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Construction Cranes, Foreign Investment Soar In Red-Hot South Florida

Foreign Investment In Condos, Apartments, Retail Fuel Latest Development Wave in Sunshine State
December 3, 2014
A group led by MG Properties is building 1201 Brickell Bay Drive, a 1.8 million-square-foot luxury residential development project on Biscayne Bay in Miami's financial district.
A group led by MG Properties is building 1201 Brickell Bay Drive, a 1.8 million-square-foot luxury residential development project on Biscayne Bay in Miami's financial district.
As developers prepare for an early 2015 groundbreaking on the 27-acre Miami Worldcenter, one of the largest private development projects in the U.S., South Florida is again buzzing with construction and development activity after a long hiatus during and after the Great Recession, when dozens of planned condominium, office, retail and hotel projects were idled.

Apartment and retail developers have been especially active in this next wave of activity hitting South Florida shores. About 2,700 units apartment units delivered in 2013 and another 3,700 units expected to deliver this year, the first two consecutive years of increasing multifamily construction since 2009, according to CoStar Portfolio Strategy.

The mixed-use Worldcenter across from the American Airlines Arena in downtown Miami will bring around 750,000 square feet of retail space through a joint venture between the Forbes Co. and Taubman Centers, with Macy’s and Bloomingdale’s signed as anchor tenants. The first 10-block phase of the $2 billion project will include retail, residential towers, an expo center and a hotel. Developer Daniel Kodsi has unveiled plans for the 60-story Paramount Miami Worldcenter residential tower, which along with other elements of the project is scheduled to begin site work in the first quarter of 2015, with vertical construction planned for midyear.

It's a scenario repeated across most property types in Miami and other South Florida markets, where some of the nation's largest private construction projects are under way or on the drawing board. The latest developments are being fueled by a strong local economy led by tourism, foreign investment and the resurging professional and business services sector.

Investors from Europe, Russia, the Asia/Pacific and the Middle East have joined Latin America capital, which historically dominated investment into Miami and South Florida, Neisen Kasdin, vice chairman of the city's Downtown Development Authority and Miami office managing partner at law firm Akerman LLP, recently told CoStar News.

Argentine investors, once a small part of the Miami property market, have emerged as particularly active in South Florida of late. A group headed by the family that owns Coto Supermarket in Argentina recently bought a 1.25-acre parcel at 300 Biscayne Boulevard Way on the Miami River for a record-setting $125 million. The land near the Epic Residences and Hotel, which could accommodate hotel, residential, retail and office uses, features waterfront access with the capacity to dock boats.

"We are seeing a shift of focus towards clientele whose interests lie in development projects," said Octavio Rinaldi, CEO at CWV Realty Group, the Miami-based real estate investment and development company which negotiated the land sale. "The Miami market has re-emerged as a lucrative investment market."

Multifamily development remains strong even as rent growth has begun to slow down in Miami after several strong years. New apartment, retail and mixed-use projects continue to start across the metro almost weekly, particularly in the Brickell submarket.

Strong pre-sales of new condo construction in the coastal Miami market reflect hot demand for new properties, according to the latest new construction market report released late last month by Cranespotters.com and the Miami Association of Realtors. At the end of October, nine new condo towers had been completed year to date in Miami-Dade County east of I-95, with 54 under construction, 62 approved but not yet started, and 66 towers announced but not yet approved.

"South Florida’s preconstruction condo market is booming east of Interstate 95 in the tricounty area as the area heads into the winter buying season," said Peter Zalewski, founder of Cranespotters.com. "Industry sentiment suggests that preconstruction condo sales are expected to strengthen further during the upcoming historically busy winter tourism season."

The fully recovered Miami retail market is a growth story that rivals the largest U.S. metros. Improving absorption will help to counter an incoming wave of supply, developers are quickly bringing new projects to key locations, principally on the downtown submarkets as well as the northern and southernmost suburban submarkets, according to CoStar Portfolio Strategy.

The influence of wealthy foreign shoppers has helped to fuel retail spending and employment growth, underpinning the uptick in demand that began this year. Rising deliveries over the next building cycle, particularly in the new Miami Design District and Brickell, will cause fundamentals to soften.

However, Miami boasts some of the lowest historical vacancies in the country and after several years of minimal demand for retail space, the market has likely turned a corner now that retailers are feeling more confident.

The Brickell and downtown submarkets will see 40% of the metro's growth, including the Worldcenter and Brickell City Centre, the huge mixed-use project which broke ground in June 2012 and will span four city blocks and bring 520,000 square feet of retail, 800 condo residences, 243 hotel rooms, 93 apartments and 110,000 square feet of office when it fully delivers in 2015. Swire Properties and the owners of the Bal Harbour Shops are co-developing the retail portion.

Other recent projects include:

  • Los Angeles-based Canyon Capital Realty Advisors LLC provided a $157 million senior construction loan to finance a 54-story luxury hotel and condominium tower on South Miami Avenue, under development by a joint-venture of the Related Group of Florida and SBE Hotel Group. The mixed-use project will include a 124-room hotel and 453 condo units, both under the SLS brand.

  • MG Properties, the real estate arm of McCourt Global, last week announced a partnership with developer Florida East Coast Realty and Corigin Real Estate Group, a division of New York-based Corigin, to develop 1201 Brickell Bay Drive, a 1.8 million-square-foot luxury residential development project on Biscayne Bay in Miami's financial district.

  • The $312 million redevelopment of the Miami Design District, scheduled to deliver about 1.1 million square feet of retail space across 51 parcels and about 20 acres over the next few years. The new luxury district aims to compete with Bal Harbour Shops on Miami Beach and thus will be packed with high-end retailers, including Louis Vuitton.





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