For Miami Beach developers looking to deliver to their buyers some of the most coveted amenities around—ocean views and easy beach access, options are somewhat limited.
The South Florida city covers around 15 square miles across an assortment of islands and the beachfront area is just a fraction of that. But developers and brokers there don’t seem too worried about an impending beachfront land extinction.
“Any condo can be recycled in Florida,” said Peter Zalewski, a real estate consultant who tracks South Florida development on CraneSpotters.com. The practice has been going on for decades and will go on for decades more, he said, adding that even now, there is empty oceanfront space waiting for brand new buildings to go up.
Take 321 Ocean, a 21-unit condo building on Ocean Drive, as an example. Built in 2015, the tower replaced a “little apartment building,” Mr. Zalewski said.
One of the building’s two penthouses sold for $20 million in 2015 to Boris Jordan and his wife, photographer and philanthropist Elizabeth Jordan, according to the Wall Street Journal.
At $20 million, the Jordans paid $1,512 per square foot for the five-bedroom unit. The apartment is currently listed for $34.99 million, or $2,647 per square foot, far less than the $53 million it was first listed for in 2016.
A more modest, four-bedroom apartment in the building is listed for $5.9 million, equating to $1,776 per square foot.
L’Atelier Residences, a luxury 20-unit, under-construction building at 6901 Collins Ave., is being built on the site of the former Golden Sands Hotel. The developers have preserved the hotel’s three-story historical façade—a requirement for a historically significant property.
Scheduled for completion in 2018, prices at L’Atelier start at $3.65 million, according to the property’s website. The building’s six-bedroom penthouse was most recently asking $25 million and sold to Steve Hafner, chief executive of Kayak Software Group, which operates travel website Kayak, for $21 million, according to the Wall Street Journal.
“I would say there are more old properties than new properties on the water,” said Carlos Gutierrez, 2016 president of the Miami Association of Realtors. But buying an existing building to tear down and rebuild can be cost prohibitive. Access to sand comes at a premium, and it can cost double or even more for a developer to purchase a building on the beach, Mr. Gutierrez said.
And, on the other hand, it’s a slow gradual process to recycle an existing residential building on the sand. Unit owners in the existing building often either don’t want to sell or want a high price for their property, said Mr. Zalewski, and a developer must control a high majority of units before they can start the transformation process.
Developers looking at the sand need to, “buy expensive, build expensive and sell expensive,” Mr. Gutierrez said.
But new development doesn’t come cheap in Miami whether it’s on the beach or off. In Miami Beach overall, the average asking price is $768 per square foot, while the average sales price is $545 per square foot, according to Mr. Zalewski. For new construction, average prices will be at least $1,000 per square foot and some are pushing $3,000 and up, he said, pointing to a huge price disparity between the old and new. Mr. Zalewski did not have data for beachfront property specifically.
Some Miami projects being revised
Time and cost, though, aren’t the only things holding Miami Beach developers back from embarking on build projects on the sand. Many developers are choosing to pause or alter their plans, cautious not to overflood the saturated market any further, or to wait for construction prices to drop.
Since 2011, 44 residential projects, or 7,185 units, have been revised (defined as either revising original intentions, opting to build rental units instead, placing the projects on hold or simply canceling their original plans) in Miami-Dade, more than any other county in south Florida, which as a whole saw 58 towers halted in the same time frame, according to CraneSpotters.com.
There have been 26 projects completed since 2011, according to CraneSpotters.com, and there are currently nine under-construction developments in the entirety of Miami Beach right now, the website said.
Mr. Gutierrez suspects he’s seen less than 10 new developments go up on the sand in the past five years, he said.
But there are some signs that the market may be improving, both on the beach and off. A third quarter market report from Douglas Elliman found that the average sale price for a luxury condo in Miami Beach and on the Barrier Islands was up 9.3% to $2.846 million compared to the same period last year. Inventory, meanwhile, was down 8.5% in the same time. And the second quarter of 2017 delivered the highest average sale price since mid 2015—just before the widely reported market slow-down— $3.428 million.
Whatever property is waterfront or beachfront, “that’s what the people want” said Carlos Rosso, president of Related’s condominium division.
“Developers are very creative. We are going to find ways to maximize what exists in the city,” Mr. Rosso said. “If there’s a demand, we’ll continue to grow.”
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