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Miami Commercial Investment Activity Upticks, Aided by Low Vacancies

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According to the Miami Association of Realtors’ Realtor Commercial Alliance, Miami’s commercial vacancy rates continue to rank among the lowest in Florida, leading to more local investment from global companies and investors.

Miami’s vacancy rates for office (14.9 percent), industrial (5.3 percent), retail (6.3 percent), and multifamily (4.4 percent) are the lowest among major cities in Florida, according to a May 2015 Commercial Outlook report from the National Association of Realtors (NAR) and Reis, Inc., a leading provider of commercial real estate market information. Each of Miami’s commercial sectors are performing better than the U.S. average, except for multifamily which is 0.1 percent lower. The national vacancy rates in May were 15.6 percent for office, 8.4 percent for industrial, 9.6 percent for retail and 4.3 percent for multifamily, according to NAR and Reis.

“One of the world’s top global cities, Miami has become a launching pad for new industries,” said Barbara Tria, the 2015 Miami Commercial Alliance President. “Technology companies and other businesses are moving to Miami largely because of the region’s top-tier cultural offerings, outdoor lifestyle, and affordability compared to other major cities around the globe.”

Miami Office Market

Miami’s 14.9 percent office vacancy rate in May ranks as the 21st lowest out of 82 major U.S. cities, according to the NAR and Reis report. New York leads the nation at 8.9 percent. Statewide, Miami’s office vacancy rate is performing better than Florida’s major cities. The Sunshine State’s other major metropolitans had the following rates: Fort Lauderdale (18.6 percent), Jacksonville (20.4 percent), Orlando (16.5), Palm Beach (16.5) and Tampa (19.7). The national average is 15.6.

South Florida’s growing, multilingual workforce is one reason for its low office vacancy rate. Miami-Dade County added 33,700 jobs across several sectors from April 2014 to April 2015, a 3.1 percent increase, according to job numbers released May 22. Miami had the third-largest job gain in Florida behind Orlando and Tampa. Miami’s unemployment rate from April 2014 to April 2015 decreased by 0.7 percentage points, to 6.2 percent from 6.9 percent.

Miami Industrial Market

Miami’s industrial vacancy rate of 5.3 percent is the third-lowest in the nation among the 82 major American cities studied by NAR and Reis. Only Orange County (Calif.) and Los Angeles performed better than Miami in the industrial sector in May, registering vacancy rates of 3.4 and 3.6 percent, respectively. Florida’s other major metropolitans had the following rates: Fort Lauderdale (8.2), Jacksonville (6.9), Orlando (10.3), Tampa/St. Petersburg (7.8), and Palm Beach (5.5). The national average is 8.4.

Miami International Airport and PortMiami are two of South Florida’s international trade successes. Miami International ranks as the top airport in the U.S. for international freight, and the ninth-best airport for foreign cargo in the world. In 2013, Miami International handled 2.1 million tons of total airfreight, of which 88 percent was international freight.

PortMiami is the top-ranked container cargo port in Florida with 900,000 TEUs handled each year. The port has an opportunity to expand its international business as it is deepening its channel from its current 42-foot depth to 50-52. When the deep dredge project is completed, PortMiami will be the only U.S. port south of Norfolk, Va. that can accommodate the new, mega cargo vessels that will pass through the expanded Panama Canal.

Miami Retail Market

Miami has the 15th lowest retail vacancy rate among U.S. major cities, according to the NAR and Reis report. Miami’s 6.3 percent rate is considerably lower than Florida’s other large metropolitans. Fort Lauderdale (9.3 percent), Jacksonville (12.9), Orlando (11.0), Palm Beach (9.5) and Tampa (10.6) are higher than Miami. The national average is 9.6.t”>

Miami’s tourism and multilingual employment base are just two reasons why major developers are bringing new retail ventures to the region. Earlier this year, the company that owns and runs the largest mall in America announced plans to build the nation’s largest shopping mall in northwestern Miami-Dade, a roughly 200-acre entertainment complex with submarines, a Legoland, sea lions and an artificial ski slope. American Dream Miami is projected to cost as much as $4 billion to build.

Brickell City Centre and The Mall at Miami World Center are two other significant Miami retail ventures. At Brickell City Centre, Hong Kong developer Swire Properties will deliver 500,000 square feet of retail space anchored by Saks Fifth Avenue by late 2016. The Mall at Miami Worldcenter, in the heart of downtown, will complete 765,000 square feet of restaurant, retail and entertainment space by 2017.

