Greater Downtown Miami Mid-Year Report · 2019-05-23 · Miami should rejoice in the 2016 delivery...

Greater Downtown Miami Market Study Update

Prepared for the Miami Downtown Development Authority (DDA) by Integra Realty Resources (IRR)

July 2016

Mid-Year Report

Greater Downtown Miami Market Study Update Prepared for the Miami Downtown Development Authority (DDA) by Integra Realty Resources (IRR)

July 2016

For more information, please contact IRR-Miami/Palm BeachThe Douglas Centre2600 Douglas Road, Suite 801Coral Gables, FL [email protected]

Mid-Year Report

2 Introduction

4 Greater Downtown Miami Market Submarket Map

5 What’s Changed since Year-end?

10 Submarket Analysis

12 Unit Sizes and Pricing Trends

14 Resale Condominium Pricing

16 Rental Market Statistics

19 Rental Market Supply

21 Condo Development Process Appendix

Contents

2 | Integra Realty Resources

Introduction

Integra Realty Resources - Miami | Palm Beach (IRR-MIami) is pleased to present the following mid-year update to our Residential Real Estate Market Study covering the Miami Downtown Development Authority’s (Miami DDA) market area, defined as Greater Downtown Miami market through June 2016.

Findings during our Mid-Year update:

• Global and domestic headwinds continue to affect the market depth and velocity. Nonetheless, area professionals remain optimistic that while current sales paces are not on par with 2014, current activity is at a more normalized pace and remains strong.

• Condominium resale pricing in Greater Downtown is down YTD 4% since year-end. This average price decline is coupled with increasing inventory availability. The pricing retreat follows a five year period of double-digit increases.

• Despite retreats in the resale pricing, the pre-construction market pricing remains solid. Projects nearing close out are holding pricing, or even increasing pricing as the current wave of project deliveries is substantially sold out. Sales offices reporting a slow January and February sales indicate that sales in April and May were above trend.

• Given the declines in the reservation/contract phase, it is unlikely the that these projects will commence fast enough to refill the under construction pipeline. The lack of inventory entering the pipeline today will lead to less competition heading into late 2017-2018.

• Average condo rental pricing has leveled off year-to-date in all unit types except 1 Bedrooms; where rents are growing 1.5%+. A similar trend appears in the conventional rental data, with studio rents growing 4.4%, while all other unit types are nominal or slightly negative rent growth.

• IRR Miami expects that the development environment in the coming 12-18 months will require much stronger developers/sponsors with higher levels of equity as availability of conventional financing wans.

• Larger projects will contemplate a rental format, or other form of development. Not every project is going to fit into the conventional rental pipeline, and the current direction of rents suggests that the rental market is going to favor the tenant for the balance of 2017.

Millicento


Introduction

• Therefore, the patient land investors will be rewarded in the next demand cycle for residential condos.

• The mid-year 2016 report is optimistic that the major new developments in downtown have met with success over a very robust 4+ year period of gains. The market continues to mature, but general housing market statistics suggest a reset is occurring in the broader market. Inventory is up, and pricing may respond. Rental market availabilities will favor the tenant in the coming 6 months.

• In the balance of supply and demand in real estate, the good news is that affordability may come back in vogue. The greater downtown market emerged as a vibrant force in Miami’s economy as young people populated the city when rents were less expensive. Some near term rent stability will assist in keeping the inflow of urban professionals needed to continue with the growth of Downtown Miami.

Respectfully,

Integra Realty Resources (IRR) – Miami/Palm Beach

Anthony M. Graziano, MAI, CRE, FRICS Senior Managing Director

Dan Bowen Market Research Analyst


The map opposite illustrates the boundaries of the Miami DDA, as well as each submarket within the Miami DDA market.

Greater Downtown Miami Market Submarket Map

Beyond the statistical changes in supply-demand, the downtown market is strongly tied to global high net worth investment demand. By far, the hottest topic in this period in the financial markets was Brexit,

with the UK voting to leave the European Union. While some speculate this pivot will result in increased capital inflows into the US, it remains unclear whether the US economy can resist GDP contraction against these larger global events.

Before Brexit, Brazil’s President Dilma Rousseff was under impeachment proceedings, her defense against impeachment continuing into July 2016, all under a political cloud of uncertainty due to weak economic conditions. Rioting and food shortages continue in Venezuela with far less media coverage than Brexit, but more important to global stability. Commodity, and particularly petrol prices, continue to drag on global economies.

