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'Still Super Early' in CRE Expansion?

CIASF Panelists in Miami Optimistic with Tax Changes, End to Banking Restrictions
March 8, 2018

Panelists (left to right) Tony Arellano, Joe Furst, Avra Jain, Alex Karakhanian and Jonathan More discuss the Miami real estate market Thursday at an event held by the Commercial Industrial Association of South Florida.
Photo Credit: CIASF

Some commercial real estate observers in South Florida are convinced that the longtime market expansion is close to the end.

Not Jonathan More.

A managing director with the debt and equity finance group for New York-based Mission Capital, More applauds the recent changes to the federal tax code and the Trump administration’s reversal of banking regulations enacted after the Great Recession.

Both are big news for the real estate community and can prolong the bull market, he told business leaders Thursday during a Commercial Industrial Association of South Florida panel discussion at the Bilzin Sumberg law firm in downtown Miami.

“It’s still super early,” More said. “We’re nine years into the recovery. It could easily be another five.”

Developer Avra Jain of The Vagabond Group echoed that sentiment, saying she’s getting calls from hotel groups looking for space. They believe Miami will have a shortage of hotel rooms by next year, given the area’s still-steady population increases.

“The hotel guys are in the business of looking forward,” Jain said. “If that’s any indication, buckle up.”

Still, while many CRE professionals remain optimistic, a leading economic indicator points to the potential of another downturn, cautions Ben Braley, senior analyst with CoStar Market Analytics.

In 2017, the national unemployment rate fell below the natural rate of unemployment for the first time in this economic cycle, according to Braley, who says that’s generally a harbinger of an impending recession. Even so, it’s only one of many data points to consider, he said.

“So while we always say to do your homework, you should be especially diligent on deals now that may not have the benefit of being in an environment where all boats rise,” Braley said.

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The CIASF panelists touted the growth of Miami’s urban core, which has been revitalized in recent years with new retail and residential. More office buildings also are in the pipeline.

During a brief presentation, Braley noted that historically one in four apartments built in Miami was in the urban core. In the last seven years, it has been closer to one in two.

“That speaks to desirability, people wanting to live, work and play in a concentrated area,” he said. “Also tied into that is development costs. You can’t make healthy margins building cheap apartments right now.”

Moderator Suzanne Amaducci of Bilzin Sumberg asked panelists where in the Miami area they would invest if she handed them $3 million.

Tony Arellano of DWNTWN Realty Advisors mentioned Wynwood, while Alex Karakhanian of LNDMRK Development pointed to the Biscayne Corridor. Joe Furst of Goldman Properties cited Doral and its potential for growth.

Jain said she loves the Miami River, but pointed to its restrictive zoning. She concluded the event by urging developers and investors never to buy land with the expectation that the zoning can be changed.

“Play by the rulebook,” she said.

Paul Owers, South Florida Market Reporter  CoStar Group   
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