Miami Real Estate 2023 – Key Factors Behind South Florida’s Market Stability

 
We have done it again, in a nation of real estate markets in upheaval, Miami remains sparkling and stable coming into 2023. Francis Suarez knows it, but he’s our mayor. It is his job to make sure that Miami continues to thrive. Knight Frank knows it, and it is their job to rank global markets. The rental market is even thriving despite low inventory and rising rents.

So what about Miami is making our market stand out among the rest? Just like the others, we have increasing interest rates, high inflation, supply chain problems and the added albatross that is our identity as a crypto-haven in paradise in a highly volatile crypto market. Here is our safety net, which keeps us at the top of the list.

Population Growth

The bottom line is that if given the choice, very few people would move to Miami in a heartbeat. We know that you are tired of reading about our amazing climate, the low taxes, diversity and accessibility, but these factors remain.

People continue to migrate to the sunshine state for work, the business-friendly climate and inventory remains low, something that is not going to change anytime soon. Reason being that while there are many new construction projects in the works and  under construction, they are not going to be delivered in 2023. The labor market is drained from having to rebuild after Hurricane Ian, delaying the active projects and increasing the labor demand.

Miami’s saving grace on the mortgage rate squeeze and stable pricing is the rental market, which offers a cushion for those who need to move to Miami but cannot get into a new home at this moment. New rental buildings that were launched in the late 2010’s are now coming to completion and many of the newcomers from the beginning of Miami’s post-COVID boom have now identified and moved into their more permanent homes.

According to Michael Taylor, president of construction firm Current Builders, “will still be a real estate hotspot” in 2023, with a sector that “has been booming since the pandemic” and “will not experience a slowdown” at the rate of other states.

“High demand continues, as does the influx of new residents” to the state of Florida, “the opposite of what is happening nationally,” Taylor said.

Available Land

This seems like a questionable reason for Miami’s stability coming into 2023, especially considering that the Florida Realtor Code of Ethics was founded by necessity back in 1913 because South Florida ran out of developable land and some unscrupulous businesspeople started selling swamp lots in the Everglades, but I digress… (that is a true story though).

Waterfront properties will always be in demand, but with beachfront and bayfront lots mostly built out at this point, developers have already begun to search farther north into Broward and Palm Beach Counties. New waterfront developments in Miami-Dade are still being announced and built, but are typically in the ultra-luxury bracket in 2023 since developers have the added takedown cost of buying out older buildings and demolishing them. This is an incredibly risky, expensive and time-consuming process, but pays off as the demand remains.

While takedown (the process of buying a build site) and demolition are more risky, time consuming and expensive processes, they are easier in 2023 than they were a decade ago. This is due to the increased cost and sanctions imposed upon owners of aging condos and especially the condo associations and management companies of these buildings after the Champlain Tower tragedy in 2020.

In order to turn an aging building to a build site, a developer must purchase at least 90% of the owners to sell. It used to be that a handful of owners would dig in their heels and refuse until the developer offered well over market value for the units, but after the Champlain Towers sanctions, many of these owners are having a difficult time being able to afford the necessary upkeep on the buildings, so are easier to convince that it is time to move on.

International Appeal

Miami has long been a magnet for people from around the world, and we speak about it often. Heck, nearly 60% of Miami’s residents were born in a country outside of the United States! (Another nugget from Mayor Suarez and something we will go into detail about later.)

After a brief hiatus due to COVID restrictions and lingering political tensions, the foreign national migration has resumed at an increased pace. Latin Americans remain the highest percentage of those migrating to Miami, but this time around we are also seeing an uptick of new residents from European and Middle-Eastern regions.

According to the Miami Association of Realtors, these are the top-10 countries searching for real estate in Miami during November of 2022:

1. Colombia 12.03%
2. China 10.47%
3. Venezuela 6.52%
4. Germany 5.76%
5. Argentina 5.40%
6. Philippines 5.02%
7. United Kingdom 4.51%
8. France 3.99%
9. Canada 3.42%
10. Mexico 3.37%
All other countries 39.51%

China is representing the country with the largest increase in rank, rising from #14 last year during this time and Colombia has reclaimed its crown after a contentious election threatens to drive the country into the despair that has plagued Venezuela for years.

Available Office Space

Lucky for us, many developers took a short break in the last decade from developing residential towers in order to fill in the gaps in the office market with some very impressive trophy office projects that are now available or coming available soon.

Vacancy rates on trophy office properties in South Florida will drop beneath 5%, predicts Tere Blanca, founder, chairman and CEO of Blanca Commercial Real Estate, Inc. That should trigger local rent growth to continue outpacing national rent growth.

After Ken Griffin’s Citadel packed up in Chicago and started setting up shop in Miami, launching a wave of corporate immigration, we have experienced a handful of newsworthy office transactions over recent months.

Just last week Kirkland and Ellis, a mammoth law firm, also announced that they are packing their briefcases and hightailing it for the Magic City, inking a mammoth lease for 115,000 square feet of office space (six floors) in 830 Brickell. This is Vlad Doronin’s new office tower that is currently under construction next to Brickell City Centre and just around the corner from the new Citadel offices. Is this a coincidence? Likely not.

While the news of struggling office markets plagues competing cities and many firms are reducing their office footprint (*cough cough, Meta, Amazon, and others*), Miami is constantly signing up new firms to work where others vacation. Bravo, Mayor Suarez!

So, when you are reading year-end reports and new year forecasts for the real estate markets and business world, please know that Miami is a soft place to land and we are here to help.

If you are interested in speaking more specifically about a neighborhood, project or listing, please contact Michael Light, Broker and Executive Director of Luxury Sales at Douglas Elliman. You may reach Michael directly at (786) 566-1700 or via email at michael@miamiluxuryhomes.com.