IRR Miami has concluded many times that the state of the Miami market rests heavily on global output, coupled with a strong domestic economy. To be sure, the middle of 2016 continues to deliver uncertainty globally, and far less enthusiasm domestically heading into a US Presidential election season heavy on rhetoric, and light on encouraging policy pronouncements.

The city continues to evolve as a global destination, and its maturity will be tested in the coming 6-12 months in the face of many economic changes. The long-term outlook is strong for Miami as the rental market will continue to activate the downtown urban market. This in turn improves the urban experience, which drives future for-sale demand.

Miami should rejoice in the 2016 delivery of Brickell City Centre, one of the nation’s largest urban development projects that not only has forever changed Miami’s urban landscape, but the project is a testament to the resiliency of the downtown Miami market.

The addition of new units to the under construction pipeline coincides with the delivery of downtown Miami’s greatest urban assemblage, the residential phase of Brickell City Centre, which removes 773 units from the construction pipeline. Both phases of BCC (Reach and Rise) and Le Parc (128 units) received their Temporary Certificates of Occupancy (TCO), and are therefore considered completed.

The highly-anticipated first phase of Miami World Center (512 units) broke ground in the past six months, as did Flatiron (549 units), adding over 1,000 units to the under construction pipeline.


What’s Changed since Year-end?

Brickell House

For the first time in 5 years, the average resale pricing dipped in the first half by 4%. However, after 3 years of double digit price growth (2012-2014), the current retreat from 2015 pricing may

be temporary. After five years of double-digit growth, last year’s trend showed the first half with 0% increase, only to close the 2015 year up 6%.

A review of the rental price changes within the past 6 months helps to explain some of the pricing retreat. After (3) consecutive IRR-Miami reports signaling that rent stability was imminent, we finally reached equilibrium in the rental market following the delivery of Melody, Soma, Brickell View Terrace, and Met3. Conventional rent growth was nominal or negative in all unit types except studios, which grew 4%. The condo leasing prices also moderated, with overall mid-year rent growth at 3.7%, 40 -130 basis points behind prior years.

Pre-construction pricing continues to hold. Some projects even increased pricing this quarter, most notably those closest to sellout. Developers and brokers report a continued expectation that pricing will hold on new product, and remain bullish that slowing construction and normalizing traffic and sales will deliver a soft landing.

There is a fair amount of market speculation that new construction debt is getting too expensive and may become inaccessible for new construction in the coming quarter. IRR Miami notes that this level of banking discipline will force more deals to move deeper into the equity stack, which supports a slower construction cycle into 2017.

Few projects continued to be announced and planned, and some observers and media continue to issue dire predictions as to the future of the downtown market. However, most downtown developers are taking a wait and see approach. New entrants to the market include Missoni Baia (168 units) and Spark (56 Units). New completions in the coming 6 months will likely include Centro and the Crimson.



Figure 1.0Greater Downtown Miami Current Growth – Contracts and ReservationsSubmarket Building Avg. SF Units StatusBrickell One River Point 1,284 406 ContractsEdgewater Elysee 3,383 100 ContractsEdgewater Gran Paraiso 1,549 317 ContractsEdgewater Spark 1,378 56 ContractsA&E Auberge 1,203 298 ReservationsEdgewater Bentley Edgewater Condo Hotel 905 207 ReservationsEdgewater Missoni Baia 2,950 168 ReservationsTotal/Average 1,591 1,552

