Miami-Dade Dev Site Listings Surge Since December

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Condo and multifamily development in South Florida is still booming, but signs of a market correction are appearing, as some builders are abandoning planned projects and listing their sites for sale.

In the past three months, nearly two dozen development sites across Miami-Dade County have hit the market, as small and mid-tier builders trim their project pipelines. In some cases, developers are pulling back because of high interest rates, lenders’ tightening terms and rising construction costs, experts say. About a quarter of the listed development sites have full zoning and building permitting approvals, based on an analysis by The Real Deal. The remainder have at least obtained site plan approvals.

Builders are hoping to cash out early after realizing that their projected returns on investment have been severely diminished by rising development costs.

“[Market conditions] are forcing certain developers to reconsider projects and monetize a site that they have spent preparing for two, three years,” said Alex Karakhanian, who leads Miami-based Lndmrk Development. “There’s an opportunity for sites that are shovel-ready to command a much more substantial premium than three, four years ago.” 

Finding equity investors may also be more of a challenge.

Rising development costs mean planned projects have a higher cap rate, increasing the risks for equity investors, said Devlin Marinoff of Dwntwn Realty Advisors.

“If you bought a development site two, three years ago, you would underwrite it with an exit cap rate at around 5 percent,” Marinoff said. “Now the costs are much higher, so your exit cap rate is at 6 to 7 percent. As a result, the equity you put into building a project disappears. That’s a market correction.” 

Because of this, developers with a full plate of projects are seeking to unload some sites. Miami-based commercial broker Fabio Faberman is listing properties for development in Miami Beach, Miami, Homestead and Fort Lauderdale.

 “In some cases, the sellers don’t have the money to build a project,” Faberman said. “In other cases, the equity investors have pulled out. And some are not moving forward because construction costs keep rising.” 

Source:  The Real Deal