Miami Multifamily Market

The vacancy rate for Miami’s multifamily market is tied for 38th among 82 major U.S. metros, according to the NAR and Reis report. Miami’s 4.4 percent multifamily vacancy rate is the lowest in the state. Fort Lauderdale (5.2 percent), Jacksonville (7.0), Orlando (6.1), Palm Beach (5.6), and Tampa (5.0) all have higher rates. The national average is 4.3 percent.

 

Source: WPJ

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Miami Beach Sea Level Rise Conference Targets Future Developments

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It’s up to developers and city officials to protect projects in Miami Beach from the threat of global sea level rise, architect Reinaldo Borges warned an audience gathered inside a conference room at the W South Beach on Thursday.

“Developers need to change their perspective,” Borges said. “They go in with a short-term investment mentality. That mindset has to change.”

Business leaders discuss sea level rise at the Miami Beach Community Resiliency Summit

Business leaders discuss sea level rise at the Miami Beach Community Resiliency Summit

Borges, a principal of Borges & Associates Architects, lamented that hotel projects his firm worked on like the Royal Palm Miami Beach and the Bentley Beach Hotel will be negatively impacted by sea level rise. Before new projects break ground, Borges suggested city officials find ways to provide developers with incentives if they build structures at a higher elevation.

The Miami-based architect was part of a panel of business community leaders at the Miami Beach Community Resiliency Summit Friday morning. Other speakers such as Wendy Kallergis, president and CEO of the Greater Miami and the Beaches Hotel Association, and Gabriole Van Bryce, a member of the association’s sustainable hospitality council, talked about successful efforts to convince builders and owners to make their properties greener.

“We have really helped hotels reduce the impact of climate change by reducing greenhouse gas emissions,” Van Bryce said. “We want to further reduce the effects of greenhouse emissions by promoting a cool roof initiative to place local gardens on rooftops.”

Al Roker, host and weatherman for NBC’s “Today Show,” kicked off the summit by providing attendees with a few cold hard facts about climate change. “In the next 50 years, Miami’s high tide will be five feet higher,” Roker said. “At the city’s 100th anniversary concert last night, I told the crowd, ‘I hope you’re enjoying this now because where you are standing now will be underwater one day.’”  The popular morning show personality also said the mainstream media made a mistake by coining the term “global warming,” instead of using “climate change.”

Following his presentation, Roker told The Real Deal that developers, city officials, and residents have to work together to address the real threat of climate change. “Everybody should be concerned,” Roker said. “Are buildings ready? Is the infrastructure ready? Those are all real concerns condo owners, private property owners, businesses and everybody should be concerned about.”

 

Source: The Real Deal

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‘Green Bonds’ For A Parking Garage?

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A state agency in Massachusetts recently sold “green bonds,” a type of debt designed to fund environmentally-friendly projects.

But the money raised from the sale won’t go to a new park, more bike lanes or a renewable energy facility. Instead, the Massachusetts State College Building Authority plans to use some of the funds to build a 725-space parking garage at Salem State University near Boston.

A parking garage at Salem State University near Boston, financed by so-called green bonds issued by a Massachusetts state agency, would feature car-charging stations, such as this one in Atlanta. Photo: Chris Aluka Berry for The Wall Street Journal

A parking garage at Salem State University near Boston, financed by so-called green bonds issued by a Massachusetts state agency, would feature car-charging stations, such as this one in Atlanta. Photo: Chris Aluka Berry for The Wall Street Journal

The garage will have electric-car charging stations and spots for carpoolers, and officials said it would cut down on pollution from students who now circle the campus in their cars, looking for spots. But some analysts and environmental advocates said the garage still encourages people to drive, a major contributor to greenhouse-gas emissions.

The debate over the garage underscores the lack of clear rules for determining what projects help the environment. Investors said the green-bond market allows companies and governments to tap into large pools of money for environmental initiatives. But some said “greenwashing,” the financing of projects whose environmental impacts are at best unclear, could discredit the market and make buyers wary.

One concern is that there is no mandatory legal framework to decide what projects are environmentally friendly. That leaves issuers and banks to decide. Wall Street firms last year adopted voluntary green-bond guidelines, but critics said they aren’t sufficiently stringent.

