Five Things to Remember in 2014
South Florida had an uneven boom in 2013—great for selling condos, pretty good for leasing industrial or retail, so-so for office space. Here are five things to remember going into 2014 (besides, watch out for falling Amazon drones).
1) Condos still booming, but not like before
Douglas Elliman Florida brokerage CEO Jay Parker tells us condo sales volume and prices reached or exceeded '08 levels, and in Miami-Dade, 2013 saw the best sales volume since 2006. Even though the majority of purchases are still cash, a growing number of mortgages means that lenders are starting to loosen their belts, and buyers are eager to snap up units while interest rates are still relatively low. Finally, New Yorkers, Canadians, and Midwesterners are in the market in droves—it isn't just about foreigners with cash any more.
2) The international demand for office
Miami attracts new-to-market office space users from the four corners of the earth. Landlords are wise to compete for even the smaller ones, Brickell Bay Office Tower VP Christian Driussi tells us. Newcomers from Latin America and Europe—and nowadays Russia, China, and India—are often in the market for only 3,000 SF or 4,000 SF. More than half of the tenants who leased at his building are new to the market, Christian says. Taking care of smallish tenants is a long-term investment because many of them will expand.
3) Retail's more national this time
The lack of new retail development in most major Florida markets, coupled with an increased demand, has resulted in absorption of most vacant anchor boxes, Shopping Center Group investment sales director Anthony Blanco tells us. (We're going to have to move our book club meetings from the vacant Linens 'n Things.) Fully leased properties are in high demand, but unlike the previous real estate cycle that saw escalating rental rates, Anthony says, current rents are generally level with new market rents and, just as important, seem to align with retail sales volumes.
4) Domestic demand for industrial
Everything you know about the South Florida industrial market is true: rising demand, Latin America companies in the game, large tenants looking for large blocks. But that's not all. Transwestern managing director Walter Byrd (snapped with colleague Ben Eisenburg at their new office in Miami Tower) tells us local consumption is as important as international trade. "And as long as new jobs are created and the residential market is hot, that's going to be true," he says. Unlike some property types (and you know who you are, condos), new industrial development is actually catching up with demand—for now.
5) Hospitality is doing well, but...
South Florida's hospitality market is improving with the economy, but hotel operators can't relax. Better times mean more competition luring guests from properties that are even the least bit dowdy. H3 Hospitality partner Seth Gadinsky told us that "value enhancement for hotels is a constant goal—they need to keep up with competition as fresh new hotel brands appear on the market monthly." Common-area assets like lobbies, restaurants, retail, and even storage areas and rooftops are great opportunities for hotels to generate revenue. "Hotels can use these spaces to create one-of-a-kind dining or entertainment, and their guests will talk about it," Seth says.