The battered construction industry is going higher in the new year after showing strong signs of life in 2012. Will Miami feel more like Manhattan in a few years? It just might.
So far, there has been more talk than action, fewer shovels in the ground than grand announcements. Even so, construction is underway on a dozen new condominiums in Miami-Dade County — something that seemed beyond the realm of possibility not so long ago.
Commercial building is picking up, too, particularly in Miami’s hot new urban core.
The construction sector, which posted 62 consecutive months of job losses in Miami-Dade as of November 2012, is expected to finally begin adding jobs in 2013.
By far the centerpiece project to date is Brickell CityCentre, a $1.05 billion shopping and mixed-use project that broke ground in June 2012 and will span three blocks just west of Brickell Avenue to the south of the Miami River.
The 5-million-square-foot mega-project by developer Swire Properties will include a department store, luxury shops, restaurants, a hotel, office towers and condominiums. It is expected to be connected with bridges and covered walkways and to cement downtown Miami’s emerging image as a trendy place to work, live and play.
In Brickell alone, three new condominium projects already are under construction: Jorge Perez’s Related Group is building Millecento, a 42-story tower with 382 units, and MyBrickell, a smaller project with 28 stories and 192 units shoehorned onto a 0.4-acre site. Newgard Development Group is building BrickellHouse, a 46-story, 374-unit project.
More building, much more, is coming.
“We’re going to see a lot of cranes popping up in the first and second quarter, and a year from now, we’re going to see cranes all over the skyline,” said Tom Murphy Jr., chairman and CEO of Coastal Construction, a large Miami builder that is involved in various projects, from hotels to condominiums. “I believe we as a community — South Florida, especially Miami — will build more in the next 10 years than we did in the last 15.”
Among a long roster of projects, Coastal was tapped by developer DACRA for a major renovation project in the Design District, which in 2012 marked the arrival of luxury fashion retailers such as Cartier, Hermes, Louis Vuitton, Celine, Christian Dior and Prada, adding a new dimension to an area already known for home furnishings and restaurants.
DACRA president and CEO Craig Robins has a broader plan to bring in 40 to 50 luxury brands to the Design District by 2014. The area will have a pedestrian promenade, rooftop gardens and public plazas, in keeping with Miami’s emerging urban scene.
The focus on commercial development in Miami’s urban core, is all about providing more services to cater to the new residents who want everything within walking distance.
Spanish developer Espacio USA will break ground in 2013 on the first phase of a $412 million mixed-use project at 1400 Biscayne Boulevard. Starting with one 103,000-square foot office tower, the project will eventually include retail shops and residential units.
“It’s becoming much more of a New York lifestyle, and we’ll continue to see that,” said Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors in Coral Gables.
Construction starts in Miami-Dade County posted strong gains in 2012, rising 62 percent through November to $3.16 billion from the same period of 2011, according to McGraw-Hill Construction. The recovery in 2012 followed six consecutive years of dramatic declines from the 2005 peak when construction starts hit $7.94 billion in Miami-Dade.
Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction, said because construction starts lead the pace of construction spending by about a year, “The substantial increase for construction starts in 2012 for Miami-Dade county means that construction spending in 2013 will increase, and along with it, construction employment.”
Brickell CityCentre, for example, has about 100 people working, but their ranks will swell to 300 in the next six months and eventually reach up to 3,500 workers, according to Chris Gandolfo, senior vice president of development for Swire. There will be 11 cranes on site this year.
“I would expect 2013 to see a significant increase in construction employment,” said Brad Meltzer, president of Plaza Construction, which has lined up apartment, condo, hotel and shopping-center work around Miami-Dade and has been staffing up.
“We’re cautiously optimistic,” Meltzer said. “We have a significant amout of work under contract currently, but you never know if that is going to stay — like last time.”
When the financial crisis hit, many projects were abruptly shelved or canceled.
Meltzer said investments in Miami by prominent national real estate investment firms like LeFrak, LNR and Simon Properties bode well for the area: “It’s great to see big strong clients in South Florida.”
Leading the surge in new development: nearly 100 condominium projects have been proposed in South Florida since the downturn, according to Bal Harbour-based Condo Vultures, which tracks the market. Most experts predict only a fraction of those will come to fruition.
A key driver will be the availability of financing. Lenders, still leery in the wake of the real estate crash, are balking at backing new condos. So far, nearly all the new condominium projects are being financed by the unit buyers, who typically put up 50 percent to 80 percent of the purchase price over various stages of construction.
That financing model — which essentially amounts to an unsecured loan to the developer — has attracted almost exclusively foreign buyers, primarily Latin Americans drawn to Miami as an investment safehaven. Political uncertainty in countries like Argentina and Venezuela fuel the trend.
Even so, many people doubt that foreign demand for fancy condos will be sufficient to sustain the many projects that are being talked about.
“Are there going to be enough people to fund the construction of those units? I’d be surprised,” said Jack McCabe, founder and CEO of McCabe Research and Consulting. “I think 25 percent to 33 percent of the projects announced actually will get built.”
Many of the proposed projects are ultra-luxury towers along the ocean, from South Beach to Sunny Isles and Aventura with amenities such as wrap-around terraces, private pools and individual elevators.
Coconut Grove is also a magnet for luxury development, albeit at lower density. “There isn’t a square inch of the Grove that isn’t being looked at,” Alicia Cervera Lamadrid, managing partner of Cervera Real Estate, which markets new condominiums for developers, said at a real-estate roundtable in November.
The new condominium projects are rising in a sort of parallel universe even as the suburbs remain burdened by thousands of distressed homes. Miami-Dade Circuit Court has a backlog of 53,000 foreclosure cases, and new filings have been rising since a settlement last spring between big banks and 49 state attorneys general over lenders’ practices provided clearer ground rules.
As more foreclosures and short sales are processed, they are sure to constrain housing prices, which have been rebounding off recession lows.
While lenders are generally skeptical of condominium projects, they are readily lending for the construction of new rental apartments, an area expected to grow solidly.
Rents are rising; occupancy is strong. For many people, buying a home isn’t financially feasible. Others simply prefer to rent. At the same time, the supply of rental apartments in Miami-Dade was gutted during the boom when many were converted to condominiums.
Miami developer Armando Codina, who previously focused on commercial projects and industrial parks, and Miami-based Adler Group, a major commercial developer, both are pursuing rental apartment projects in Miami-Dade to capitalize on the robust demand. Institutional lenders — insurance companies, real estate investment trusts and pension funds — drawn to the steady income from rental projects, have been eager to invest long term, making banks comfortable with financing construction.
Industrial construction has also picked up. With industrial real estate sale prices in Miami-Dade County hitting record levels and vacancy rates dropping, last year marked the beginning of a mini building boom under way in the warehouse district west of Miami International Airport.
After several years when industrial warehouse construction ground to a halt in Miami-Dade, there is now nearly one million square feet of warehouse space under construction, plus another two million square feet planned. Much of the space is being built without tenants because the owners are so confident in the market’s future.
“Institutions with a lot of capital tend to go in areas that have the highest potential for growth,” said Steve Medwin, managing director of South Florida for Jones Lang LaSalle. “Miami is really the shopping cart for Latin America. The growth of international trade is giving us a leg up on the recovery compared to the rest of the country.”
Source: Miami Herald