Developers have announced 400 new condo buildings with nearly 49,000 units for sites located east of Interstate 95 in the tricounty South Florida region since this current cycle began in 2011.
Based on the projects announced as of Dec. 1, the average new South Florida condo building slated to be built east of I-95 during this boom would stand 18 stories tall and feature more than 120 units in the tricounty region of Miami-Dade, Broward and Palm Beach, according to the preconstruction condo website CraneSpotters.com.
(For disclosure, my firm operates the website.)
The supermajority of the preconstruction units — nearly 74 percent — currently in the South Florida pipeline at various stages of development have been announced for the international-oriented buyer market of Miami-Dade County.
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Developers envision ultimately building 252 new condo buildings with nearly 36,000 units east of I-95 in Miami-Dade County during this cycle. The average condo building in Miami-Dade County is proposed to stand 23 stories tall and feature more than 140 units.
By comparison, the more domestic-oriented buyer market of Broward County ranks a distant second in preconstruction activity with 93 new condo buildings and more than 9,000 units in the pipeline. In Broward County, developers plan to construct smaller buildings that are an average of 10 stories tall with fewer than 100 units.
Palm Beach County is third based on 55 new buildings and more than 3,800 units announced during this cycle. The average new condo building in Palm Beach County is envisioned to have 13 stories and fewer than 70 units.
It is worth noting that the actual number of floors and units built compared to what is initially announced or ultimately approved for construction can change — usually downward — based on a number of factors, including presale marketing campaigns.
Even with today’s high presale deposit requirements of up to 50 percent, the current pipeline of new condo projects in the South Florida pipeline is similar to the number of units ultimately created during the previous cycle that stretched from 2003 to 2010.
Back then, presale deposits were generally about 20 percent as developers attempted to encourage preconstruction condo investment by primary users, second-home buyers and investors in South Florida’s seven largest coastal markets.
The relatively low deposit requirements of the last cycle — coupled with easily obtainable financing — is thought to have greatly contributed to overbuilding and a subsequent crash that devastated South Florida real estate prices beginning in 2007.
Despite the number of new units announced this cycle, it cannot be assumed that the South Florida market will automatically suffer the same fate as the 2003 boom, especially given the higher deposits said to be collected by developers.
In analyzing the data, consider that only 8 percent of the new condo units announced for this cycle have been completed as the market enters its fifth year of this cycle.
An additional 25 percent of the pipeline is currently under construction with completion scheduled in the next few years.
Combined, the categories of newly completed condos and units under construction only represent about 16,100 units for a market that did not build new towers for a number of years due to the crash.
Alternatively, more than two-thirds of the new condos — some 32,600 units — in the pipeline for South Florida today are in the planning or presale phase of development.
As a result, the possibility is growing that some of the announced new condo projects in the South Florida pipeline might not actually get built during this cycle.
In fact, the original plans for 18 previously announced condo buildings with nearly 2,800 units have already been revised, put up for sale or outright canceled as buyers and developers react to the changing market.
A key factor driving the recalibration of the South Florida condo market is the global economic slowdown that has resulted in a strengthening dollar against most foreign currencies.
South Florida condos are no longer on sale for international buyers, especially those purchasers attempting to buy with currencies from commodity price-depressed countries in Latin America.
Consequently, domestic buyers — who generally have different expectations — are increasingly the pool of purchasers being targeted by condo developers.
The unanswered question going forward is whether the South Florida condo market has a deep enough pool of buyers to warrant all of the new units that are currently in the pipeline for the tricounty coastal region.
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.
Current condo boom to feature modest-sized buildings
This is an overview of the new condo buildings in the development pipeline east of I-95 in the tricounty South Florida region between 2011 and Dec. 1, 2015.
S. Fla. units
Average new building:
Average new building:
▪ South Florida
▪ Palm Beach county