Figure 1.1Greater Downtown Miami Current Growth – Under Construction and Q2 CompletionsSubmarket Building Avg. SF Units StatusBrickell Brickell CityCentre - Reach 1,368 390 CompleteBrickell Brickell CityCentre - Rise 1,368 383 CompleteBrickell Le Parc 1,272 128 CompleteA&E 1000 Museum 5,389 83 Under ConstructionA&E Canvas 892 513 Under ConstructionBrickell The Bond 960 328 Under ConstructionBrickell Flatiron 1,160 549 Under ConstructionBrickell Echo Brickell 1,510 180 Under ConstructionBrickell 1010 Brickell 1,283 387 Under ConstructionBrickell Brickell Ten 1,050 155 Under ConstructionBrickell Brickell Heights East 1,078 350 Under ConstructionBrickell Brickell Heights West (BH02) 983 332 Under ConstructionBrickell SLS Lux 1,250 534 Under ConstructionBrickell SLS Hotel & Residences 1,117 450 Under ConstructionBrickell Cassa Brickell 1,060 81 Under ConstructionCBD Paramount Miami 1,793 512 Under ConstructionCBD Centro 703 352 Under ConstructionEdgewater Aria on the Bay 1,317 648 Under ConstructionEdgewater Biscayne Beach 1,305 399 Under ConstructionEdgewater 26 Edgewater 645 86 Under ConstructionEdgewater The Crimson 1,143 90 Under ConstructionEdgewater The Edgewater 778 30 Under ConstructionEdgewater Paraiso Bay Tower I 1,360 360 Under ConstructionEdgewater One Paraiso 1,682 272 Under ConstructionEdgewater Paraiso Bayviews 1,044 398 Under ConstructionMidtown Hyde Midtown 1,100 410 Under ConstructionTotal/Average 1,250 8,400Excluding Completed 1,238 7,499



Figure 1.0 and 1.1 list the active projects currently selling, contracting, or under construction representing what we defined as “current growth” in the market.


Related’s Auberge has resumed reservations with a reduced unit count of 298 units. Elysee and Missoni Baia enter the contracts/reservations phase with substantially larger units and smaller

overall project sizes. A total of 1,591 units are in the contracts/reservations phase as of mid-year, a further reduction from the 2,000+.

The under construction pipeline nudged up 191 total units by mid-year, although this total will come down significantly as other projects deliver in Q3 and Q4 2016. It is unlikely that projects in reservations/contracts will commence fast enough to refill the under construction pipeline by 2017. This will leave remaining projects under construction with less competition by late 2017-2018.

Figure 2

Current Greater Downtown Miami Condo Pipeline – Q2 2016Submarket Complete Under Construction Contracts Reservations Proposed Totals

A & E 0 596 0 298 1,758 2,652

Brickell 2,218 3,346 406 0 4,952 10,922

CBD 0 864 0 0 6,040 6,904

Edgewater 561 2,283 473 375 2,183 5,875

Midtown 0 410 0 0 195 605

Wynwood 11 0 0 0 478 489

Q2 2016 2,790 7,499 879 673 15,606 27,447

YE 2015 1,889 7,308 1,874 207 17,615 28,893

YE 2014 1,044 6,019 2,070 1,598 12,543 23,274



Figure 3

Greater Downtown Miami Condo Market Size – Q2 2016Submarket Current Market Current % Potential Long % Growth Size [1] Growth Growth Term Growth Longterm

A & E 4,052 894 22% 1,758 43%

Brickell 22,061 3,752 17% 4,952 22%

CBD 6,288 864 14% 6,040 96%

Edgewater 4,613 3,131 68% 2,183 47%

Midtown 978 410 42% 195 20%

Wynwood 111 0 0% 478 431%

Q2 2016 38,103 9,051 24% 15,606 41%

YE 2015 37,202 9,389 25% 17,615 47%

YE 2014 36,357 9,687 27% 12,543 34%

[1] Includes all 2014-2015 new deliveries. Net change of 1,227 units in 2015, 566 in 2014, and 96 in 2012.[2] Long-Term Growth is the remaining Conceptual units, net of current growth.[3] Current Growth is all Under Construction, Contracts and Reservations.

As mentioned in the year-end report, the Wynwood submarket has the largest long-term growth potential, and the mixed use projects in this submarket are likely to emerge in the coming months. The overall annual supply growth (U/C; contracts; reservations) has held relatively constant at about 27% (2014) of existing market supply, declining slightly in 2016 to 24%.

IRR Miami has reviewed published and unpublished pricing, interviewed various sales and brokerage offices, and continues to monitor back to back quoted pricing. On balance, the pre-construction pricing has held relatively constant. Sales offices reported an extremely slow January and February season, but report more active April and May contracting.



Submarket Analysis

BrickellA temporary certificate of occupancy was granted to the 773 condominiums in Brickell City Centre, although not all of the complex is open (the office tenants opened first), and Le Parc (128 units). Brickell Flatiron broke ground, adding 549 units to the neighborhood’s total. The 76 market-rate units in Brickell View Terrace were delivered in the first quarter.

CBDMiami World Center’s Paramount tower broke ground with 512 units in the second quarter. Although sales have not yet begun for the former Epic Marina site at 300 Biscayne Boulevard Way, the site’s owner has filed plans for a sales center and 384-unit condominium.