“I really don’t trust developers and bond issuers to police themselves, to make sure what they say is green is really green,” said Karen Orenstein, a senior analyst at environmental group Friends of the Earth U.S. When asked about using green bonds to pay for a parking garage, Ms. Orenstein said: “That’s why you need standards.”

The Massachusetts agency generally follows the banks’ green-bond guidelines. Edward Adelman, the executive director, said the garage has environmental positives.

To be open by early 2016, it will free up land for other new school buildings, reducing sprawl and making the rest of the campus more pedestrian friendly, he said. It is also being designed to receive a certification from the Green Parking Council, according to the bond prospectus.

The issue is becoming more important as the market expands. Green-bond sales have more than tripled from a year ago in each of the past two years, with $53.2 billion outstanding at the end of 2014, according to the Climate Bonds Initiative, a nonprofit group in London.

Big asset managers such as BlackRock Inc., Vanguard Group and TIAA-CREF have purchased green bonds. Calvert Investments, a $13 billion asset manager, has raised $33 million for a mutual fund that focuses on green bonds, drawing on what portfolio manager Matthew Duch calls investors’ increasing “social consciousness about the environment.”

The voluntary guidelines, called the “green-bond principles,” suggest green bonds can pay for renewable energy, clean transportation and energy efficiency projects. Nothing, however, is explicitly ruled out.

GreenBondsChartThe guidelines are expected to be updated this month, and many investors are generally supportive. Still, one group of buyers, including BlackRock and Pacific Investment Management Co., said recently that the guidelines “can benefit from further definition and structure.”

“Personally, I do think the principles could use an update and provide a little bit more rigor,” said Rob Fernandez, a credit analyst at Breckinridge Capital Advisors, which buys green bonds.

Some investors said having inflexible rules would be counterproductive, discouraging issuers from selling green bonds and making it more difficult to pay for environmentally friendly projects. But they said it is important that issuers are transparent about how the money is used.

Environmentally dubious deals are rare, and one questionable bond shouldn’t disrupt the market, investors said. But “if there were multiple events in a short period of time, and investors just get uncomfortable, that would be a different story,” said Manuel Lewin, head of responsible investment for Zurich Insurance Group, a green-bond buyer.

At Salem State, where many people commute, students said the need for parking is real.

“I feel like I’m in a battle with all these people for spots,” said Tessa Haynes, a junior. “It’s a little episode of ‘The Hunger Games,’ ” a movie about a fight to the death among teens.

The parking garage isn’t the only project to come under scrutiny. Environmental groups, including Friends of the Earth U.S. and International Rivers, have raised concerns that proceeds from a green bond sold by French power company GDF Suez SA could help support a hydropower plant in Brazil. The groups said the plant could imperil fish species and has increased deforestation.

‘I really don’t trust developers and bond issuers to police themselves, to make sure what they say is green is really green.’

—Karen Orenstein, senior analyst at Friends of the Earth

GDF Suez said “a great effort is being undertaken to understand and to preserve biodiversity.” The company said it is deciding which projects will benefit from a €2.5 billion ($2.66 billion) green bond it sold last year and will disclose its decision in the coming weeks.

Mr. Adelman, driving around the Salem State campus, pointed out cars parked on nearby side streets with university parking stickers. He said the new garage isn’t encouraging people to drive more but is serving existing students who must park off campus. “Nobody objects to building a parking garage,” said Mr. Adelman, who drives a hybrid car himself. “The reason it’s questioned is because of the discussion about the green bond.”

 

Source: Wall Street Journal

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Miami River Spilling Over With New Development

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Edge, Sushi Samba, River Oyster Bar and Fox Hole Marketplace and Deli —  are just some of the planned new eateries banking on the Miami River.

 New restaurants, retail and increased public access along the Miami River were among the highlights of a development boat tour of the five-mile-long waterfront district on Thursday.

Renderings of River Landing Project

Renderings of River Landing Project

Developers and real estate professionals toured the river as part of an Urban Land Institute and NAIOP partnership. Brett Bibeau, managing director of the Miami River Commission, said that popular restaurants Seaspice (formerly Sea Salt and Pepper), Garcia’s Seafood and Casablanca have brought business to the area.

