Population growth in the United States has slowed overall in recent years, but South Florida has continued it’s remarkable and rapid growth.
That growth is spurring demand for more multifamily housing in the region, specifically of the affordable variety, even as the nation faces uncertainty heading into the 2020 presidential election.
“Regardless of what happens in the upcoming election, the demand for multifamily, particularly affordable multifamily in South Florida is deep and wide,” said Anthony Graziano, CEO at IRR ,during Connect South Florida in Miami Feb. 26. “I expect the sector to grow tremendously in 2020 and beyond.”
Graziano noted that while the overall population growth in the United States has slowed to scarcely over replacement level fertility rate, South Florida’s population is growing much faster due to a number of factors. Those factors include favorable state tax policies, job growth and more companies setting up shop in South Florida.
Other CRE expert panelists echoed Graziano’s sentiments during Connect South Florida, which took place at the Rusty Pelican in Key Biscayne.
“We’re seeing growth across sectors,” said Fred Zutel, head of corporate risk & brokering at Willis Towers Watson, while participating in the 2020 Trends and Forecasts panel at Connect South Florida. “Not solely within real estate development and construction, but also with large companies from New York moving here for tax reasons. It’s interesting, because a few years ago we saw a lot of real estate developers switching their condominium plans to multifamily. That has exploded recently. We’re hearing about large projects like shopping malls and hotels on the beach across all asset classes. It doesn’t seem like that is slowing down anytime soon.”
“On the office side, South Florida is really a place now that you need to have on your business card,” said Tere Blanca, CEO at Blanca Commercial Real Estate. “Yes, we’re a smaller tenant type of market, but those tenants that arrive here historically have grown and continue to grow. So, the history of Miami is you open an office with 3,000 square feet and you end up with 30,000 square feet.”
South Florida’s retail market, which has been characterized in recent years by increasing vacancy rates in big box spaces, is expected to continue to rebound.
Spaces previously taken by big box retail tenants will eventually be filled by a combination of smaller and experiential retailers, as well as fitness and medical tenants.
“I think we are well past the question if retail is going to make it,” said Ryan Kratz, president of the Southeast at Colliers. “Our main challenge continues to be filling big box retail space. You can count on two hands, the number of big box retailers that are truly in the market for space right now. So what you do with those spaces is convert it to alternate use. That space will get absorbed, but it is a challenge right now in the marketplace relative to finding big tenants to take big box retail.”
With growth comes development, and Connect South Florida’s final panel of the afternoon discussed Miami’s Mega Projects and featured Adam Tiktin of Tiktin Real Estate Investment Services, Andrew Hellinger of Urban-X Group, and Jeffery Ardizon of The Estate Cos. The panel was moderated by Camilo Nino of LV Lending.
Urban-X Group is currently developing the $425 million River Landing Shops & Residences development in Miami’s Mid River District, a 2.2 million-square-foot mega project which will feature 528 apartment units, 118,000 square feet of office space and 28,000 square feet of riverfront restaurant space, as well as five marinas on the river with water taxi service.
Speaking on the panel, Hellinger explained that the biggest headwinds faced in developing his firm’s project are skyrocketing land costs. Local governments are pushing to include more affordable housing in projects. In order for developers to achieve affordability, land price must be adjusted. One solution developers have offered local planning departments is co-living multifamily concepts. But, Hellinger points out many political leaders have frowned on this concept as a long term viable solution to affordability.
“Developers are struggling to make money in 2020,” said Hellinger, co-principal at Urban-X Group. “Affordable housing is in demand but it’s squeezing the developers.”
“We think that the best amenity today that you can have is price point,” said Ardizon, principal at The Estate Cos. “Developers are struggling today to come up with rental figures that make the deals work.”
*Pictured above (from left to right): Fred Zutel, Ryan Kratz, Michael Fay, Fred Guerra and Tere Blanca participate in the Industry Leaders panel at Connect South Florida.