 boom, developers created 10,500 condos near the Broward coast with almost 5,000 units in the Hollywood-Hallandale Beach area.
IN PALM BEACH AREA
Palm Beach County ranks third in the region with more than 3,050 proposed units, including almost 2,125 announced for West Palm Beach.
Developers created more than 4,450 units in coastal Palm Beach County during the last boom. West Palm Beach was home to about 3,400 units of them.
The question going forward is whether developers, buyers and lenders will be more proactive during the current cycle to thwart the forces that triggered widespread speculation followed by a crash during South Florida’s last pre-construction condo boom.
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. Zalewski also runs the pre-construction condo project website CraneSpotters.com in conjunction with the Miami Association of Realtors.
South Florida presconstruction condo projects
|(By county and status as of 8/18/2014)|
|Market||Towers||Floors||Units||Shares of S. Fla. units|
|Palm Beach County||36||431||3,055||8.7%|
|Status||Towers||Floors||Units||Share of S. Fla. units|
|Completed (since 2011)||16||200||786||2.2%|
S. Florida pre-construction condo projects market rankings as of Aug. 18
|Rank||Market||Towers||Floors||Units||Share of Units|
|South Florida||256||5,059||35,132||100 %|
|1||Greater Downtown Miami||61||2,583||18,267||52%|
|3||West Palm Beach||12||261||2,122||6%|
|5||Sunny Isles Beach||14||547||1,924||5.5%|
|7||Bal Surf Bay||30||225||1,286||3.7%|
|10||North Bay Village||4||93||549||1.6%|
|11||Miami (Coconut Grove)||7||130||435||1.2%|
|15||Palm Beach Gardens||5||19||197||.6%|
|16||North Palm Beach||2||44||166||.5%|
|20||Miami (Design District)||1||0||96||.3%|
|25||Palm Beach Shores||3||9||18||.1%|