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Renting And Flipping – New Miami Condos Is All The Rage

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The majority of new condo buyers in Miami have been looking to capitalize on their investments by flipping the units or renting them out, according to research by CraneSpotters.com.

Looking at the four largest condo towers completed in greater downtown Miami since construction resumed in 2011, anywhere from 45 percent to 96 percent of the units sold by the developers in each building were placed back on the market or put up for rent. That indicates a high level of investor ownership in those buildings, and also raises some questions.

With more than 18,100 condo units either under construction, planned with approvals or proposed in greater downtown Miami, according to CraneSpotters.com, is there enough rental demand at higher price points to support that many new units? And how will they be impacted by the nearly 7,800 apartments in the development pipeline?

The recently completed condo towers in Miami sold in the mid-$400s per square foot, but the average price per square foot for new projects is more than double that now, CraneSpotters.com principal Peter Zalewski said. When the sales prices climb, so must rents. Are there enough high-earning renters in Miami to fill those units?

“We strongly believe that when Brickell CityCentre opens and people will be able to walk to a shopping mall with a Saks Fifth Avenue, 11 cinemas and 500,000 square feet of retail, Brickell condos will raise in value and so will rents,” said Carlos Rosso, head of the Related Group’s condominium division. “Twenty-four-hour urban living close to the workplaces is and will continue to be in high demand.”

Here’s a look at how the four largest recently completed condo projects in Miami have performed:

CondoFlipping - Nine at Mary Brickell VillageNINE AT MARY BRICKELL VILLAGE
Units: 390
Units sold/price per square foot: 300 for $501
Active MLS listings/price per square foot: 17 for $469
Units resold: 0
Asking rentals/price per square foot: 95 for $2.78
Closed rentals/price per square foot: 23 for $2.47

CondoFlipping - 1100 Millecento Residences1100 MILLECENTO RESIDENCES
Units: 382
Units sold/price per square foot: 376 for $435
Active MLS listings/price per square foot: 99 for $403
Units resold: 1
Asking rentals/price per square foot: 67 for $2.59
Closed rentals/price per square foot: 120 for $2.25

CondoFlipping - BrickellHouseBRICKELLHOUSE
Units: 374
Units sold/price per square foot: 374 for $504
Active MLS listings/price per square foot: 91 for $627
Units resold: 7
Asking rentals/price per square foot: 64 for $3.63
Closed rentals/price per square foot: 77 for $3.24

CondoFlipping - MyBrickellMYBRICKELL
Units: 192
Units sold/price per square foot: 192 for $360
Active MLS listings/price per square foot: 31 for $379
Units resold: 8
Asking rentals/price per square foot: 19 for $2.67
Closed rentals/price per square foot: 126 for $2.01

It looks like some of these condo towers are more like apartment buildings. Projects in other South Florida cities have behaved quite differently. For instance, in Broward County’s largest newly completed condo tower:

CondoFlipping - BeachwalkBEACHWALK – HALLANDALE BEACH
Units: 300
Units sold/price per square foot: 289 for $448
Active MLS listing/price per square foot: 49 for $532
Units resold: 1
Asking rentals/price per square foot: 6 for $2.97
Closed rentals: 0

There’s a fair amount of resale activity, but not many rentals. However, Beachwalk has a rental pool system managed by the hotel management that doesn’t show up on MLS, so many unit owner participate in that. CraneSpotters.com also looked at the largest recently completed condominium in Palm Beach County, Bay Colony Juno Beach, and found only two of its 121 units on the rental market, although it had 23 resales.

For more on the South Florida condo market, see this week’s feature story with comments from the region’s leading condo experts. Most of them agree that sales are slowing.

 

Source: SFBJ

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Miami Commercial Investment Activity Upticks, Aided by Low Vacancies

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According to the Miami Association of Realtors’ Realtor Commercial Alliance, Miami’s commercial vacancy rates continue to rank among the lowest in Florida, leading to more local investment from global companies and investors.

