Miami's Condo Craze Has Developers Spending Millions On Sales Galleries

How do you convince someone to spend $3M to live in a tower that carries the branding of legendary DJ Kygo's Palm Tree Crew? It starts with a turntable in a one-story building on a patch of asphalt.

The 22K SF property in Downtown Miami is the sales center for a handful of projects being developed by Property Markets Group, one of the most active developers in the nation's hottest market for new luxury condos. 

As dozens of these projects rise across South Florida — many adorned with luxury and exotic brands from St. Regis and Four Seasons to Dolce & Gabbana, Aston Martin and Frida Kahlo — developers are spending more time and money than ever building out sales centers. Relying on a couple of building models and a mock kitchen or master bedroom is no longer enough to stand out.

“It's kind of wild the economics of how that works and how much money the developers put into something that's really kind of temporary,” Native Realty CEO and founder Jaime Sturgis said.

Some of the newest centers have virtual reality experiences, sandwich shops, concierge and butler services, and luxury transportation so prospective buyers can tour surrounding neighborhoods.

With a $10M condo sale recorded every day in Miami and record sales of units for $20M and up, there is ample opportunity for return on investment in these centers, especially for projects expected to bring in half a billion dollars or more. 

“When you start passing that $500M echelon, you're looking at having to showcase more, you're buying more technology, more touch and feel in terms of model units or vignettes,” said Veronica Gorson, PMG's managing director of development sales and marketing.

But there is also stiff competition.

There are about 115 condo projects totaling nearly 18,000 units in preconstruction in Miami’s Downtown core, Miami Beach and Broward County, according to a first-quarter report by ISG World.

Much of the clientele willing to pay millions for a new unit are the ultra-wealthy flooding Miami amid tax-the-rich politics in New York, California and Washington. But even more are coming from overseas — international buyers bought more than 50% of new-construction, preconstruction and condo conversion units in South Florida last year, according to Miami Realtors + RWorld.

To help navigate the sea of choices, residential brokers are often the ones scoping out galleries and narrowing the list for their clients, said DaGrosa Capital Partners founder and CEO Joe DaGrosa, who is developing the Kempinski Residences Design District.

That means sales centers have to capture buyer’s agents’ attention with the design, location and experience. It is the closest international buyers can get to touching and feeling the product before it is built, developers and brokers told Bisnow.

“It just makes the buyer feel more comfortable about making a decision,” said Gerardo Gonzalez, a Compass principal and broker focused on buyer representation.

DaGrosa Capital Partners spent between $5M and $8M to build the Kempinski sales center on the project site about a 10-minute walk east of the heart of the Design District, DaGrosa said.

The gallery, which opened this month, is marketing the first U.S. residential project from Switzerland-based Kempinski Hotels, Europe’s oldest luxury hotel group, known for operating historic palaces.

The developer offers a concierge service to shuttle prospective buyers from the center to high-end shopping at fashion brands like Hermès, Louis Vuitton and Dior or dining at a Michelin-starred restaurant like L’Atelier de Joël Robuchon. But it also makes sure they are pampered at the center itself. 

“They want to sip champagne? That's obviously ready for them,” DaGrosa said. “They want a cappuccino? Whatever they want.”

There’s more pressure than ever on developers to make a good impression, as construction lenders increasingly favor projects with meaningful presales before providing financing, and sales centers are key to getting contracts signed. That means the stakes are higher on nailing the gallery — which comes with its own real estate challenges.

Finding a location for a center can be the hardest part of building one. Developers take into consideration the importance of proximity to the project site, renovations and lease terms.

Most developers sign two-to-five-year leases for the space — enough time to sell out a project but shorter than the average five-to-10-year leases retail landlords seek. That results in developers paying above asking prices in some cases to secure their location, said Sturgis, who represented Naftali Group in leasing space for the gallery of the Viceroy-branded condos in Fort Lauderdale.

Developers also focus on connecting their sales centers with the surrounding community to help sell the project and its lifestyle.

For Allen Morris Co., the sales gallery for its Ziggurat mixed-use project in Coconut Grove includes a sandwich and cheese shop on one of the wealthy enclave’s busiest corners. 

Just steps away from CocoWalk, the developers decided to partner with Chévre, known for its artisan sandwiches and imported cheese and wine products, for a store open to buyers and the public.

The five-story project features 19 luxury residences selling for up to $15M, but also 40K SF of retail and 100K SF of offices. 

“Having a prime walkable corner in a neighborhood like Coconut Grove is a game-changer,” Allen Morris Co. President Spencer Morris said.

“They'll pop their heads in and learn about the project in an organic way,” he added.

But most developers prefer to build their sales centers on the project site, allowing buyers to get a taste of the location.

For The St. Regis Residences, which Chateau Group is co-developing with Fortune International Group, it gave potential residents the opportunity to experience the prime oceanfront location it has on Sunny Isles Beach, Chateau Group Operations Manager Sebastian Sagranichne said.

But that advantage has an expiration date. As construction starts on the north tower of The St. Regis, the developers are moving the gallery across the street, Sagranichne said.

“It's the ideal scenario, but it gets to one point where, of course, you have to start construction on-site, and then, of course, you need to move it,” Sagranichne said.

The developers now have to build a whole new gallery to market the two-tower, 62-story project, where units are selling for $5M and up. Construction could take up to a year.

Jumping through these hoops is especially important for branded condos, especially as Miami competes with Dubai for global buyers, DaGrosa said. 

There were 55 branded condo projects in the South Florida pipeline earlier this year, second only to the United Arab Emirates' biggest city, according to Savills. Only 48 such projects have been completed, a reflection of how much supply is on the market as developers try to capitalize on the average 30% premium branded condos fetch compared to those without a brand.

With so many units in the pipeline, developers feel they have little choice but to try to outdo one another with these sales centers, the most important — and expensive — marketing tool they have.

“I'd like to say we're unique,” DaGrosa said. “We're not unique, but we know it's a competitive environment, and we have to make sure we're demonstrating to potential buyers that it's a high-quality product that they're going to be investing in, and ultimately going to be their home.”