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Real Estate Primed for Further Growth in Greater Miami’s Evolving Neighborhoods

The state of real estate development today in Miami-Dade is fueled by expectations of strong returns. One need only look at the number of cranes dotting our regional high-rise commercial and residential zones of Miami, Miami Beach, Coral Gables and elsewhere to recognize the intensity. Currently, metropolitan Miami has the third tallest skyline in the country, and nearly every commercial neighborhood has construction of some kind occurring.

The great challenge and opportunity for developers and investors has been twofold since most are seeking near-term returns that satisfy their investors. Generally, there are two considerations on their minds: when is the right time to purchase and develop property, and what barriers to entry are manageable. Although some local developers have the cash and strategy to be more patient and wait for two to 10 years to move forward with projects on land they own, that is not commonplace.

The key success metrics for many developers is tied to the highest and best use of their capital for mixed-use, residential, office, etc. Here are some market conditions and signals that may tip the prospect of successful development in one direction or another:

First, the macro conditions of the market, including inflation and monetary policies affecting access to capital, tax incentives, and the cost and availability of construction labor and materials, are key success factors for any developer.

Second, sea-level rise and climate change are ground zero in Miami-Dade. Our proximity to the bay and ocean, and the prospect of lifestyle disruption from rising tides, hurricane storm surge, and in some neighborhoods the very existential issue of structures within flood zones, create an urgency and massive investment of federal, state, and local government resources in the billions. We are already witnessing both institutional and noninstitutional lenders refusing long-term financing for certain locations, and that prospect will continue and become more prevalent this decade and beyond. Upland neighborhoods and districts, ones that will not witness flooding in the next two decades, are thus naturally more attractive.

Lastly, the story of Miami, over the past 125 years, has been one of three steps forward and one step back when it comes to development. We have witnessed growth cycles greater than most American cities, but we also tend to be on the frontline of overdevelopment and vacancy when recessions occur. Yet, the sophisticated real estate investor and developers, like those who may have battle scars from the crash and burn of 2008-2010, or who have the wisdom to know that markets ebb and flow, recognize that Miami leads with its entrepreneurial opportunity.

So, based on predictors, trending and conditions, beyond neighborhoods we would call currently “hot” where developers are executing on major projects, what are the next group of neighborhoods ripe for major development in the next decade?

Certainly, areas like Little River are enticing because of their historic position in the marketplace. Assemblages around the immediate commercial corridor along 79th Street are a good play because there is precedent for taller buildings, some of which are targets for repositioning.

We could witness more infill projects in East Little Havana, but the challenge there is tied to limited densities and parking requirements on properties that can make development cost prohibitive. Investors must buy right to make the numbers work. If commercial use is on their mind, they have to work with neighborhood residents in advance to quell concerns over noise at eateries, bars and clubs. That can be costly and time consuming, but if done right could yield great results.

There was an innovation in parking requirements, which shifted it to the street in Little Havana, but that applied to small residential buildings, which fit the small-scale profile of existing residences. Another play might be to buy a handful of these small building complexes or a portfolio of the same, which can be held as prices rise or flipped in three to five years for a nice return.

The key to development in places in the city of Miami north of the central business district is the rezoning of some properties with outdated or limited infrastructure to prepare the land to be flipped or developed. There are opportunities for four-parcel assemblages for small residential development that can produce acceptable returns with low beta.

A good partner in Miami may be its community redevelopment agency, which is looking to bid properties they own and provide tax incentives to developers and investors interested in building housing in these communities.

Lastly, there are ever greater opportunities that should be considered near Metrorail stations and along the US-1 corridor, which are zoned for higher density, with the city of Miami and Miami-Dade County incentivizing opportunities for builders. Noise is a challenge, but that is the point–managing challenges can yield good pricing on land and nice margins upon development.

Going forward, more developers will look to commercial with barriers to entry they can remove to stake their real estate project.

 

Source:  GlobeSt.

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Report: Miami Multifamily Holds Steady

As Miami continues to navigate the health crisis and ensuing economic hardship, the metro became an example of resilience in the face of adversity, according to a study by the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center.

The report commended Miami’s efforts to repurpose existing strategies—already tested against coastal vulnerabilities, disease outbreaks and economic difficulties. Despite the challenges, Miami real estate has endured, with multifamily rents up 0.4 percent to $1,704 on a trailing three-month basis as of December, above the $1,462 U.S. average.