Miami’s vacancy rates for office (14.9 percent), industrial (5.3 percent), retail (6.3 percent), and multifamily (4.4 percent) are the lowest among major cities in Florida, according to a May 2015 Commercial Outlook report from the National Association of Realtors (NAR) and Reis, Inc., a leading provider of commercial real estate market information. Each of Miami’s commercial sectors are performing better than the U.S. average, except for multifamily which is 0.1 percent lower. The national vacancy rates in May were 15.6 percent for office, 8.4 percent for industrial, 9.6 percent for retail and 4.3 percent for multifamily, according to NAR and Reis.

“One of the world’s top global cities, Miami has become a launching pad for new industries,” said Barbara Tria, the 2015 Miami Commercial Alliance President. “Technology companies and other businesses are moving to Miami largely because of the region’s top-tier cultural offerings, outdoor lifestyle, and affordability compared to other major cities around the globe.”

Miami Office Market

Miami’s 14.9 percent office vacancy rate in May ranks as the 21st lowest out of 82 major U.S. cities, according to the NAR and Reis report. New York leads the nation at 8.9 percent. Statewide, Miami’s office vacancy rate is performing better than Florida’s major cities. The Sunshine State’s other major metropolitans had the following rates: Fort Lauderdale (18.6 percent), Jacksonville (20.4 percent), Orlando (16.5), Palm Beach (16.5) and Tampa (19.7). The national average is 15.6.

South Florida’s growing, multilingual workforce is one reason for its low office vacancy rate. Miami-Dade County added 33,700 jobs across several sectors from April 2014 to April 2015, a 3.1 percent increase, according to job numbers released May 22. Miami had the third-largest job gain in Florida behind Orlando and Tampa. Miami’s unemployment rate from April 2014 to April 2015 decreased by 0.7 percentage points, to 6.2 percent from 6.9 percent.

Miami Industrial Market

Miami’s industrial vacancy rate of 5.3 percent is the third-lowest in the nation among the 82 major American cities studied by NAR and Reis. Only Orange County (Calif.) and Los Angeles performed better than Miami in the industrial sector in May, registering vacancy rates of 3.4 and 3.6 percent, respectively. Florida’s other major metropolitans had the following rates: Fort Lauderdale (8.2), Jacksonville (6.9), Orlando (10.3), Tampa/St. Petersburg (7.8), and Palm Beach (5.5). The national average is 8.4.

Miami International Airport and PortMiami are two of South Florida’s international trade successes. Miami International ranks as the top airport in the U.S. for international freight, and the ninth-best airport for foreign cargo in the world. In 2013, Miami International handled 2.1 million tons of total airfreight, of which 88 percent was international freight.

PortMiami is the top-ranked container cargo port in Florida with 900,000 TEUs handled each year. The port has an opportunity to expand its international business as it is deepening its channel from its current 42-foot depth to 50-52. When the deep dredge project is completed, PortMiami will be the only U.S. port south of Norfolk, Va. that can accommodate the new, mega cargo vessels that will pass through the expanded Panama Canal.

Miami Retail Market

Miami has the 15th lowest retail vacancy rate among U.S. major cities, according to the NAR and Reis report. Miami’s 6.3 percent rate is considerably lower than Florida’s other large metropolitans. Fort Lauderdale (9.3 percent), Jacksonville (12.9), Orlando (11.0), Palm Beach (9.5) and Tampa (10.6) are higher than Miami. The national average is 9.6.t”>

Miami’s tourism and multilingual employment base are just two reasons why major developers are bringing new retail ventures to the region. Earlier this year, the company that owns and runs the largest mall in America announced plans to build the nation’s largest shopping mall in northwestern Miami-Dade, a roughly 200-acre entertainment complex with submarines, a Legoland, sea lions and an artificial ski slope. American Dream Miami is projected to cost as much as $4 billion to build.

Brickell City Centre and The Mall at Miami World Center are two other significant Miami retail ventures. At Brickell City Centre, Hong Kong developer Swire Properties will deliver 500,000 square feet of retail space anchored by Saks Fifth Avenue by late 2016. The Mall at Miami Worldcenter, in the heart of downtown, will complete 765,000 square feet of restaurant, retail and entertainment space by 2017.

