All the Reasons We're Not About to Repeat the Crash
Is this South Florida real estate boom like the one in the 2000s? Fortunately not, according to our speakers at Bisnow's 3rd annual South Florida State of the Market on Tuesday.
The key differences this time around are South Florida's new-found stature as an international hub and the influence of Millennials, the speakers noted. But, it's more than simply Latin American buyers coming here to buy properties with cash, though that's been important. South Florida's been a solid market since the end of the recession because buyers from around the world and the country have stepped into the market at various times ("different buckets of money," as one speaker put it). More than 500 attendees packed Soho Studios to hear our speakers.
Also supporting the residential for-sale market, and to some extent the rental market: the growing popularity of this part of the country with Millennials. Between international buyers and Millennials, demand has managed to keep up with supply, our speakers explained, and they don't expect that dynamic to run out of gas any time soon. Snapped: Related Development CEO Steve Patterson and Tate Capital CEO Jimmy Tate.
Residential developers are facing some difficulties, however, the speakers added. As the market fully recovered after the recession, construction costs, especially labor, ballooned—and so did land costs. Residential development deals are still being done, but it's harder to pencil them out. Affordable housing is also a major concern. Renters in South Florida are facing the prospect of paying more for smaller units (though the amenities are a lot better now). Fortune International Group CEO Edgardo Defortuna, Adler Development president David Adler, and Gables Residential EVP Cris Sullivan, who moderated the Residential panel.
None of our speakers were surprised that the Fed kicked the interest rate can down the road a little further last week, but everyone's expecting rates to rise before long. Will that affect commercial real estate in South Florida when it finally happens? Not so much, especially for deals involving highly desirable Class-A assets. Class-B and C deals, on the other hand, might suffer a bit more. Newgard Development Group CEO Harvey Hernandez, Franklin Street regional managing partner Greg Matus and Hunt Mortgage Group director Marc Suarez.
Even so, the speakers noted a wave of deals this year, ahead of an anticipated rate hike. Now's the time to lock in long-term debt, and everyone knows it. Also, the stronger dollar hasn't crimped the flow of overseas capital in the South Florida market. Mostly that's because much of the money is looking for a safe, long-term place to be. The higher cost posed by currency fluctuation isn't going to change that. Bilzin Sumberg partner Jay Sakalo, who moderated, NES Financial EVP Reid Thomas and Miami Worldcenter Associates managing principal Nitin Motwani.
Here's Bisnow's Brian Kinslow. In our next edition, we'll cover what the Market Trends panel had to say about where the South Florida market's going from here.