Despite a slow pace, employers added some 24,400 jobs in the metro over the three months ending in November. But as a region heavily reliant on tourism, Miami has felt the full weight of job losses in the leisure and hospitality sector, which contracted by 19 percent and shed 63,300 position in the 12 months ending in November. On a positive note, following the $900 billion federal relief package passed in late December, many Floridians had already started receiving the extra $300 payments for the week ending Jan. 2.

Metro Miami had 35,969 units under construction as of December, with 87 percent of those aimed at high-income earners. The bulk of the pipeline (71 percent) is expected to come online through this year. More than $2.2 billion in assets traded in 2020, representing a 19 percent decline from 2019.

 

Source:  MHN

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For Retail Sector, Liquidity And Communication Key To Surviving Coronavirus Crisis

Measures to contain the spread of coronavirus are still shifting by the day — and so are responses by investors, developers, builders, banks and buyers. To track the impact in real-time, RE|source Miami is asking area real estate professionals in various sectors for on-the-ground reports.

Today we hear from Michael Comras, president & CEO of the Miami-based Comras Company, which specializes in the development, leasing and sale of urban and suburban retail properties across South Florida.

As a principal in various development entities, Michael has also been involved in shaping retail in high-profile destinations including Coconut Grove, Miami Beach’s Lincoln Road, Design District, Wynwood, and Downtown Miami.

Q: How is the South Florida retail sector coping with the unfolding coronavirus crisis, and the economic slowdown we are experiencing?

In the short term, the market has been significantly impacted due to the government mandates requiring that all restaurants and non-essential retailers close their doors to curb the spread of COVID-19.

As a community, we need to acknowledge the challenging times ahead and recognize that by working collectively we will get through the pain and ensure that the retail and restaurant community lands on its feet. Now more than ever, tenants and landlords need to work in unison toward a common goal: sustaining business and our retail and restaurant economy.

Everything that existed prior to the coronavirus pandemic will exist again, but there is no silver bullet to solve the economic slowdown. The building blocks to recovery will depend on solid relationships and positive collaboration amongst all stakeholders.

Landlords do not want widespread vacancies and tenants want venues where they can grow their business and thrive. Fusing these objectives into a cohesive goal will allow the retail sector to reemerge stronger, faster. In addition, banks and lenders need to work closely with developers and property owners to make sure liquidity continues to flow. State and Federal financial relief will also provide necessary support.

 

What is the state of construction in Miami-Dade? Are real estate projects still getting built, and have timelines been delayed due to the virus?

The good news is that most construction projects in Miami are making headway and moving forward as planned, to the extent that the work can be completed in a safe manner. Construction firms are following strict guidelines to ensure social distancing inside job sites.

We expect to see delays in lease negotiations and leases that have not been executed. The permitting and approval process required for tenant interior buildouts will also take longer, and projects currently undergoing inspections may lag as there are new restrictions that will limit on-site inspections. In addition, the plan approval process will be extended by cities prohibiting the “walk-through” of plans. A process that provides for a quicker review of buildout plans.

 

Many retail tenants have shut their businesses. How are you counseling regarding landlords and rent concessions?

Communication is key. There is no one-size-fits-all strategy to resolve these issues. Every landlord has a unique relationship with their tenants and the parties must openly communicate to arrive at a sustainable solution that can work for both sides.

Local retailers and restaurateurs are integral to the fabric of our community and, unfortunately, they are the ones being most affected. In the spirit of working through a difficult time, all sides must be honest and transparent. Often, landlords are not privy to tenant sales figures, which is the main indicator of how a business has been performing. It will be important for tenants and landlords to look at the sales trends prior to the crisis to strategize towards a successful resolution.

Access to information can help guide landlords when evaluating potential rent concessions for their tenants. Solutions may include rent abatement, deferrals or other payment structures that allow both the tenant and landlord to navigate this hardship and remain open for business.

 

Do you anticipate that this outbreak will have a long-term, lasting impact on the way real estate projects are planned and designed?

Prior to COVID-19, retail was already going through a major transition, becoming more experiential and interactive. This will only become further pronounced as we emerge from this pandemic. At the same time, people are becoming even more accustomed to ordering goods online – since they have no other option at this time – and this could have a ripple effect on select brick-and-mortar businesses. Retailers will need to continue to improve their business’s online capabilities.