Miami Multifamily Market

The vacancy rate for Miami’s multifamily market is tied for 38th among 82 major U.S. metros, according to the NAR and Reis report. Miami’s 4.4 percent multifamily vacancy rate is the lowest in the state. Fort Lauderdale (5.2 percent), Jacksonville (7.0), Orlando (6.1), Palm Beach (5.6), and Tampa (5.0) all have higher rates. The national average is 4.3 percent.

 

Source: WPJ

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‘Green Bonds’ For A Parking Garage?

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A state agency in Massachusetts recently sold “green bonds,” a type of debt designed to fund environmentally-friendly projects.

But the money raised from the sale won’t go to a new park, more bike lanes or a renewable energy facility. Instead, the Massachusetts State College Building Authority plans to use some of the funds to build a 725-space parking garage at Salem State University near Boston.

A parking garage at Salem State University near Boston, financed by so-called green bonds issued by a Massachusetts state agency, would feature car-charging stations, such as this one in Atlanta. Photo: Chris Aluka Berry for The Wall Street Journal

A parking garage at Salem State University near Boston, financed by so-called green bonds issued by a Massachusetts state agency, would feature car-charging stations, such as this one in Atlanta. Photo: Chris Aluka Berry for The Wall Street Journal

The garage will have electric-car charging stations and spots for carpoolers, and officials said it would cut down on pollution from students who now circle the campus in their cars, looking for spots. But some analysts and environmental advocates said the garage still encourages people to drive, a major contributor to greenhouse-gas emissions.

The debate over the garage underscores the lack of clear rules for determining what projects help the environment. Investors said the green-bond market allows companies and governments to tap into large pools of money for environmental initiatives. But some said “greenwashing,” the financing of projects whose environmental impacts are at best unclear, could discredit the market and make buyers wary.

One concern is that there is no mandatory legal framework to decide what projects are environmentally friendly. That leaves issuers and banks to decide. Wall Street firms last year adopted voluntary green-bond guidelines, but critics said they aren’t sufficiently stringent.

“I really don’t trust developers and bond issuers to police themselves, to make sure what they say is green is really green,” said Karen Orenstein, a senior analyst at environmental group Friends of the Earth U.S. When asked about using green bonds to pay for a parking garage, Ms. Orenstein said: “That’s why you need standards.”

The Massachusetts agency generally follows the banks’ green-bond guidelines. Edward Adelman, the executive director, said the garage has environmental positives.

To be open by early 2016, it will free up land for other new school buildings, reducing sprawl and making the rest of the campus more pedestrian friendly, he said. It is also being designed to receive a certification from the Green Parking Council, according to the bond prospectus.

The issue is becoming more important as the market expands. Green-bond sales have more than tripled from a year ago in each of the past two years, with $53.2 billion outstanding at the end of 2014, according to the Climate Bonds Initiative, a nonprofit group in London.

Big asset managers such as BlackRock Inc., Vanguard Group and TIAA-CREF have purchased green bonds. Calvert Investments, a $13 billion asset manager, has raised $33 million for a mutual fund that focuses on green bonds, drawing on what portfolio manager Matthew Duch calls investors’ increasing “social consciousness about the environment.”

The voluntary guidelines, called the “green-bond principles,” suggest green bonds can pay for renewable energy, clean transportation and energy efficiency projects. Nothing, however, is explicitly ruled out.

GreenBondsChartThe guidelines are expected to be updated this month, and many investors are generally supportive. Still, one group of buyers, including BlackRock and Pacific Investment Management Co., said recently that the guidelines “can benefit from further definition and structure.”

“Personally, I do think the principles could use an update and provide a little bit more rigor,” said Rob Fernandez, a credit analyst at Breckinridge Capital Advisors, which buys green bonds.

Some investors said having inflexible rules would be counterproductive, discouraging issuers from selling green bonds and making it more difficult to pay for environmentally friendly projects. But they said it is important that issuers are transparent about how the money is used.