Arts and EntertainmentAfter a brief hiatus, Auberge has resumed marketing reservations. Melo has completed their Melody rental tower and is moving on to 14 Plaza, with up to 760 units.

EdgewaterMissoni Baia moved immediately to begin reservations within one quarter of its announcement; another project, Spark, has moved into contracts; however, it will only contain 56 units.

A summary of the key changes to date:

MidtownMidtown has remained predominantly a rental submarket with the groundbreaking of Midtown 29. Currently under construction, Midtown 5 and District 36 advancing; the latter could be complete by year-end.

WynwoodSimilar to Midtown, Wynwood’s current growth has been static, with few major condo or rental proposals.

OvertownThere has been little change this cycle in the DDA portion of Overtown east of Interstate 95. David Beckham has proposed a Major League Soccer stadium in the neighborhood; however, that lies outside of Greater Downtown’s borders.


Submarket Analysis


Unit Sizes and Pricing Trends

Figure 4Greater Downtown Miami New Condominium Pricing MetricsSubmarket Name/Location # Units Avg. Price Avg. SF Avg. $/SF

Arts & Entertainment 1000 Museum 83 $6,937,775 5,389 $1,287 Auberge 298 $703,463 1,203 $585 Canvas 513 $462,200 892 $518Brickell Le Parc 128 $593,309 1,272 $467 The Bond 328 $570,780 960 $595 Flatiron 549 $812,000 1,160 $700 One River Point 406 $1,059,428 1,284 $825 Echo Brickell 180 $1,900,000 1,510 $1,258 1010 Brickell 387 $833,333 1,283 $650 Brickell Ten 155 $420,000 1,050 $400 Brickell Heights - East 350 $600,000 1,078 $557 Brickell Heights - West (BH02) 332 $600,000 983 $610 SLS Lux 534 $745,000 1,250 $596 SLS Hotel & Residences 450 $521,759 1,117 $467 Brickell CityCentre Reach 390 $889,200 1,368 $650 Brickell CityCentre Rise 383 $923,400 1,368 $675 Cassa Brickell 81 $627,500 1,060 $592CBD Paramount Miami 512 $1,365,778 1,793 $762 Centro 352 $308,945 703 $439Edgewater Aria on the Bay 648 $958,950 1,317 $728 Biscayne Beach 399 $688,723 1,305 $528 26 Edgewater 86 $312,662 645 $485 Bentley Edgewater Condo - Hotel 207 $601,765 905 $665 Elysee 100 $2,935,000 3,383 $868 The Crimson 90 $623,194 1,143 $545 The Edgewater 30 $340,333 778 $437 Gran Paraiso 317 $1,205,100 1,549 $778 Paraiso Bay Tower I 360 $782,000 1,360 $575 One Paraiso 272 $1,201,627 1,682 $715 Missoni Baia 168 $2,750,000 2,950 $932 Spark 56 $686,251 1,378 $498 Paraiso Bayviews 398 $586,900 1,044 $562Midtown Hyde Midtown 410 $632,500 1,100 $575Total/Average 9,952 $892,640 1,303 $685


Unit Sizes and Pricing Trends

The new construction pricing models are adapting to the market. As developers see slower sales velocity and less traffic, they are increasing pricing where projects are substantially

sold. Despite having one building 90% sold out, and the other 40% pre-sold, Brickell City Centre raised prices on average 9% this past quarter expecting the market to react favorably to existing new inventory ready for delivery.

However, for sale inventory increases across all condo segments and price points will compete for buyers in the market, which could extend sell-out times on remaining projects irrespective of the pricing strategy.

14 | Integra Realty Resources14 | Integra Realty Resources

Resale Condominium Pricing

Figure 5

Average $/SF Sale Price Trend – Greater Downtown Miami Resale Market

0

$100

$200

$300

$400

$500

2009

$221

2010

$224

2011

$240

2012

$305

2013

$372

2016 YTD2014 2015

$431$457

$438

For the first time 5 years, prices retreated 4% in the resale market comprised of buildings constructed after 2001. A review of MLS statistics indicate the broader condo market pricing

declines are deeper, indicating that the new product pricing is outperforming older product.

Last year demonstrated a similar pattern, where the first six months showed nominal change, and the back-end 6 months closed higher. This is unlikely to repeat for 2016 given that in the prior (3) 6-month periods, the market closed approximately 750 condominium units in the market (excluding developer sales), and this current 6 months period closed nearly 550.

