The future is in question for at least a dozen new condo projects that were originally proposed to be developed east of Interstate 95 in the tricounty South Florida region since this current real estate cycle began in 2011.
A growingly bearish sentiment for South Florida’s previously booming preconstruction condo market has emerged since the last winter tourism season ended and prospective domestic buyers returned north for the summer.
In their absence, developers are dealing with international investors who increasingly find themselves priced out of the South Florida condo market as preconstruction prices have surged to reflect higher construction costs and foreign currencies have fallen against the U.S. dollar as the global economy has slowed.
On a year-over-year basis, the dollar has risen significantly against the currencies of the countries from which the bulk of South Florida’s international buyers originate.
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For example, the dollar is up about 11 percent against Argentina’s peso, 29 percent against Brazil’s real, 30 percent against Colombia’s peso, 19 percent against the euro and 40 percent against Russia’s ruble as of July 15, according to the currency conversion website OandA.com.
It is against this backdrop that more and more developers are opting to revise their original plans for preconstruction condo projects or even attempting to sell off their development sites.
The latest project in limbo is the planned 27-story Gulfstream Park Tower that was slated to feature 182 units in the expansive mixed-use retail and gambling facility in Hallandale Beach just north of Aventura.
Despite purported presales representing some “80 percent” of the project, the developer has reportedly “halted” sales, according to the South Florida Business Journal.
News of the Gulfstream Park Tower comes just weeks after the developer of the planned Edge On Brickell project – which launched presale at the beginning of last winter tourism season in October 2014 - sold off the land where a 58-story tower with 130 units was slated to be built on the south bank of the Miami River for $18.3 million on June 30, according to the Miami-Dade County records.
Even before this, veteran developer Ugo Colombo in May chose to list for sale the development site of what was originally envisioned to be a “companion project” to the planned 64-story Brickell Flatiron project with nearly 550 units going up two blocks away in the Brickell Avenue Area of Greater Downtown Miami, according to the Miami Herald.
The summer of condo project revisions in South Florida got off to an early start in April when the developer of the planned 36-story Ion East Edgewater condo tower with 328 units in Greater Downtown Miami reportedly decided to reconfigure the “property for a mixed-use development,” according to The Real Deal Miami.
Added to this, some preconstruction projects have recently opted to reduce their presale deposit requirements below 50 percent in hopes of attracting a greater pool of buyers and gain a competitive advantage.
The series of changes is not a surprise to industry watchers given the loss of buying power for international investors combined with a surge in the number of newly proposed projects in South Florida.
The latest count of new South Florida condo projects for this cycle stands at more than 355 towers with nearly 43,000 units even when excluding the projects in question, according to the preconstruction condo projects website CraneSpotters.com.
(For disclosure, my firm operates the website.)
By comparison, developers had announced 255 new condo towers with nearly 34,600 units back in July 2014. A year earlier in June 2013, developers had proposed nearly 140 new condo towers with less than 18,600 units.
To date during this cycle, developers have completed 34 new condo towers with more than 3,200 units east of I-95 in South Florida. More than 110 new condo towers with nearly 10,900 units are currently under construction as of July 13, according to the research.
An additional 211 new condo towers with nearly 28,900 units are currently in the planning or presale stage of development, according to the data.
The unanswered question going forward is whether the current pullback by developers in South Florida’s condo market is a temporary pause due to changing market conditions or an inflection point for the current real estate cycle that began in 2011.
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 preconstruction condo project website CraneSpotters.com in conjunction with the Miami Association Of Realtors.
Preconstruction condo market booms
This is an annual comparison of the number of new condo projects announced for sites east of Interstate 95 in the tricounty South Florida region of Miami-Dade, Broward and Palm Beach since this real estate cycle began in 2011.
S. Florida units
S. Florida units