Environmentally dubious deals are rare, and one questionable bond shouldn’t disrupt the market, investors said. But “if there were multiple events in a short period of time, and investors just get uncomfortable, that would be a different story,” said Manuel Lewin, head of responsible investment for Zurich Insurance Group, a green-bond buyer.

At Salem State, where many people commute, students said the need for parking is real.

“I feel like I’m in a battle with all these people for spots,” said Tessa Haynes, a junior. “It’s a little episode of ‘The Hunger Games,’ ” a movie about a fight to the death among teens.

The parking garage isn’t the only project to come under scrutiny. Environmental groups, including Friends of the Earth U.S. and International Rivers, have raised concerns that proceeds from a green bond sold by French power company GDF Suez SA could help support a hydropower plant in Brazil. The groups said the plant could imperil fish species and has increased deforestation.

‘I really don’t trust developers and bond issuers to police themselves, to make sure what they say is green is really green.’

—Karen Orenstein, senior analyst at Friends of the Earth

GDF Suez said “a great effort is being undertaken to understand and to preserve biodiversity.” The company said it is deciding which projects will benefit from a €2.5 billion ($2.66 billion) green bond it sold last year and will disclose its decision in the coming weeks.

Mr. Adelman, driving around the Salem State campus, pointed out cars parked on nearby side streets with university parking stickers. He said the new garage isn’t encouraging people to drive more but is serving existing students who must park off campus. “Nobody objects to building a parking garage,” said Mr. Adelman, who drives a hybrid car himself. “The reason it’s questioned is because of the discussion about the green bond.”

 

Source: Wall Street Journal

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Miami Among Top U.S. Cities For Green Commercial Buildings

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Many Miami real estate investors are doing their part to ward off global warming and save energy as the city ranked high for green commercial real estate.

A new study by CBRE Group and Maastrict University ranked Miami ninth in the nation, with 19.4 percent of its commercial real estate certified as green. There are 79 buildings totaling 21 million square feet of office space with either U.S. Green Building Council LEED certification or Energy Star labels.

Given that South Florida would be among the first places in the nation to be swamped by sea level rise, that’s a helpful move.

“Miami was slow to embrace green building standards relative to cities like San Francisco and Manhattan, but has caught up quickly thanks in part to good public policy and buy-in from owners and investors who realize there is growing demand from tenants for more sustainable, energy efficient space,” said Patricia Nooney, LEED AP, who leads investor services for CBRE Florida, in a news release.

In fact, Miami’s municipal code requires all new private development over 50,000 square feet to achieve LEED Silver certification.

The study rated Minneapolis as the greenest city for commercial real estate, with 77 percent of buildings certified as green.

Since 2005, the number of LEED certified buildings has increased more than 1,000 percent nationwide.

Florida homeowners are also going green. A recent study by the USGCB ranked Florida seventh for the most LEED-certified homes, with 1,860. California was first, with 9,186.

 

Source: SFBJ

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Investors Assess Development Potential Around Proposed Passenger Rail Stations

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As traffic congestion worsens in South Florida, a plan to restore passenger service to the Florida East Coast Railway corridor that dates back to industrialist Henry Flagler’s first train service to Miami in 1896 is generating a buzz in the local real estate development community.

Opportunity-minded investors are closely monitoring a two-tiered process that could ultimately result in regular daily train service from Miami to Orlando with multiple stops in between in various downtowns in Miami-Dade, Broward and Palm Beach counties. To accommodate the proposed new passenger commuter service, plans call for the creation of nearly 30 train stations to be built east of Interstate 95 along the South Florida coast.

The creation of train stations for the planned passenger service is expected to trigger a wide array of indirect investment in the surrounding areas to develop everything from residential towers to retail centers, hotels to office buildings. Under a pair of separate but interconnected plans, All Aboard Florida — an entity that is privately controlled by the owner of the Florida East Coast tracks — wants to launch a high-speed passenger rail service from downtown Miami to Orlando with stops in the downtowns of Fort Lauderdale and West Palm Beach. This service is scheduled to begin by 2016.