A review of monthly listings indicate a large increase in the level of inventory offered for sale. As inventory increases, Figure 6 demonstrates that resale pricing will adjust. This will likely continue if for-sale inventory remains at a level exceeding 2,500 units per month.


Resale Condominium Pricing

Figure 6

Greater Downtown Miami Condo Listings (Built 2001+) by Month

(Zip codes: 33127, 33128, 33129, 33130, 33131, 33132, 33136, 33137)Date For Sale New Listing Sold Pended

May-14 1,918 387 144 155Jun-14 1,926 351 146 146Jul-14 1,939 345 132 120Aug-14 1,932 340 118 155Sep-14 1,931 356 135 147Oct-14 2,006 410 131 140Nov-14 2,078 342 114 104Dec-14 2,152 357 124 99Jan-15 2,127 399 109 136Feb-15 2,146 408 106 153Mar-15 2,264 499 140 143Apr-15 2,428 518 112 155May-15 2,481 413 152 139Jun-15 2,539 452 133 124Jul-15 2,568 438 130 144Aug-15 2,546 410 126 128Sep-15 2,619 465 136 139Oct-15 2,726 511 128 108Nov-15 2,792 396 104 109Dec-15 2,747 346 126 100Jan-16 2,859 536 90 84Feb-16 2,976 528 83 123Mar-16 2,980 431 111 121Apr-16 3,045 469 95 110May-16 3,041 412 88 136

Source: Trendgraphix, compiled by Integra Realty Resources, Inc.

This mid-year report is the first period when condominium rent levels held steady with only increases demonstrated in the studio segment. Two bedroom rents remain largely unchanged, three bedroom

rents declined slightly, and one bedroom rents are up 1.5%. Prior annual rent changes by unit type ranged from 4% - 10% per year since mid-year 2012.

Figure 7

Average Condo Leasing Price – Greater Downtown Miami Studio 1 BR 2 BR 3 BRYear Overall* $/Unit $/SF $/Unit $/SF $/Unit $/SF $/Unit $/SF

2012 $2,255 $1,421 $2.64 $1,804 $2.33 $2,625 $2.13 $4,340 $2.25

2013 $2,371 $1,504 $2.67 $1,926 $2.30 $2,819 $2.21 $4,427 $2.51

% Change 5% 6% 1% 7% -1% 7% 4% 2% 12%

2014 [1] $2,481 $1,632 $2.92 $2,008 $2.48 $2,908 $2.32 $4,346 $2.60

% Change 5% 8% 9% 4% 8% 3% 5% -2% 4%

2015 [1] $2,582 $1,698 $3.03 $2,139 $2.62 $3,008 $2.45 $4,773 $2.89

% Change 4.1% 4% 3.6% 6.5% 5.8% 3.4% 5.7% 9.8% 11.1%

2016 YTD [1] $2,677 $1,683 $2.97 $2,165 $2.66 $3,009 $2.46 $4,675 $2.72

% Change 3.7% -0.9% -2% 1.2% 1.5% 0% 0.4% -2% -6%

[1] Midyear.

This leveling off of rent levels in the condominium market is largely due to increased supply of units in the downtown conventional category. IRR Miami believes rent levels will remain relatively constant through year-end as more rental inventory is expected to deliver by the close of 2016.


Rental Market Statistics

Conventional rent levels were also muted, with studios showing the greatest gains, but one, two and three bedroom units competing for tenants without much increases, and in some cases,

slightly decreasing conventional rents.

Figure 8

Overall Downtown Conventional Rental Rent Survey (2,474 Total Units) Studio 1 BR 2 BR 3 BR SF $/Unit $/SF SF $/Unit $/SF SF $/Unit $/SF SF $/Unit $/SF

Q3 2014 638 $1,585 $2.49 864 $1,605 $1.86 1,221 $2,106 $1.73 1,752 $2,622 $1.50

Q2 2015 638 $1,856 $2.91 864 $1,774 $2.05 1,221 $2,241 $1.84 1,752 $2,707 $1.55

Q2 2016 638 $1,937 $3.04 864 $1,772 $2.05 1,221 $2,257 $1.85 1,752 $2,652 $1.51

Q3 2014‐- Q2 2015 17.1% 10.5% 6.4% 3.2% % Change

Q3 2015‐- Q2 2016 4.4% -0.1% 0.7% -2% % Change

This survey omits the Filling Station Lofts from SF and pricing analysis because of the loft style layout of their units as well as the ultra-luxury status of the building. The units are included in the overall unit count.





