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Most real estate experts in South Florida agree that the condominium market has cooled — at least for big, new, luxury product. The heavy supply, plus a strong dollar, has thinned the buyer pool for the thousands of high-end units coming to market. But developers aren't calling off the cranes.
Condo builders are instead moving north, creating smaller projects, courting domestic buyers and incorporating additional uses in their designs. For example, Miami-based Related Group, the leading condo developer in South Florida, is preparing to launch pre-construction sales in the first three months of 2020 for a Pompano Beach condo development after a redesign reduced the number of units from 130 to 105.
Related Group Vice President Nicholas Pérez said asking prices will be “definitely under $1K” per SF. He said Related’s Pompano project is likely to draw the same types of buyers who paid prices averaging about $700 per SF at Sabbia Beach, a new oceanfront condo about five blocks south of Related’s development site.
“If you look at what happened with Sabbia, it was a lot of Canadians, Northeasterners and empty nesters coming and buying, and we’ll probably see the same thing here,” Pérez said. “I don’t think we’re going to rely too much on the South American buyer here.”
Peter Zalewski, founder of Miami-based Condo Vultures Realty, says condo development potential persists in Pompano Beach and other South Florida markets north of Fort Lauderdale’s international airport, where buyers tend to be Americans and Canadians, but not south of the airport, where more buyers are foreign nationals.
That area is "where the sales have crashed," Zalewski said. "North of the airport, it’s still doable.” Miami-Dade County already has enough actively listed condos for sale to provide a one-year supply, based on the pace of monthly sales, according to a Dec. 5 research report by Condo Vultures Realty.
Miami-Dade had 13,742 actively listed condos for sale Dec. 5, but the monthly number of sales averaged only 963 during the first nine months of 2019, according to Condo Vultures. The unsold inventory of condos is even bigger, relative to sales velocity, in submarkets such as Sunny Isles Beach, where oceanfront condo construction has surged in recent years. The little seaside city had a 27-month supply of condo listings with an average asking price of $1.45M.
Compared to Miami-Dade, the condo market appears more balanced in Broward and Palm Beach counties. The two counties had about a five-month supply of listings, based on sales velocity, Condo Vultures reported. The average asking prices for listed condos also were far lower in Broward ($399,919) and Palm Beach ($533,716) than in Miami-Dade ($974,486).
“Some small projects in the right locations could very well work in this environment,” said Dan Kodsi, who co-developed the 60-story, 569-unit Paramount Miami Worldcenter condo development, which was completed this year and sold at prices that averaged $700 per SF.
But to launch a major condo development as big as Paramount Miami Worldcenter, “you can’t sell two or three units a month … You have to sell 150 to 200 fairly quickly to get the project off the ground,” he said. “You won’t get that type of [sales] velocity until 2023. I wouldn’t launch something similar to Paramount until 2023.”
Kodsi just launched pre-construction sales for his next building at the Miami Worldcenter master-planned community, Legacy Hotel and Residences. But it’s not what he calls “a traditional, full-size condo” because Legacy is designed with 278 condos above 255 hotel rooms. “There are no [short-term] rental restrictions. This is not a full residential product,” Kodsi said. “It’s more of a second-home, crash-pad type of product,” ranging in size from 373 to 949 SF, and in price from the $300Ks to the $500Ks.
Few South Florida condo developments are pricier than Estates at Aqualina, a two-tower, 256-unit project under construction along the ocean in Sunny Isles Beach. The developer, Jules Trump, said pre-construction prices for most units in the 93-unit north tower will range from $6M to $8M, and the tower’s two penthouses are priced at $20M and $30M.
“My guess is he’s got some buyers from his existing buildings who are going to buy into the new one,” Fort Lauderdale-based developer Dev Motwani said. “Aqualina is kind of his own brand that appeals to the highest crust of the market. Those buyers are always looking for new product. They want to be in new buildings.” Motwani’s projects include the 95-unit, 18-story Paramount Fort Lauderdale condo tower across the street from the beach. Construction was completed in 2017, and the tower sold out at prices averaging over $800 per SF. He said he is planning to build another 95-unit condo farther north on an oceanfront site in Pompano Beach with pre-construction prices “in the range of $1K per SF.”
"I think we’re going to see local buyers from western Broward County, Northeasterners and Canadians,” he said. “West Broward has been a big market for Paramount because you’ve got a lot of people — in Parkland, Weston, Coral Springs — who are empty nesters moving east, and they want a condo on the beach.” Motwani said he expects to start pre-construction sales for his Pompano project no sooner than fall 2020, citing the Related Group’s plan to start pre-construction sales for its 105-unit Pompano condo development in the first quarter.
“Having two projects in the market at the same time is probably too much inventory,” Motwani said. Condo developers are benefiting from the sustained strength of the domestic economy, but the strength of the U.S. dollar against foreign currencies has made South Florida condos too expensive for many foreign nationals. Nevertheless, developer Masoud Shojaee expects Latin Americans to buy many of the 43 units at his boutique condo development in Miami Beach. Preliminary construction site work is underway for the development at 1030 15th St., called Ten30, where the most expensive units will be two-bedroom condos with a $950K asking price. The homeowners’ association fee is expected to be about $390 a month. Fortune International Group is handling pre-construction sales for Ten30 on behalf of Shojaee’s Shoma Group and targeting wealthy residents of Brazil, Mexico, Colombia and Argentina. The currencies of these countries have weakened against the U.S. dollar, but capital preservation is a bigger concern among the rich, Shojaee said. “People who have money in these countries are always thinking of where they are going to put their money that is the safest,” he said. Ten30 residents will be free to rent their units through Airbnb and other vacation rental platforms. The project is “very suitable for that location. It’s two blocks from Lincoln Road,” Shojaee said. “You need to analyze the weaknesses and strengths of every location. You cannot generalize the whole market.” But he also said a large condo project without some other uses is likely to fail, regardless of the location. “To start a new project with 200 or 300 units without anything else that takes away some of the space — like a hotel or retail — is very, very risky," Shojaee said.
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