Just this month, All Aboard Florida issued $405 million of debt to help finance the creation of the high-speed rail service that is expected to cost at least $2 billion. Complementing the All Aboard Florida private-sector initiative, the South Florida Regional Transportation Authority — a public entity that oversees the Tri-Rail passenger service on tracks west of Interstate 95 — plans to introduce a new commuter line that is to travel on the Florida East Coast line on the east side of Interstate 95 with stops in various downtowns from Miami to West Palm Beach.

Under the Tri-Rail plan, Miami-Dade County would have eight stations stretching from Aventura to the Miami Design District to a newly proposed Grand Central Station to be built in downtown Miami. Plans call for the east of Interstate 95 commuter service — dubbed the TriRail Coastal Link — to be “implemented” within seven years for a launch in or before the year 2020, according to the organization’s website.

Ironically, the same train tracks that have historically meant lower prices and constant complaints about noise and traffic delays from nearby residents are expected to trigger a wave of new residential developments for individuals seeking easy access to planned passenger rail service.

Anyone who has ever relied on public transportation knows that train service is much more predictable than that of buses. Many commuters in cities around the world generally attempt to live and work close to train stations to improve the efficiency of using public transportation. As a result of this phenomenon, the introduction of passenger rail service in Miami-Dade County has the potential to stimulate real estate development in areas that are far removed from the water.

It is not surprising that developers who focus on the South Florida mainland have typically tried to build condo towers on sites that front Biscayne Bay or the Intracoastal Waterway. If waterfront land is not available at acceptable prices, the next best alternatives are usually development sites in popular neighborhoods such as Midtown Miami or on iconic streets such as Brickell Avenue.

Generally, the interest level in land near the railroad tracks — which are west of Biscayne Boulevard and east of Interstate 95 — is not the first choice for developers or buyers in South Florida, especially in Miami-Dade County. For example, fewer than 385 condos between west of Biscayne Boulevard and east of Interstate 95 from Flagler Street in downtown Miami north to Aventura were sold, at an average price of about $187 per square foot, between January and May of this year, according to the Southeast Florida MLXchange. By comparison, nearly 1,025 condo units east of Biscayne Boulevard from Flagler Street in downtown Miami north to Aventura were sold, at an average price of $250 per square foot, during the first five months of the year.

Some quick arithmetic suggests condo units east of Biscayne Boulevard traded at an average premium of 34 percent over the units on the west side of the street, according to the data. As for the supply of available condos, about 800 units are currently on the resale market west of Biscayne Boulevard from downtown Miami to Aventura.

Based on the 2014 sales pace of about 77 transactions monthly, there is more than 10 months of available inventory on the market west of Biscayne Boulevard, according to the data. The condo market east of Biscayne Boulevard from downtown Miami to Aventura has nearly 1,800 units available for resale. Despite having more units up for resale than the area west of Biscayne Boulevard, the condo market east of Biscayne Boulevard has less than nine months of supply available, according to the data.

For the rental market, there is less of a difference between east and west of Biscayne Boulevard in Miami-Dade County from downtown Miami north to Aventura when it comes to price and transactions. Tenants leased more than 1,025 residential properties west of Biscayne Boulevard at an average price of $1.63 per square foot monthly between January and May of this year, according to the data.

For the same five-month period, tenants leased nearly 1,200 residential properties east of Biscayne Boulevard at an average price of nearly $1.62 per square foot month. Currently, about two months of rental-property supply are available for lease west and east of Biscayne Boulevard, according to the data.

Given the market trends, developers could become more open to the idea of building residential towers in the area located west of Biscayne Boulevard and east of Interstate 95 especially since land costs are generally cheaper and rents are comparable to those rates being achieved on the east side of Biscayne Boulevard.

The unanswered question going forward is whether developers and residents will ultimately embrace a lifestyle in South Florida that revolves more around public transportation than the current dependence on cars. If this were to happen as the government planners are hoping, the future of real estate development in Miami-Dade County could increasingly focus on the land west of Biscayne Boulevard in the coming years.

 

Source: Miami Herald

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