Based on the 2014 household density, the market turnover of units represents approximately 10% of households annually. The spread between asking rents and achieved rents has

narrowed significantly, indicating the landlord market is pricing aggressively and getting reasonably-set asking pricing.

Figure 9

Average Current Asking vs. Achieved Leasing Price and Velocity (2016 YTD) Overall Overall Total # Leases/ # of HouseholdsSubmarket Asking Achieved Month (2014 est.)

Brickell $2,649 $2,606 123 18,338

CBD $2,502 $2,544 68 7,482

A & E $4,395 $4,172 9 6,725

Edgewater $2,742 $2,793 46

Midtown $2,672 $2,580 11 6,756[1]

Wynwood $3,133 $3,100 1

[1] Wynwood, Midtown, and Edgewater were not broken out in the 2014 population report.


Rental Market Supply

The following is the list of under construction and planned apartment complexed in the Greater Downtown submarkets.

Figure 10a

Greater Downtown Miami Rental Pipeline - Proposed ProjectsSubmarket Building 2016 Q2 Status # Units

A & E 17 Edgewater Proposed 240

14 Plaza Phase II Proposed 760 Melody II Proposed TBD School Board Proposed TBDBrickell TBD Allen Morris/Related Proposed TBD Brickell Market Place Proposed TBD Megacenter Brickell Proposed 57 One Brickell II Proposed 500 MaiZon at Brickell Proposed 262CBD River Tower Proposed 449 54 West Flagler Proposed 391 M-Tower Proposed 440 Cultural Center Garage Redevelopment Proposed 432 Grand Station Proposed 300 225 SE 2nd St Proposed TBD Miami River Village Proposed TBD 7th Street Promenade Tower 2 Proposed 413 Lynx Tower Proposed TBD Luma at Miami World Center Proposed 429 Miami World Center Block E Proposed 418Edgewater AR Edgewater Proposed 171 1900 Biscayne Proposed 429 1836 Biscayne (Possible Condo) Proposed 352 700 Edgewater Proposed TBD Biscayne 27 Proposed 330Midtown Midtown East Proposed 700 Midtown 6 Proposed 447 Midtown 8 Proposed 387Wynwood 2801 NW 3rd Avenue Proposed 264 Wynwood Central Proposed 69 2110 N Miami Ave Proposed 163 2800 NW 2 Ave Proposed TBD 222 NW 24th St Proposed 80 Total # of Units Proposed 8,483

Figure 10b

Greater Downtown Miami Rental Pipeline - Under Construction and Complete ProjectsSubmarket Building 2016 Q2 Status # UnitsArts & Entertainment Melody Complete 500

Brickell SoMa Complete 418

Brickell View Terrace (Market Rate) Complete 76

CBD Monarc at Metropolitan 3 Complete 462

Arts & Entertainment Square Station (14 Plaza Phase I) Under Construction 710

Brickell Broadstone at Brickell Under Construction 372

Panorama Under Construction 821

Solitair Brickell (former Brickell Bayview Center) Under Construction 438

CBD MiamiCentral Apartments (up to 5 towers) Under Construction 800

7th Street Promenade Tower 1 Under Construction 450

Vice Under Construction 464

Avant at Met Square Under Construction 391

Edgewater 2500 Biscayne Under Construction 156

Midtown District 36 Under Construction 197

Midtown 5 Under Construction 400

Pearl Midtown 29 Under Construction 309

Total # of Units Under Construction 5,508 Total # Units Completed 2014-2016 1,456 Total # Units U/C or Proposed 13,991

Despite delivery of over 500 units in the past two quarters, the rental construction pipeline expanded to top over 5,500 units under construction as of June 2016, with the largest concentration in the CBD.

This rental pipeline will deliver over the next 12-24 months, so rent growth will remain constrained in the coming months.

IRR Miami has discussed the impact of the conventional rental market extensively on the condo market, but it is no surprise that as rental growth has retreated, and inventory of for-sale units has increased, that we see the first signs of prices retreating on the resale product.

Overall, the downtown market continues to demonstrate strong household growth, owing to net job creation in the CBD and Brickell corridors. The launch of the Brightline connecting Miami to Ft. Lauderdale and Palm Beach Counties (expected in late 2017) could positively alter the rental landscape.


