Remember the “good old days” when condos were sprouting up like daisies in Florida and developers and investors “couldn’t go wrong” with a nice, shiny new residential building located near a beach or tourist destination? Well, if you have forgotten those days and you live in Florida, just look out your window. The blighted remnants of the condo boom that started in 2003 are still moldering in your backyard. According to Miami real estate consultant Peter Zalewski, principal of Condo Vultures, more than 1,200 condos erected during the previous real estate boom remain unsold in Florida at this time[1]. “The unanswered question going forward,” he said, “is whether developers with unsold condos from the previous boom will still be able to achieve premium prices for their older new units now that another cycle is underway.”
The highest concentration of unsold Florida units resides in South Beach, Florida, where about nine percent of all condos built during the last cycle remain unsold. Greater Downtown Miami also has a heavy concentration, with about 290 of 22,200 units built in the previous unit remaining in developer hands. Third on the list is Boca Raton-Deerfield Beach, where 24 percent of the condos built during the boom remain unsold (about 250). Interestingly, this is not slowing developers down much in these areas. More than 3,200 new units are presently slated for development in South Florida at this time, and analysts predict that in many areas, analysts are predicting these new units could go for nearly $500 a square foot.
Interestingly, foreign developers are also hoping to get in on the new condo action down in Florida. According to Canadian developers, now is the time to invest in Florida real estate that could be used for condos in the future because, as one developer put it, “We are probably a good two years away before we are at a normalized U.S. housing market and so it is actually a good time to go and buy in the U.S.” He added that he expects to “hit a sweet spot with retirees and second-home buyers” when he starts building condos in the area[2]. That particular developer’s company recently purchased 9,600 acres in Florida.
Do you think that the Florida condo market can recover and thrive even though there are still many condos from the previous boom still floating around unsold?
Source: The Brian Ellis Investing Letter
