Large investors in the Miami area are shifting their focus from blocks of units in troubled projects to potentially lucrative land that has been earmarked for new towers in the Greater Downtown Miami market.
Despite potentially being years away from getting underway, developable sites are becoming a focus for investors because of the expected next wave of new condo building developments in the area. According to The Miami Herald, from January through July 2011, investments groups have already purchased the deed or mortgage to at least 10 condo development sites totaling in at almost $300 million. In 2010, Miami-Dade County records show the sale of at least six development sites for just $20 million.
Included in 2011’s developable land deals thus far is the waterfront Miami Herald land which was reportedly sold for $236 million, the Coral Station at Brickell Way for $14.8 million and the land where the Brickell Tennis Club operates for $14 million.
The Greater Downtown Miami area, which spans from the Julia Tuttle Causeway south to the Rickenbacker Causeway, I-95 east to Biscayne Bay, currently has approximately 125 development sites within the 60 blocks. Over the past 18 months, increasing rental, resale and new-sale activity has reignited investor interest in the area.
Median rental rates for condos have increased by 5% to $1.82 per square foot per month as of the end of June because of growing leasing activity. According to The Herald, renters are leasing condos in Downtown at a pace of 360 unites per month so far in 2011. A one bedroom, 800-square-foot condo in the area is currently renting for around $1,500 per month.
On the condo resale front, by quantity per month sales are up 25% in the first half of the year compared to the previous year. There were approximately 154 transactions per month at a median price of $197 per square foot with in the first six months of 2011 when nearly 925 condos were resold.
New condo sales are also fairing quite well in Greater Downtown Miami with individual buyers and equity groups acquiring nearly 5,000 new condos in the last 18 months. The current sales pace for new condos is 200 new units per month.
While this is all encouraging news, the process of obtaining construction financing for new condo buildings is a major issue and some developers are dipping into their own personal funds to complete projects. To avoid such a situation, some developers who want to build now are requesting that potential buyers place deposits of between 30% and 70% prior to the building being completed in a staggered deposit approach. This approach is seen as one way to lessen the importance of lenders and is more common in Latin America. During the condo boom a few years ago in Miami, developers usually were collecting around 20% in deposits from preconstruction buyers.
Source: Miami Herald