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South Florida poised to surpass 40,000 new condo units during this current cycle

ZALEWSKI
ZALEWSKI

The South Florida preconstruction condo market is rapidly expanding some three years into this latest real estate cycle.

In the last two months alone, developers have announced plans to build nearly 5,000 new condo units east of Interstate 95 in the Miami-Dade, Broward and Palm Beach counties, according to the preconstruction condo projects website CraneSpotters.com.

(For disclosure, my firm operates the website.)

This current growth spurt means developers are now on the verge of reaching their latest milestone of this cycle: 40,000 new condo units proposed.

At the end of October, developers had already announced plans to build nearly 39,750 new condo units in South Florida.

The total unit count could quickly climb in the upcoming weeks.

Developers from a number of recently announced condo towers are expected to reveal just how many units will be featured in their respective projects before the winter buying season kicks off with the Thanksgiving holiday.

Once this latest milestone is reached, the South Florida market will be less than 10,000 units away from matching — and possibly surpassing — the nearly 49,000 new condos that were created east of I-95 during the previous real estate boom-bust cycle that occurred between 2003 and 2010.

To date, Miami-Dade is the busiest county for preconstruction condo units announced during this cycle.

Developers have proposed at least 189 new condo towers with nearly 28,500 units east of I-95 in Miami-Dade.

Contrast this current total with the last boom when developers created at least 148 new condo towers with about 34,100 units in Miami-Dade, according to an analysis of government records.

Despite a recent surge in newly announced projects, Broward still ranks a distant second in South Florida based on 56 new condo towers announced with nearly 7,600 units to be developed east of I-95.

During the last cycle, developers created at least 70 new condo towers with more than 10,250 units in Broward, according to government records.

Palm Beach is experiencing some preconstruction condo market activity but nowhere near the same velocity as the other counties in the South Florida region.

In this current boom, developers have announced at least 43 new condo towers with less than 3,700 units to be built on sites located east of I-95 in Palm Beach.

During the previous boom, developers created at least 28 new condo towers with more than 4,400 units in Palm Beach.

Developers repeatedly say they are optimistic this current cycle will end differently from the last boom when bulk buyers purchased blocks of condos in various South Florida towers at deep discounts from lenders that had previously seized these unsold units from unsuccessful developers.

A key reason for the widespread developer bullishness this time around is the 50-percent deposit safeguard put in place during this cycle to curtail speculators from purchasing numerous preconstruction units.

In the last condo boom-bust cycle, buyers purchased preconstruction units with only 20-percent deposits.

Developers point to the lower deposit requirement of the last boom as the primary reason buyers decided not to complete their preconstruction condo purchases once the market showed signs of stalling.

To this end, Miami-Dade developers are standing firm at 50-percent deposits even as their counterparts to the north are seeking deposits of as little as 30 percent in Broward and 25 percent in Palm Beach.

To illustrate the power of high deposits, consider that the minimum mean price to purchase a preconstruction condo unit east of I-95 in South Florida is $772 per square foot as of Oct. 3, according to the latest CraneSpotters.com Developers Price Survey.

On a county-by-county basis, the minimum mean price per square foot is $850 in Miami-Dade, $507 in Broward and $495 in Palm Beach, according to the survey.

Despite the strong prices, developers claim to have sold 65 percent — or about 11,100 units — of the nearly 17,000 preconstruction condo units currently being marketed for presale in South Florida, according to the survey.

The unanswered question going forward is whether South Florida this time around can finally break a nearly 100-year-long history of boom and bust cycles in real estate.

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.

Developers price survey for October 2014

This information was collected by researchers of CraneSpotters.com from the exclusive list brokerages for the respective projects as of Oct. 3, 2014.

County

Preconstruction condo projects Currently Selling

Total

Towers

Total

Floors

Total

Presale Units

Presale Units

Currently Sold

Ratio Of

Units Presold

Minimum Mean Price

PSF For Presold Units

Broward

20

27

279

1,891

1,426

75%

$507

Miami-Dade

82

96

2,363

14,690

9,478

65%

$850

Palm Beach County

4

15

91

344

167

49%

$495

South Florida

106

138

2,733

16,925

11,072

65%

$772

SOURCE: CRANESPOTTERS.COM

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