IT MAY BE EARLY IN SOUTH FLORIDA’S NEWEST CONDO BOOM, BUT THE MODESTLY POPULATED BARRIER ISLAND CITY OF SUNNY ISLES BEACH IN NORTHEAST MIAMI-DADE COUNTY IS EMERGING AS THE EPICENTER OF THE REGION’S NEXT VERTICAL REAL ESTATE CYCLE.
Developers are proceeding with at least six condo towers — nearly 15 percent of the more than 45 towers proposed for the tricounty South Florida region through July 2012 — with at least 530 luxury units to be constructed in a community that stretches less than 40 blocks along Collins Avenue.
The potential growth in new condo towers does not stop there for the Sunny Isles Beach market.
The number of proposed new condo towers in Sunny Isles Beach is expected to increase in the upcoming months as developers have recently purchased an additional four condo sites that were previously approved for residential towers with more than 580 units. Additionally, an investment group has recently purchased the loan for a partially completed condo tower that is approved for 134 condo units and 140 hotel rooms, according to city of Sunny Isles Beach records.
Developers are swarming Sunny Isles Beach — a city created only 15 years ago on a stretch of beach that was dominated by theme-oriented boutique hotels built in the 1950s — for oceanfront sites to tap into the ferocious demand for luxury South Florida condo units by international buyers with strong foreign currencies.
To date, only one condo tower is actively under construction in Sunny Isles Beach: the 43-story Regalia project that features 39 units on the northern edge of the city overlooking the wealthy single-family house community of Golden Beach.
Several other projects, including the Chateau Beach and the Mansions at Acqualina, have — or are close to opening — sales centers to generate the preconstruction contracts that will be essential to launch construction.
Unlike the last South Florida condo boom, lenders are not yet willing to finance condo construction projects, thereby forcing developers to build using their own money combined with payments from contracted buyers.
This new reality is considered by some to be a practical way of ensuring that South Florida finally does not repeat the boom-and-bust cycle that has occurred in the region since its inception.
Developers are also taking steps to reduce their vulnerability to that cycle by requiring deposits of as much as 80 percent of the purchase price to be paid in increments based on construction milestones being achieved.
Additionally, developers in this newest condo tower wave have, for the most part, ditched the 300-plus unit projects targeted to the masses for boutique projects with low density and ultra-luxury amenities such as car elevators that go to units.
The new developer philosophy seems to be it is easier to sell 100 luxury condos to wealthy individuals who pay cash rather than peddling 300 units to middle-class buyers who are likely to need financing in a market where banks remain apprehensive.
If all goes as planned, the city of Sunny Isles Beach could see its total number of condos increase by more than 1,200 units with the latest boom.
In comparison, developers created more than 25 condo towers with more than 6,000 units in Sunny Isles Beach during the last real estate boom in South Florida that began in 2003.
More than 90 percent of those boom-era units have transacted as of the first quarter of 2012, according to research based on Miami-Dade Clerk of the Court records.
At the current sales pace, the remaining unsold developer condo units from the last South Florida boom-and-bust period would transact before these newly announced projects are scheduled to be completed.
The unknown factor is how the Sunny Isles Beach market for existing condos could change with this latest wave of proposed towers.
Currently, condo resales and rental in Sunny Isles Beach are experiencing mixed results.
In the first six months of the 2012, buyers have purchased nearly 500 condo units at a median price of about $280 per square foot.
This year’s condo resale activity is down about 13 percent in the total number of transactions compared to the same January through June period of 2011 when nearly 560 deals occurred.
On the pricing front, the 2012 median resale amount is up noticeably from $174-per-square-foot level realized a year ago in the first six months of 2011, according to an analysis based on Southeast Florida MLXchange.
At the current 2012 resales pace of about 81 units monthly, Sunny Isles Beach has more than six months of available condos inventory currently on the market.
For many condo buyers in Sunny Isles Beach, leasing out their units for a portion of the year is an effective way to manage the overall annual cost of the residences.
On the condo rental front in Sunny Isles Beach, the leasing activity has held constant in the first half of 2012 at more than 375 transactions completed, nearly matching the total for the first half of 2011, according to the data.
Rental rates, however, are on the rise in Sunny Isles Beach with the median monthly price increasing to more than $1.45 per square foot in 2012 compared to $1.30 per square foot in 2011.
Given the amount of activity, Sunny Isles Beach is sure to be a focal point for buyers, sellers, lenders, developers, and industry watchers who are trying to gauge South Florida’s newest condo boom.