Embracing Miami’s Booms and Busts

Today’s Urban Land Institute symposium on Miami’s condo sector explored the good, the bad and the ugly of today’s seemingly booming market. Panelists covered topics including economic dynamics, the state of financing, development trends and more.

uli conference pic
L to R: Jane Wooldridge, Alicia Cervera, David Martin, Carlos Rosso and Carlos Melo

Participants ranged from NYC real estate magnate Howard Lorber and South Florida investment scion Ezra Katz, to mega-broker Alicia Cervera and MIami attorney John Sumberg.

The conversation was fast and furious, but we did our best to keep up. Here are some highlights from today’s discussions. And in case you want even more, you can read The Herald’s recap here.

  • Land, land, land: A panel moderated by Miami Herald business editor Jane Wooldridge uncovered a universal sense that the cost of land — not condo supply or demand — would be the ultimate downfall of the current boom. Developers who spend too much on land will have a tough time recouping their costs through sales down the road. In other words, we’ll get to a point where land values cease to justify development. That’s when the music stops.
  • It’s a broker’s market. We’re just living in it.: When asked whether we’re in the throes of a developer’s market or a buyer’s market, Aztec Group’s Ezra Katz threw out an alternative: it’s a broker’s market. Today’s projects are selling themselves in many cases. Brokers are serving as marketing representatives and, ultimately, collections officers when it comes time to collect buyer deposits.

  • Miami’s buyer pool may be deeper than some think: For all the talk of condo buyers from Latin America, we’re seeing increasing interest from Europe and Asia. Sales to Chinese nationals doubled in the past year, according to Alicia Cervera, and France is one of the fastest-growing buyer markets. Developer Carlos Melo put it this way: “Demand for Miami condos is really endless, because we’re selling to the world.”
  • Cash-heavy model creates opportunity, presents challenges: The reliance on hefty buyer deposits means developers have the capital needed to begin construction even before a loan is secured. Larger cash deposits equates to more equity in upstart projects and that’s a good thing. For now. The real question according to John Sumberg: what happens down the road if financing isn’t available when it comes time to complete a development and the cash runs out? How will developers respond? Where will buyers turn? Only time will tell. This leaves well-established developers best-positioned to sustain the inevitable ups and downs.