Among the restaurants awaiting permits or under construction are Sushi Samba, at 40 Southwest North River Drive; Edge at 39 to 55 Southwest Miami Avenue Road; a new location for the River Oyster Bar at 350 Flagler Street, and Fox Hole Marketplace and Deli at Latitude on the River, 615 Southwest Second Avenue.

River Landing rendering and Andrew Hellinger

River Landing rendering and Andrew Hellinger

The Miami River has increasingly drawn interest from developers who are embracing the river lifestyle. “It’s a place that people don’t have to see as up and coming. It exists,” said Andy Hellinger, developer of the River Landing project, a massive nine-acre development that will include apartments, retail and a linear park along the riverwalk.

River Landing’s retail component will include a five-story vertical shopping center, with a different theme for each floor. Among them: restaurants and supermarkets, sporting goods and entertainment. Two acres of the project are dedicated to parks and pathways. Hellinger compared the linear park, with a 50-foot setback, to the Highline in New York.

River Landing recently applied for a seawall permit, and digging for the foundation will be complete in a few weeks, Hellinger told The Real Deal.

Cleaning up the water and building the riverwalk are both key to the area’s success. Bibeau said his organization, the Miami River Commission, sends clean-up crews to pick up trash, pressure clean and paint over graffiti. “If the riverwalk is not maintained,” Bibeau said, “it will not live up to its potential.”

 

Source: The Real Deal

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Top 8 Predictions For Green CRE In 2015

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Several green building trends emerged over the past 12 months that will impact commercial real estate in the United States in 2015, according to Doug Lawrence, founder and managing principal of 5 Stone Green Capital—Bainbridge, an institutional real estate company.

Lawrence serves on the investment and natural resources committees of the University of Connecticut Foundation and the advisory board of Rutgers Business School.

Here’s what he foresees for emerging trends in green real estate in the year ahead.

1. Aging baby boomers and Gen X, Y and Z will continue to move to cities, requiring more affordable housing—and expecting it to be green.

CREPredictionNo1U.S. cities are growing faster than the suburbs. Baby boomers will need urban housing that supports their health and community needs, but so will the younger generations flocking to live in urban environments. As a policy matter, this means cities will be pressured to create housing that serves a wider range of income and age demographics. Affordable housing is likely to be the target of municipal agendas throughout the country.

Green multifamily really wins within this demand picture. The ability to reduce overall operating expenses through green technology, therefore also reducing occupancy costs for tenants, should improve residential affordability. Green multifamily properties featuring optimal health designs will become increasingly attractive. These would include better air filtration systems to reduce dust, pollen and airborne pathogens that may trigger asthma; more daylighting to improve natural vitamin D production; and antibacterial countertops and doorknobs.

Expect multifamily vacancy rates to continue to fall for affordable and seniors housing sub-sectors. Absorption rates will remain solid for new multifamily construction. The 18-to-34-year-olds seem psychologically predisposed to green housing and, thanks to tight lending standards and high student loan debt, this group will not be seeking single-family homes in the near future. Thus, multifamily demand looks pretty good for 2015, and green multifamily will be the likely winner with the younger generations.

2. The anti-climate-change voices will yell even louder.

CREPredictionNo2Some naysayers will stop arguing that there is no increase in carbon dioxide (CO2) in our atmosphere. Instead, they will argue that increasing CO2 is good for the global economy because CO2 is necessary to increase agriculture. Under this theory, more CO2 in the atmosphere would mean a golden age for crop production. Green real estate investors will continue to reduce their carbon footprint under the belief that doing so increases profitability and is good for the environment as well.

3. Renewable technology, particularly solar, will continue to fall in price and improve in efficiency.

CREPredictionNo3Solar panels that can convert up to 70 percent of the sun’s light spectrum into electricity (from gamma rays to X-rays) are already in beta testing. This could be a game-changer for real estate owners, especially in the multifamily and industrial sectors, as well as for those with properties in dense urban environments in high-cost electricity states.

The cost of solar energy could fall below that of fossil fuel-generated electricity per kilowatt hour, even with the drop in oil and/or gas prices. As technology improves, real estate managers will explore new ways to provide energy to tenants and users at more efficient prices.

4. Urban resiliency and climate change will become topics for deeper discussion among policy-makers.

CREPredictionNo4Following rising average sea levels in a wide range of American cities—from Los Angeles to Galveston, Texas to New York and Boston—and more frequent and more damaging storms, cities are becoming very focused on hardening essential infrastructure.

