Writer: Max Crampton-Thomas
2 min read May 2021 — Miami’s commercial real estate landscape is bustling with activity, but it also serves as a cautionary tale for preventing another period of oversupply while addressing the pressing issues of public transportation and affordable housing. Edgardo Defortuna, president and CEO of Fortune International Group, takes the pulse of the Magic City’s real estate market.
How would you characterize the high-end luxury real estate market?
The most significant activity to date has been on the waterfront, with single-family homes. In some cases, you have three or four offers for a single house. The strong demand for this asset class has spilled over to the waterfront’s luxury condominium market. Buyers are looking for finished products with great service that provide a great lifestyle and offer great amenities. Before the pandemic, it was difficult to sell the larger units like the penthouses. These were slower to sell than the typical smaller units. Now, the reverse is true. People are looking to live in these properties so they need more space because they either are working from home, have kids who are learning online, or both. The definition of home changed with the pandemic.
Beyond the location, the amenities and different ambiances available have become a key demand component on the development side. We need to pay a lot more attention to those types of things. They are key factors that allow people to live comfortably, especially in high rises. You need to compete with single-family homes and the services and amenities need to be outstanding to attract the prospective client.
What are your plans regarding ongoing and future development opportunities?
We are highly active with pursuing new projects and starting the projects that we have in the pipeline. At the beginning of 2020, we purchased a site in Pompano Beach for two towers that we are going to be launching by 3Q21. We also have a large site on Sunny Isles for another two towers that we are accelerating to be ready to launch before the end of 2021. We are analyzing potential opportunities in the Business District and in Brickell. Most developers slowed down pre-pandemic because supply was outpacing demand. The reality is that from 2021 to 2024, there is not going to be that many units delivered to the market. We anticipate a significant undersupply of new units in the market for the next three to four years. COVID-19-triggered big demand, which combined with the lack of supply, generated tremendous momentum for the Miami market. Additionally, high-net-worth individuals in Latin America are seriously considering either moving here or spending significantly more time here.
What long-term changes or consequences are you seeing emerge out of the pandemic?
We are addressing the hygiene and cleaning issues related to common areas, elevators and public spaces to unlock the ability for people to feel comfortable and safe. We’re also increasing the level of amenities, with more spaces and larger gyms, so people can feel safer using them. We’re even creating food services within the building so residents don’t have to go out or order out; they’ll have the choice to eat in the convenience of their building or to take their food up to their own residences. Those are but a few subtle changes to some extent, but no less critical, that are here to stay. We will also continue to invest in technology as it is a huge component of connectivity, which needs to be strengthened to accommodate the needs of widely adopted remote work and online learning. We anticipate the need for bandwidth and connectivity will continue to grow going forward. Developing touchless applications and hardware will also be important.
What are some challenges that are unique to doing business in Miami?
A city that grows exponentially can be a source of concern, creating urgency in terms of addressing public transportation. Traffic in Miami is a serious issue. It has gotten significantly worse, like in any big city. Unfortunately, the system of public transportation has been lacking for a while. The same consideration has to be made for workforce, middle- and low-income housing. The difficulty around developing affordable housing is finding enough developers to work in that sector. Margins are much better within the high-end market, and land scarcity parallel with high demand further complicates the issue. The local government is working hard and providing incentives and creating areas in which the numbers work. We want to avoid large companies relocating here and facing a lack of affordable housing for their employees. If the issue is left unattended, we’re not going to be able to attract that type of workforce.
What is your outlook for Miami’s real estate sector toward 2022?
We are highly bullish on Miami. The only thing that I would caution is to continue monitoring the market because while it is inherently great, we do not want an oversupplied market again, because unfortunately in Miami, we all think that our project is the only one and the best, oftentimes launching them at the same time, sometimes without the consideration of what else is going on out there. We do not want to stop the momentum by flooding the market with product again. We need to be continuously careful about it and avoid launching projects because the market is good. Rather, we should be setting them in place because they make sense in the overall context of the location.
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