Developers have surpassed the 50,000-unit milestone for new condos planned for east of Interstate 95 in Miami-Dade, Broward and Palm Beach counties during this real estate cycle.
If every proposed unit is constructed, developers will have created more new condos during this cycle, which began in 2011, than in the previous stretch from 2003 to 2010, when fewer than 49,000 units were created in coastal South Florida, according to research from the preconstruction condo projects website CraneSpotters.com.
(For disclosure, my firm operates the website.)
It is unclear if all of the announced South Florida units will actually get built because developers are increasingly struggling to sell preconstruction condos as the global economy slows, the dollar is strengthening, and the supply of richly priced units available for purchase grows. To this point, the original plans for nearly 20 new condo buildings with more than 2,800 units have been revised, put on hold, or canceled.
As of the week of Feb. 1, developers have completed 57 new condo buildings with more than 4,300 units during this South Florida real estate cycle. Nearly 130 new condo buildings with more than 12,900 units are under construction.
The combination of new units completed and under construction together represent less than 35 percent of the total number of condos announced since 2011.
An additional 233 condo buildings with nearly 33,000 units — more than 65 percent of the announced pipeline — are in the planning or presale phase of development in coastal South Florida.
In attempt to generate sufficient preconstruction condo sales to justify building all the currently announced projects, developers are increasingly offering generous incentives. They include travel reimbursements for out-of-town buyers, designer credits for the interior build-out of units, and broker commissions of as much as 10 percent of the contracted purchase prices.
Most of the perks are being offered in Miami-Dade County where developers have announced more than 260 new condo buildings with nearly 37,000 units. Nearly three of every four condo units slated to be developed during this South Florida boom are in Miami-Dade.
By comparison, developers have announced 96 new condo buildings with fewer than 9,050 units — about 18 percent of the South Florida pipeline — in Broward County.
To the north, 62 new condo buildings with fewer than 4,300 units — about 9 percent of the South Florida preconstruction pipeline — have been proposed in Palm Beach County.
Contributing to the struggles for developers in Miami-Dade County: Beginning in March, the Financial Crimes Enforcement Network bureau of the U.S. Treasury Department will require title companies to determine the ultimate individual ownership of corporations that use cash — or forgo bank financing — to purchase luxury residential real estate at transaction prices of more than $1 million.
The temporary order — extending through August — only applies to two places: Miami-Dade County and the New York City borough of Manhattan.
The order was announced in January in response to growing concerns about “dirty money” being invested in, and propping up, the luxury residential real estate market of Miami-Dade.
Industry watchers speculate that luxury residential real estate buyers — who generally purchase property under a corporation’s name, often to keep their transactions a secret — are being incentivized to refocus their investments to the north into Broward and Palm Beach counties.
It is unclear if the Treasury Department’s order will be made permanent or expanded to include other counties in Florida.
Despite the obvious headwinds for the preconstruction condo market, the South Florida region — as a result of hefty 50-percent presale buyer deposits requirements instituted since 2011 — appears better suited to avoid a repeat of the last cycle that ended in a devastating crash that dragged prices down to levels that were below the cost to replicate the new units.
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Back in the last cycle, some buyers opted to forfeit their 20 percent presale deposits to developers — who ended up with an oversupply of condos — rather than follow through in purchasing preconstruction units that were under contract.
The unanswered question going forward is whether current developers actually stood firm in enforcing hefty presale buyer deposit requirements throughout this cycle even as the South Florida preconstruction condo market grew increasingly competitive in recent years.
Peter Zalewski is a principal with the Miami real estate consultancy Condo Vultures. Zalewski also runs the preconstruction condo project website CraneSpotters.com in conjunction with the Miami Association Of Realtors.
The preconstruction condo boom
This is a ranking as of Feb. 1 of the total number of preconstruction condo units announced in the Miami-Dade, Broward and Palm Beach counties since this current real estate cycle began in 2011.
Share of new
South Florida units
Greater Downtown Miami
Sunny Isles Beach
West Palm Beach
Bal Harbour-Surfside-Bay Harbor Islands
North Bay Village
Miami (Coconut Grove)
Miami (Upper East Side)
North Palm Beach
Palm Beach Gardens
Miami (Design District)
South Palm Beach
Palm Beach Shores
Source: CraneSpotters.com compiled this chart using data from the Southeast Florida MLXchange.