The real estate industry may see new building codes that emphasize sustainability, as well as resiliency.

5. Utilities companies and smart developers will form partnerships for distributed generation.

CREPredictionNo5It’s getting harder and harder to build new power plants, yet we have more people for whom to provide electricity; meanwhile, business demand for electricity is increasing as the economy strengthens. U.S. power plants are not only aged, but also use incredibly large amounts of fresh water for cooling. Moreover, some experts predict that as much as 10 percent of coal-fired electricity-generating plants in the United States may be shut down over the next few years. More demand, coupled with fewer production resources, may spur real estate owners and power companies into an alliance.

The concept of distributed generation, wherein solar-powered rooftops are used to create renewable energy that feeds the grid, will become more attractive. In this way, the utility company will gain a production source to feed growing demand without having to go through nightmarish public hearings to obtain the production increase. Meanwhile, the real estate owner may see a new revenue stream, or at least a reduction in energy consumption. All in all, partnerships between developers and utility companies may reduce overall operating expenses for garages, public areas, elevators and other electrical hot points.

6. The sharing economy will continue to grow.

CREPredictionNo6Sharing economy enterprises are thriving, particularly in urban markets. Think office sharing, or even Airbnb.com. These phenomena are no longer fads, and they are changing how we think about office space, hoteling and more.

Many experts assume that the more we share, the less stress we will have on the environment, but it may still be too early to tell whether that’s true.

7. Food production will become more urban and commercial buildings’ rooftops will increase in value.

CREPredictionNo7It’s becoming less profitable to truck a tomato from California to New York and, due to the increasing demand for locally-grown produce, the term “farm-to-table” has become embedded in our vocabulary. The demand for food that is grown without pesticides, fungicides or other chemicals is increasing. We already see grocers like Whole Foods establishing hydroponic farms on their rooftops. Such production reduces transportation costs and improves produce freshness and variety. Other grocers, including Safeway, have gone green by deploying solar arrays and other renewable energy technologies on their stores’ rooftops in order to reduce peak-demand electricity charges. Large rooftops will therefore continue to find new value as non-traditional tenants begin to use them in new ways.

8. Mortgage finance and insurance organizations will consider green standards.

CREPredictionNo8As the government-sponsored entities Freddie Mac and Fannie Mae continue reviewing and improving their standards for green buildings, other mainstream lenders and insurance companies will catch up with the trend. Insurance companies will see green buildings as a way to reduce risk. Lenders will potentially see lower volatility in net operating cash flows. As the capital markets go green, so will more building owners and investors.

The Dow Jones Sustainability Index is proving that green business outperforms the non-green Dow Jones Industrials Index. Green building will mimic that outperformance and, as a result, gain momentum in 2015.

 

Source: NREI

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Downtown Miami Sees Blockbuster Land Sales

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Just how hot is Downtown Miami’s condo market?

New stats are rolling in that make investors smile and developers move perhaps even more quickly. For starters, Downtown Miami’s condo market has posted two straight years of price appreciation. At the same time, land values are escalating and developer yields are compressing. Overall, land transaction volume is increasing. All this is according to a new study the Miami Downtown Development Authority (DDA) commissioned.

“The demand drivers of an urban lifestyle continue to provide motivation for suburban or Miami Beach residents to reconsider the Downtown Miami area,” says Anthony M. Graziano, senior managing director for Integra Realty Resources in Miami. “As the large-scale projects continue to progress, along with the development of a more transit-oriented metro area, Downtown Miami will benefit from increased downtown housing options.”

Turning to rentals in the urban core, prices are rising. That, in turn, is supporting more end-unit pricing increases and an overarching demand for new multifamily projects. Specifically, rents in Downtown Miami are appreciating by over 5% each year and are on track to experience annualized increases of 8% in 2014.

With such strong demand, new rental construction is moving ahead at a rapid clip. Developers currently building 2,301 multifamily units in five downtown projects. Another 2,742 units are in the planning phase of development to meet the demand, including strong demand from Millenials, who are moving to Downtown Miami in droves.

The third quarter saw some of the biggest blockbuster land sales in history, including the Epic Marina Site in the CBD that sold for $125 million, representing $2,296 per square foot. Ten land sites have either recently sold or are being marketed for sale through July 2014. In addition, there are three additional land transactions all upward of $50 million expected to close by the fourth quarter 2014.

