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Brickell Avenue area condo resale prices inch closer to highs of last cycle

ZALEWSKI
ZALEWSKI

It has taken nearly a decade, but condo resale prices in the popular Brickell Avenue Area submarket of Greater Downtown Miami have nearly rebounded to the peak levels reached during the last real estate cycle.

In the first quarter of 2015, buyers purchased Brickell Avenue Area condo units at an average price of $433 per square foot, which is only about 2 percent below the 2006 level of $442 per square foot for the same time period, according to data from the Southeast Florida MLXchange.

The near recovery of Brickell Avenue Area condo resale prices has long been in the works since 2009 when prices tumbled to a first-quarter low of $225 per square foot in an area that stretches from the Rickenbacker Causeway north to the Miami River, and Biscayne Bay west to Interstate 95.

Since the bottom of the last cycle, condo resale prices have increased on a year-over-year basis in the first quarter for four consecutive years and five of the past six years.

The only year in which condo resale prices in the Brickell Avenue Area did not increase on a year-over-year basis was in 2011, when the last of the distressed units from the previous cycle were being sold off and this current preconstruction boom was beginning.

Since 2009, condo resales prices in the Brickell Avenue Area have moved steadily upward on a per-square-foot basis to $251 in 2010, $297 in 2012, $372 in 2013 and $424 in 2014, according to the data.

The somewhat rapid recovery of the Brickell Avenue Area real estate market has been propelled by international investors who came to South Florida looking to capitalize on the low condo prices from the previous market crash at a time when their foreign currencies were strong.

By one estimate, international investors account for some 85 percent of the “current buyer pool” in Greater Downtown Miami, according to the Miami Downtown Development Authority.

Since last summer, the positive conditions that had resuscitated the Greater Downtown Miami condo market have begun to change.

The dollar has strengthened substantially against foreign currencies, and resale condo prices have risen to levels that have some concerned that international buyers are being priced out of South Florida.

Concurrently, the domestic buyers — with the strong dollar — who are viewed as the able replacements for foreign investment activity in the Brickell Avenue Area have failed to purchase in significant numbers. The availability of mortgage financing, rather than a lack of desire to own, in the Brickell Avenue Area is a key obstacle.

This combination of factors helps to explain why the number of condo resale transactions in the Brickell Avenue Area have stalled in recent years.

Condo resales in the Brickell Avenue Area grew by 2 percent in the first quarter of 2015 to about 231 transactions. That’s compared to 226 deals in 2014, 238 deals in 2013 and 220 deals in 2012.

As the number of transactions have flattened, the number of condo units available for purchase is rising.

Currently, more than 1,400 units are available for purchase in the Brickell Avenue area. Yet only an average of 77 condos sales were transacted monthly in the first quarter of this year, according to the data.

The current sales pace means the Brickell Avenue Area has more than 18 months of condo resale supply available for purchase.

A balanced market is considered to have six months of condo supply. More months of supply indicates a buyer’s market, and less months suggests a seller’s market.

Contributing to this growing supply, developers have announced 32 new condo towers with more than 10,200 units in the Brickell Avenue Area of Greater Downtown Miami during this cycle, according to the preconstruction condo projects website CraneSpotters.com. (For disclosure, my firm operates the website.)

Overall, 72 new condo towers with nearly 20,200 units — including the new projects in the Brickell Avenue Area — have been announced for Greater Downtown Miami since 2011.

In the Brickell Avenue area, a dozen new condo towers with more than 3,600 units are currently under construction. An additional five towers with nearly 1,400 units have been constructed since 2011.

The other 15 new condo towers with 5,200 units for the Brickell Avenue Area are in some stage of the planning or presale process.

Early indications are that a number of new condo units that are being built during this cycle will likely be listed for resale upon completion.

For the projects in the Brickell Avenue Area that have been completed within the past six months, a number of units are already being marketed for resale. For instance, nearly 90 units are currently listed for resale at an average asking price of $650 per square foot in the 46-story BrickellHouse condo tower with 374 units, according to the data. That tower was completed in October 2014,

More than 60 units in the 1100 Millecento Residences condo tower with 42 floors and 382 units — which was completed in February — are currently on the market at an average asking price of less than $400 per square foot.

Even though developer transactions only began in March, at least seven condos in the 35-story Nine At Mary Brickell Village with 390 units are already on the market at an average asking price of $535 per square foot.

Besides these recently completed projects, at least an additional three towers with more than 900 units are slated to be completed in the Brickell Avenue Area later this year.

The unanswered question going forward is not whether the Brickell Avenue Area will match — and probably surpass — the average condo resale price of the last cycle, but if the values will be sustainable given all of the new and existing units that are currently on the market.

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.

Brickell edging toward highs

A year-over-year summary of first-quarter condo resales for the past decade in the Brickell Avenue area (from the Rickenbacker Causeway north to the Miami River, and from Biscayne Bay west to I-95) shows per-square-foot prices edging toward pre-recession prices.

Annual Completed Resales Between January And March

Unit Resales

Year-Over-Year Change

Average Price Per Square Foot

Year-Over-Year Change

2015

231

2%

$433

2%

2014

226

-5%

$424

14%

2013

238

8%

$372

25%

2012

220

-20%

$297

22%

2011

276

48%

$244

-3%

2010

187

11%

$251

12%

2009

169

119%

$225

-35%

2008

77

-43%

$346

-20%

2007

136

33%

$432

-2%

2006

102

$442

Source: Southeast Florida MLXchange

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