Experts zero in on South Florida development outlook
As the South Florida real estate market faces a reality check, developers remain focused on areas in the tri-county region poised for growth.
Take Jeff Greene, who compares himself to a kid in a candy store during the last downturn, having picked up development sites for 10 to 20 cents on the dollar.
“The kinds of things we buy now are more strategic,” Greene said on a panel Thursday at The Real Deal’s Broward Showcase and Forum at the Design Center of the Americas in Dania Beach.
Greene joined Bernardo Fort-Brescia, Beth Butler, Joseph Kavana and Fernando de Nuñez y Lugones, on the panel, “South Florida Development Outlook.”
In West Palm Beach, Greene said the office market lacks new product. His project, One West Palm, designed by Fort-Brescia, will bring 340,000 square feet of Class A office space. “If a Class A tenant wants to come to West Palm Beach today, it’s just not possible,” he said.
A downturn won’t discourage him. “As far as the cycle goes, we’re just doing one or two projects at a time,” Greene said. “What’s going to dictate the path of how fast we develop will be supply and demand and market forces.”
Fort-Brescia, founding principal of Arquitectonica, said the migration of domestic buyers into the urban cores has impacted building design. “This city is seen as no different as Los Angeles or New York. This is a port of entry. The geography is dictating that there’s a future,” he said. With regard to residential, he said micro units are in; with office, it’s flex space; and on the retail side, food and beverage is playing a bigger role than it used to. “I think the projects and the micro units are an integral part of making West Palm Beach a real city,” he said.
“Imagine you’re going into your boat or your yacht. Imagine that it’s designed so tight were every inch is taken care of. It is a small unit that has carefully integrated all its pieces,” Fort-Brescia said.
Greene has proposed micro apartments at 550 Banyan Boulevard, targeting millennials. “Millennials are much more interested in experiences than things — they would rather climb a mountain than buy five extra pairs of jeans,” Greene said.
In Sunrise, Kavana said both the retail and office markets are “very strong,” amid a residential slowdown. His firm K Group Holdings is developing Metropica, a $1.5 billion, 65-acre master-planned community in west Broward that will have four million square feet when it’s completed.
Nearby, American Express is building its 400,000-square-foot regional headquarters. The building will house at least 3,000 employees. Kavana said the financial giant will start transferring employees from its existing office in Weston before the end of the year, and will drive residential demand.
Meanwhile, Kavana will break ground on Metropica’s retail component in September, and the firm is sticking to a five-year timeline for the project.
“Metropica is a phased development. We can do one building at a time,” he said. “We knew before we started we were going to hit, one way or another, a low cycle.”
When it comes to the overall condo market, Butler, president of Compass Florida, said there’s much less supply than what’s widely reported. In Miami-Dade, she said new construction on the market is anywhere from 3,000 to 5,000 units.
“We don’t have this tremendous supply in the market,” she said. “It’s very much a growth market. Three hundred people move to Florida every day — a large percentage to Miami-Dade and Broward.”
The currency devaluation, she said, “doesn’t mean they’re gone for good. Foreign buyers are still here and they’re still buying.”
Butler said developers lowering deposits is more of a closeout sale, and not a sign of distress. “As these buildings come to close they become more attractive to buyers,” she said. “If there’s a lesson people probably learned in the last downturn it’s to correct faster. I believe that when there is a small blip.”
De Nuñez, executive vice president of the ONE Sotheby’s International Realty’s luxury condo development division, said the last few months were not the best.
“This was the worst season ever for us,” he said. In 2008, almost 11,000 units were delivered. Best case scenario, he said Miami-Dade and Broward counties will see about 6,000 units come into the market at the end of the cycle.
De Nuñez expects the condo market to flatten in 2016 and 2017. He said the scarcity of land will make everything more expensive in the next cycle. “I expect 2020 to be a totally different game.”