“In 2008 many condos were sitting empty and pundits predicted they would remain dark for years to come,” says Alyce Robertson, executive director of the Miami DDA. “Local job growth, combined with foreign buyers and investors from Europe, South America and Asia have acquired most of the inventory and prices are again increasing even as dozens of new projects are in the works. Downtown Miami is witnessing a metamorphosis and evolving into a true 24/7 city as restaurants and retailers come online in the urban core.”

 

Source: GlobeSt.

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Art Basel Adds To The Skyline — And The Bottom Line

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Since its launch in Miami in 2002, Art Basel has been attracting people from all over the world who appreciate innovation and creativity.

Today, satellite events have spread to Wynwood, Midtown, downtown, Mid-Beach and North Beach, and last year about 75,000 people attended the main fair. The first Basel fair featured 160 galleries from 23 countries, attracted 30,000 visitors and has grown and grown and grown — much like our skyline and real-estate industry. The growth and popularity of the event have bolstered the tourism industry and made us one of the fastest emerging cultural epicenters of the world.

For one week in December, all eyes started looking to Miami, including those of some of the world’s greatest architects and developers. Today, they are creating a skyline that is second to none, while Basel brings buyers appreciative of artistic creations. The burgeoning love affair between Miami and art can be evidenced by two recently announced museums: the Institute of Contemporary Art, Miami, the brainchild of Norman and Irma Braman, and the Latin American Art Museum by Gary Nader. Miami was largely a blank canvas in 2002, and so many have seized the opportunity to fill the space with remarkable buildings that are works of art themselves.

In downtown Miami, Zaha Hadid paired with developers Louis Birdman and Gregg Covin for the grandiose 1000 Museum. What was once the famous Bal Harbour Club will become the spectacular, all-new Oceana Bal Harbour, thanks to Italian architect and interior designer Piero Lissoni and developer Consultatio USA. And then there is Herzog & de Meuron, Richard Meier, Norman Foster and Rem Koolhaas, among the many other great names, with others soon to be announced.

Art Basel is certainly a time for businesses to shine. It provides an instant injection of funds into the economy, and the effects of the fair linger long after it leaves town. This is certainly the case for the real-estate industry, which has benefitted greatly from the influx of discerning art lovers. Amid the week of amazing art and all the accompanying events, the glitterati look up and see Miami as a wonderful place to purchase property. And they have many to choose from, for a relatively affordable budget. All are designed by local and international architectural greats who provide a perfect place to display a new piece or two.

Daniel De La Vega, President of One Sotheby's International Realty

Daniel De La Vega, President of One Sotheby’s International Realty

The past week has seen traffic gridlock, long lines and a shortage of restaurant reservations. But as an enthusiastic collector of Latin American art and a member of the Photography Committee at the Solomon R. Guggenheim Museum, Daniel De La Vega, President of One Sotheby’s International Realty, will be sad to see the sun set on the event so soon. Art Basel will continue to play an important role in the growth of South Florida’s real-estate industry and the development of greater Miami as a whole. As a native Miamian, Mr. De La Vega is grateful for how this fair has moved the city forward in so many ways. As the tents come down and the works are carefully packed away, Miamians can still admire innovative and creative pieces all year-round.

All you have to do is look up to the skyline and thank the increased business to the bottom lines.

 

Source: Miami Herald

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Investors Assess Development Potential Around Proposed Passenger Rail Stations

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As traffic congestion worsens in South Florida, a plan to restore passenger service to the Florida East Coast Railway corridor that dates back to industrialist Henry Flagler’s first train service to Miami in 1896 is generating a buzz in the local real estate development community.

Opportunity-minded investors are closely monitoring a two-tiered process that could ultimately result in regular daily train service from Miami to Orlando with multiple stops in between in various downtowns in Miami-Dade, Broward and Palm Beach counties. To accommodate the proposed new passenger commuter service, plans call for the creation of nearly 30 train stations to be built east of Interstate 95 along the South Florida coast.