Miami is a unique “city of villages”, a series of walkable destinations such as The Miami Design District, Wynwood, Miami Beach, Brickell, Coconut Grove, Downtown Miami and South Miami. Connectivity, walkability, and revitalization will continue to fuel our local real estate economy. As human beings, we are social creatures who thrive on congregating and being a part of something greater than ourselves. Experiential retail will perfectly align with the pent-up demand people will have to enjoy experiences from dining and shopping to family entertainment once these stay-at-home measures are lifted.

There is no city as resilient as Miami. We’ve endured natural disasters with devastating hurricanes, deadly diseases with Zika and H1N1, and now the novel coronavirus – but with each setback we’ve come back stronger and have continued to thrive. This is a serious crisis that we will overcome. By supporting one another and working together, we will once again come out on top.

Source:  Miami Herald

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Boomtown: Miami Has Been Named One Of America’s Top Growth Cities In A New Analysis

Strong economic and population growth led financial site Smartasset to name Miami as one of America’s top boomtowns.

Miami ranked fourth nationwide in the analysis, and was the top big city.

Analysts looked at government data from 500 cities for the ranking.

Here is how Miami scored in key metrics:

  • 5 year population change increase of 9.43%
  • 5 year average yearly GDP growth of 3.39%
  • 5 year change in number of establishments 8.79%
  • 5 year housing growth rate 10.11%
  • 5 year change in median household income 31% (second highest in the top 10)

 

 

Source:  The Next Miami

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ULI Offers Some Climate Change Solutions For Miami’s Commercial Properties Along The Waterfront

To protect commercial properties along the waterfront in downtown Miami and by the Miami River, city officials and the real estate industry should implement natural lines of defenses, consider using less ground floor space for commercial uses, embrace transit-oriented, mixed-use projects and identify funding resources for large-scale flood mitigation projects similar to the Thames Barrier in London.

Those are some of the recommendations made by a 10-member panel of the Urban Land Institute, or ULI, brought on by the City of Miami and the Miami Downtown Development Authority to figure out ways to make the urban core more resilient to climate change.

The panel’s final report came out this month. It focuses on strengthening the Biscayne Bay waterfront as Downtown Miami’s first line of defense against rising seas, transforming the Miami River into a mixed-use district that bridges the gap between the water and surrounding neighborhoods such as Little Havana and Allapattah. The report also recommends creating incentives for responsible development along an inland ridge of high-lying ground.

“The Urban Land Institute’s preliminary findings provide us with a roadmap for enacting design, infrastructure, zoning and financing strategies that will ensure Miami sustains its growth as a world-class city – not for years, not for generations, but forever,” said Miami City Commission Chairman Ken Russel, who also chairs the Miami DDA. On Nov. 21, commissioners passed a symbolic resolution declaring Miami is an a state of climate emergency.

The ULI recommends city officials adopt living shorelines along the Miami Baywalk and Riverwalk, study the development of an iconic tidal gate for the Miami River, use the city’s transfer of development density program to give builders incentives for building in less flood-prone areas and update the downtown Miami master plan to incorporate building streets and sidewalks at a higher elevation.

According to the ULI report, commercial properties in Miami’s urban core, which includes retail storefronts, offices and large apartment buildings, comprise $21.1 billion in taxable value. Roughly $5 billion of that value exists with a quarter mile from Biscayne Bay and the Miami River.

Since 2009, a total of $13.1 billion was invested in commercial property in the Miami central business district, indicating an active market, the ULI report states. The ULI panel largely agreed that the city’s current waterfront guidelines lack overall flexibility, have some problematic design requirements, and do not allow for elements, such as terracing, that could address storm surge.

 

Source:  Forbes

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Miami Lost Amazon’s HQ2. Still, The Area Looks More Attractive Than Ever, Experts Say

South Florida’s bid to attract Amazon’s HQ2 when it came to landing the big prize. But in a panel discussion Tuesday, regional leaders said the bid process itself has galvanized the tri-county area to think and work more collaboratively.

“This process showed an extraordinary level of regional cooperation, done in a record amount of time,” said urbanist Richard Florida, who led the discussion of the panel, “What Did We Learn From Our Amazon Adventure.”

The panel, which drew about 80 attendees, was produced by the Miami Herald, the Downtown Development Authority and Florida International University’s Miami Future Urban Initiative, which Florida leads. It was hosted by the Miami-Dade Beacon Council.

Michael Finney, Beacon Council president and CEO, echoed the sentiment. He recounted how he’d initially hesitated about approaching Miami-Dade Mayor Carlos Gimenez about the idea of a region-wide pitch — only to find Gimenez was fully on board with the idea.