Rental Market Supply

Proposed

The proposed phase is the initial phase of the development process; a conceptual plan for a new building or project is initiated by a developer or property owner. The developer may release a press release or a news story with an initial rendering to gauge the interest in the project, but the project size may change over time to conform to market demand and/or as site due diligence constrains the process.

Reservations

The reservations phase is the second phase of the development process; the developer and architectural/design team produce additional renderings and floor plans; the sales centers are opened and the finishes, amenities, and features of the project are disclosed. The developer files with the State of Florida to be able to take reservations and deposits for units during this stage. This begins the pre-sale phase during which reservations are taken.

Contracts

The contracts phase is when the initial proposition and reservation of a completely undefined development idea meets the actual contracting for sale upon the receipt of further deposits. The architectural and construction drawings are completed; the developer obtains government permitting and approvals. The final unit floor plans are defined as the reservations are converted to sales contracts with additional buyer deposits upon filing of the Master Declaration of Condominium. Changes to these documents are costly, and therefore the development plan tends to be more static following this phase.

The Contracts stage is typically the make-or-break stage of development as the project was either well-received by buyers, investors, and lenders, or it was not. If the developer has as a sufficient number of sale contracts, buyer deposits, and a commitment for financing, the project’s construction will most likely commence. If the project was not well-received, either by a lack of pre-sales, or insufficient equity from initial investors or debt financing, a project may be scrapped, shelved, or significantly altered in another future attempt (either later in the cycle or in the next one). Projects which fail the Contracts stage may move all the way back to Proposed during this process.

Under ConstructionThe site improvements and vertical construction have commenced. At this stage of development, the project has secured sufficient pre-sales with significant deposits and most likely a financing commitment. These projects will enter the market under a reasonably definitive timeline of 24-48 months, depending upon the scale of the project and surrounding infrastructure requirements.

Completed

This is the final stage of the development process; as the construction of the units is completed, CO’s (Certificates of Occupancy) are issued, and the closing of the unit sales are finalized.


Condo Development Process Appendix

The information provided herein is for informational purposes. This publication does not render legal, accounting, appraisal, counseling, investment, or other professional advice. Should such services or other expert assistance be needed, it is recommended that the services of a competent person or firm, having access to the details of the situation, be employed.


Disclaimer & Acknowledgment

Cover: Photo courtesy of Robin Hill.Page 2: Photo credit: © 2015 IRR-Miami/Palm Beach.Page 4: Photo credit: © 2015 IRR-Miami/Palm Beach. Map courtesy Miami DDA.Page 5: Photo credit: © 2015 IRR-Miami/Palm Beach.Page 10: Brickell, artist’s rendering of Brickell CityCentre used by permission of Swire Properties Inc. CBD, photo courtesy Miami DDA. Arts and Entertainment, photo courtesy Miami DDA. Edgewater, photo credit: © 2015 IRR-Miami/Palm Beach.Page 11: Midtown, photo courtesy Miami DDA. Wynwood, photo credit: © 2014 IRR-Miami/Palm Beach. Overtown, by Ebyabe, Wikimedia Commons.Page 12: Photo credit: © 2015 IRR-Miami/Palm Beach.Page 14: Brickell, artist’s rendering of Brickell CityCentre used by permission of Swire Properties Inc.Page 16: Photo credit: © 2015 IRR-Miami/Palm Beach.Page 19: Photo credit: © 2015 IRR-Miami/Palm Beach.


Images

About Integra Realty Resources

With corporate headquarters in New York City, Integra Realty Resources (IRR) is the largest independent commercial real estate market research, valuation, and consulting firm in North America, with 66 offices and more than 200 MAI-designated members of the Appraisal Institute who are among its more than 900 employees located throughout the United States and the Caribbean. Founded in 1999, the firm specializes in real estate appraisals, feasibility and market studies, expert testimony, and related property consulting services. Many of the nation’s largest and most prestigious financial institutions, developers, corporations, law firms, and government agencies are among its clients. For more information, visit www.irr.com or blog.irr.com.

Contact Information:200 S. Biscayne Blvd, Suite 2929Miami, Florida 33131

T - 305.579.6675F - 305.371.2423W - MiamiDDA.com

Greater Downtown Miami Mid-Year Report · 2019-05-23 · Miami should rejoice in the 2016 delivery...

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