The creation of train stations for the planned passenger service is expected to trigger a wide array of indirect investment in the surrounding areas to develop everything from residential towers to retail centers, hotels to office buildings. Under a pair of separate but interconnected plans, All Aboard Florida — an entity that is privately controlled by the owner of the Florida East Coast tracks — wants to launch a high-speed passenger rail service from downtown Miami to Orlando with stops in the downtowns of Fort Lauderdale and West Palm Beach. This service is scheduled to begin by 2016.

Just this month, All Aboard Florida issued $405 million of debt to help finance the creation of the high-speed rail service that is expected to cost at least $2 billion. Complementing the All Aboard Florida private-sector initiative, the South Florida Regional Transportation Authority — a public entity that oversees the Tri-Rail passenger service on tracks west of Interstate 95 — plans to introduce a new commuter line that is to travel on the Florida East Coast line on the east side of Interstate 95 with stops in various downtowns from Miami to West Palm Beach.

Under the Tri-Rail plan, Miami-Dade County would have eight stations stretching from Aventura to the Miami Design District to a newly proposed Grand Central Station to be built in downtown Miami. Plans call for the east of Interstate 95 commuter service — dubbed the TriRail Coastal Link — to be “implemented” within seven years for a launch in or before the year 2020, according to the organization’s website.

Ironically, the same train tracks that have historically meant lower prices and constant complaints about noise and traffic delays from nearby residents are expected to trigger a wave of new residential developments for individuals seeking easy access to planned passenger rail service.

Anyone who has ever relied on public transportation knows that train service is much more predictable than that of buses. Many commuters in cities around the world generally attempt to live and work close to train stations to improve the efficiency of using public transportation. As a result of this phenomenon, the introduction of passenger rail service in Miami-Dade County has the potential to stimulate real estate development in areas that are far removed from the water.

It is not surprising that developers who focus on the South Florida mainland have typically tried to build condo towers on sites that front Biscayne Bay or the Intracoastal Waterway. If waterfront land is not available at acceptable prices, the next best alternatives are usually development sites in popular neighborhoods such as Midtown Miami or on iconic streets such as Brickell Avenue.

Generally, the interest level in land near the railroad tracks — which are west of Biscayne Boulevard and east of Interstate 95 — is not the first choice for developers or buyers in South Florida, especially in Miami-Dade County. For example, fewer than 385 condos between west of Biscayne Boulevard and east of Interstate 95 from Flagler Street in downtown Miami north to Aventura were sold, at an average price of about $187 per square foot, between January and May of this year, according to the Southeast Florida MLXchange. By comparison, nearly 1,025 condo units east of Biscayne Boulevard from Flagler Street in downtown Miami north to Aventura were sold, at an average price of $250 per square foot, during the first five months of the year.

Some quick arithmetic suggests condo units east of Biscayne Boulevard traded at an average premium of 34 percent over the units on the west side of the street, according to the data. As for the supply of available condos, about 800 units are currently on the resale market west of Biscayne Boulevard from downtown Miami to Aventura.

Based on the 2014 sales pace of about 77 transactions monthly, there is more than 10 months of available inventory on the market west of Biscayne Boulevard, according to the data. The condo market east of Biscayne Boulevard from downtown Miami to Aventura has nearly 1,800 units available for resale. Despite having more units up for resale than the area west of Biscayne Boulevard, the condo market east of Biscayne Boulevard has less than nine months of supply available, according to the data.

For the rental market, there is less of a difference between east and west of Biscayne Boulevard in Miami-Dade County from downtown Miami north to Aventura when it comes to price and transactions. Tenants leased more than 1,025 residential properties west of Biscayne Boulevard at an average price of $1.63 per square foot monthly between January and May of this year, according to the data.

For the same five-month period, tenants leased nearly 1,200 residential properties east of Biscayne Boulevard at an average price of nearly $1.62 per square foot month. Currently, about two months of rental-property supply are available for lease west and east of Biscayne Boulevard, according to the data.

Given the market trends, developers could become more open to the idea of building residential towers in the area located west of Biscayne Boulevard and east of Interstate 95 especially since land costs are generally cheaper and rents are comparable to those rates being achieved on the east side of Biscayne Boulevard.

The unanswered question going forward is whether developers and residents will ultimately embrace a lifestyle in South Florida that revolves more around public transportation than the current dependence on cars. If this were to happen as the government planners are hoping, the future of real estate development in Miami-Dade County could increasingly focus on the land west of Biscayne Boulevard in the coming years.

 

Source: Miami Herald

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