“It was clear that the young folks working for Amazon, some significant portion would want to live in Miami, even if Palm Beach or Broward won the site,” Finney said. “There was an incredible potential for a win-win.”

As part of the ongoing regional collaboration, the Business Development Board of Palm Beach County (BDB) will be hosting a tri-county executive leadership meeting in Palm Beach County Friday, Feb. 15. The meeting will be composed of the executive board members of the Beacon Council, the Greater Fort Lauderdale Alliance, and the BDB.

Few new details about Miami’s bid emerged Tuesday. Finney said a total of 54 South Florida business, academic and political leaders had signed nondisclosure agreements in the run-up to the bid. Seven of the nine Amazon delegates who met with Miami’s delegation were “millennials” and showed particular interest in advanced-degree and post-graduate opportunities (along with happenings in Wynwood and the Design District).

Shereena Coleman, vice president of business facilitation and The Glades region at the Business Development Board of Palm Beach County, which participated in the Amazon bid, said South Florida has still not conquered its longstanding brain-drain problem. Last year, from real estate group CBRE showed more tech graduates were moving out of Miami-Dade than coming in — although that was not the case for Broward.

“No one is coming here if the talent isn’t here,” she said.

Speaking as the lone non-South-Floridian on the panel, John Boyd — a relocation specialist and resident of Princeton, New Jersey — said that the Miami metro’s inclusion on Amazon’s finalist list was nevertheless a signal that other companies like Amazon — and perhaps even Amazon itself — would now bump the Miami metro region up on its list of relocation landing spots.

A spokesperson for Amazon did not immediately respond to a request for comment.

Still, other firms are now taking notice, and all panelists said they had seen an uptick in relocation interest as a result. “We now have a treasure trove of sorts, of people paying attention to what’s happening in Miami,” said Finney.

Boyd added that the biggest recent development for South Florida’s reputation in the corporate world was the advent of Brightline, now rebranding as Virgin Trains USA. Relocation promoters and companies are focusing on “regionalization,” including assets that may not be physically close but which can be easily reached. The ability of Brightline to connect the tri-county area will prove a key asset, he said.

“Miami is considered a world class city now,” Boyd said. Brightline “now puts it in the minds of global executives.”

At the local level, the construction of Miami Central Station means the beleaguered, inter-county Tri-Rail line will finally have a downtown destination. That will open up the region to everyday commuters, said Nitin Motwani, managing principal of Miami Worldcenter, a major real estate project downtown, and co-chair of the Downtown Development Authority’s economic development committee.

Motwani said the bid had the effect of breaking “the invisible line” that many South Florida residents recognize as dividing Miami-Dade from its county neighbors to the north.

Finney said that the tide would soon begin turning from seeing rail projects as not-in-my-backyard nuisances to desirable assets as property values increase, noting that this is usually how transportation-oriented development works in most other cities.

David Coddington, vice president for business development at the Greater Fort Lauderdale Alliance, said developments like this would give the region an opportunity to brag about itself, something it has been too shy to do in the past.

And telecommuting has made the region all the more desirable. Coddington’s new suggested motto: “Work in the cloud. Live in the sun.”

 

Source:  Stock Daily Dish

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Miami Among Top US Cities In 2019 For Growth

When it comes to economic growth, Miami ranks among the best in the nation, according to a new list.

New York-based WalletHub ranked over 515 cities on economic growth over several years, considering over 17 separate areas to score each city as part of an index out of 100. Those metrics included population growth, job growth, building-permit activity, growth in businesses and other economic factors. The study broke the cities into three categories: large, more than 300,000, midsize, 100,000 to 300,000 and small, fewer than 100,000.

Other cities in the area included:

  • Davie, No. 68
  • Boca Raton, No. 69
  • Boynton Beach, No. 92
  • West Palm Beach, No. 111

 

Source:  SFBJ

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Miami Adding 7,000 New Apartments This Year, More Than Any Other U.S. City

Miami is the top city in the U.S. for new apartment construction in 2019, according to new statistics from Rentcafe.

A total of 6,989 new apartments will be built in Miami by the end of the year, more than any other U.S. city.

The number of new apartments is more than double what was delivered last year. A total of 3,148 units were built in Miami in 2018.

Miami is unusual compared to other U.S. cities, since most new apartment construction is concentrated in the urban core (generally within city of Miami limits).

In the Miami Metro area, a total of 13,031 apartments are expected to be delivered in 2019, ranking fourth among metro areas nationwide.

 

Source:  The Next Miami

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