Grace Baquillard moved to Miami six months ago from Nicaragua — but she knew which part of town she wanted to live in before she even got here.
“If you’re a millennial in your 20s or 30s, you want to live in Brickell,” said Baquillard, 28, who works at L’Oréal Travel Retail Americas near the Miami International Airport and pays $1,800 a month for a studio apartment in a Brickell rental complex. “This is where the entire social circle of my life is. I’m paying for the location, not the apartment.”
Baquillard is not alone. After decades of growth-spurt booms and economy-crashing busts, downtown Miami is starting to settle down and act like an adult, helped by a growing demand for urban living by a generation that isn’t interested in placid suburban living.
According to a mid-2017 market study released by the Miami Downtown Development Authority (DDA), rent prices are stable, development is being balanced with demand and financial institutions have raised their requirements for loans — all indicators that the city’s downtown area is on stable long-term footing.
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The report covers Brickell, Edgewater, Overtown, Midtown, the Central Business District and the Arts & Entertainment District.
For the first time since downtown real estate began its current uptick in 2012, the condo pipeline had more completed units (5,180) than the number under construction (5,078). The implication: That unlike in the last boom, developers resisted the urge to overbuild or couldn’t secure the necessary financing.
A total of 3,365 units are expected to be completed by the end of 2017, while 652 condos will arrive in 2018 and 1,061 will land in 2019, according to the report.
Anthony Graziano, senior managing director of Integra Realty Resources, who authored the report, said that more than 80 percent of the 5,000-plus completed units are already sold, while 70 percent of the under-construction units are pre-sold.
“Not only have we reached a point where there’s more completed, but the remaining inventory that’s left to be sold is dwindling,” he said. “The reason that’s important is that it shows we’re not continuing to build beyond what the market can absorb.”
Overall, the volume of condo sales was down 50 percent from the previous two years. According to Cranespotters.com, more than 3,600 existing condo units are currently on the market in the downtown area — a 26-month supply (six months is considered the ideal amount of inventory).
In other words, it’s a good time to buy.
“Asking prices are steadying out, and with that kind of inventory on hand, now’s the time to look and find a motivated seller,” said Chris Zoller, a Realtor at EWM Realty and 2017 chairman of the Miami Association of Realtors. “Banks are also starting to loosen their purse strings for individual buyers and competing to give you a loan. If you’re not looking for waterfront or luxury [properties], things will not get cheaper if developers slow down.”
Condo resales take a hit
Prices for condos in the resale market slid six percent from the same period last year, to $403 per square foot. Graziano said the dip in resale value is a reflection of sellers’ willingness to lower prices to stimulate sales of the glut of inventory from the previous boom, when nearly 17,000 units were delivered from 2006-2008. May 2017 was the best month for volume of closed resales in the last two years, with 142 closings and 160 pending.
Renters, meanwhile, are seeking out plush digs — and willing to pay a premium for them. The new 2,675 Class-A apartment built between 2014-2017 fetched 25-35 percent higher rents than units built before 2014. Newly constructed one-bedrooms fetched an average of $2,064, while older one-bedroom apartments averaged $1,831 (up from $1,772 in 2016).
The average rent for a one-bedroom leased condo was down 7.3 percent year over year, for an average of $2,008.
Although those rent prices are high, people who live in downtown also earn more than typical residents elsewhere in Miami-Dade. The DDA estimates the average Brickell rent is $2,535, or 47 percent of the downtown Miami median household income of $66,498 (higher than the Miami-Dade County average of $51,800). By comparison, NBC New York estimates Manhattan residents spend 65 percent of their income on rent.
Greg West, president of the multifamily developer Zom, said the robust rental market — particularly in the Brickell area — is an indication of strong interest in downtown living.
“The renter is a more discriminating customer of a neighborhood than a condo buyer,” he said. “If you’re going to buy, you buy in an area where you think the value will improve in five years. A renter only cares about the neighborhood being great today. All the amenities that have come to downtown have made it a great place to live today, immediately.”
Proof: The number of Miamians living in downtown has doubled since 2000, when only about 40,000 lived in the central core. Once a virtual ghost town by night, downtown now boasts museums, high-end restaurants, culture and concerts to serve its 88,540 residents, according to the DDA — and others region wide. And downtown’s population is expected to grow another 20 percent to 106,429 by 2021. (Even The New York Times, which traditionally obsesses over South Beach at the exclusion of the rest of Miami-Dade County, published a fawning love letter to downtown Miami this week.)
“The things that we’ve been planning for a long time — downtown Miami and Brickell becoming 24/7 neighborhoods — are really happening,” said Carlos Rosso, president of The Related Group’s condo division. “Developers are finishing delivery of the projects they had started and then taking a pause to think about when to launch the next thing.”
Brickell Heights, the 690-unit condo tower Related completed in June, has sold all but one of its units, which is expected to close this week. The developer’s three other projects in the downtown area are scheduled for completion in early 2018: The 550-unit SLS Lux Brickell, the 1,400-unit Paraiso District project in Edgewater and the 470-unit Hyde Park condo/hotel in midtown.
More high-end luxury coming
Only two new projects are moving forward, both of them high-end luxury and privately financed: The 391-unit Aston Martin Residences, a joint venture between the automobile manufacturer and G&G Business Developments, and the 249-unit Missoni Baia, developer Vladislav Doronin’s 57-story tower branded by the Italian designer.
Suzanne Amaducci, a partner at the law firm Bilzin Sumberg, said that although banks have become much stricter about financing construction developments after the recession, loans are still being made.
“We’ve closed more than $2 billion in construction loans this year, and well over $1.5 billion of that were condo construction loans,” she said. “They’re just getting harder. They’re much more negotiated now. The lender consortiums are getting larger, and they’re looking for more equity and great sponsors.
“Every deal we did [this year] had an experienced, well-capitalized sponsor. Jules Trump, Turnberry, Related, Ugo Colombo — these are developers who are known for condo development. It’s the best and the brightest.
Colombo’s CMC Group, for example, secured a $236 million construction loan in April for the 541-unit Brickell Flatiron tower, which is due for completion in 2019.
“We’ve been selling consistently since we started sales in 2014,” said Vanessa Grout, president of CMC Real Estate, the sales and marketing arm of CMC Group. “We’re at 70 percent sold and have been selling about $10 million a month, which is a function of getting closer to completion and a function of the health of the market. This is not a build-it-and-they-will-come scenario. We are building product to meet demand.”
Some analysts think Miami’s long history of boom-and-bust real estate cycles has led to a real maturation for the city.
“What has happened over time is that Miami has become a market with a long-term view, rather than a short-term hit,” said Jonathan Miller, president of the New York-based real estate firm Miller Samuel Inc. “It used to be a retirement community. Then it was a highly-speculative flipper’s market. Then it became a luxury market.
“Now it’s becoming more balanced,” Miller said. “And through that entire process, infrastructure was created and services were improved. Miami used to be a place to go and have fun. Now it’s a place to live and have fun.”