💵 Cash Me if You Can

Few mortgages for Florida homebuyers; and a mall brawl near Miami

Happy Friday Highest & Best!

Today we paint with numbers, looking at South Florida’s real estate vibes through prisms of data:

🏠 Homebuyers are paying cash in over 50% of purchases

📈 Miami’s office rents are… climbing. By a lot.

🤼‍♂️ Plus: A mall brawl in Bal Harbour

Let’s get to it!

Dear Florida Homebuyer: Bring Cash

More than half of homes in Boca and Fort Lauderdale were bought with cash

Here’s some advice for home shoppers in Florida: bring your checkbook. Or several buckets to the ATM.

More than half of all home purchases in South Florida’s largest cities and towns were completed in cash during the fourth quarter of 2023, according to data released this month by appraiser Miller Samuel Inc.

Put another way: mortgages were the minority.

💰 In Delray Beach, 68% of all home and condo sales in the quarter were paid for with cash, the highest share since 2016, according to Miller Samuel.

💰 In tony Palm Beach — where the median price of a home was $8.75 million the share of cash deals set a record, at 96% of all transactions.

💰 In Fort Lauderdale, 51% of property buyers didn’t use a mortgage.

💰 In Boca Raton, cash buyers accounted for 60% of all residential sales. This comes as the median price of a single-family home there jumped 20% from last year —to a record-setting $920,000.

💰 Compare these rates to the U.S. overall, where about 34% of buyers paid cash, according to a November study by brokerage Redfin.

It’s not too surprising that home shoppers who need financing would sit things out in the final months of 2023, after mortgage rates reached 8% in October. There aren’t many price discounts to be had in the Florida market so long as the inventory of homes for sale remains tight and demand to buy is still coming in from well-heeled newcomers to the state.

“It’s daunting to somebody who sees this,” said Jonathan Miller, president of Miller Samuel. “You have to pay cash to get into this market —and what if you don’t have the cash?” he said.

Ah, but here’s the silver lining around these cash-only clouds:

The share of cash buyers — which has hovered above 50% in many south Florida locales for the past two years — has likely peaked, Miller said. With interest rates forecast to come down this year, it’s reasonable to expect that mortgage buyers will re-enter the market, especially if lower rates spur more sellers to list their homes for sale.

“We’re in the middle of a pivot,” Miller said. “This is the end of the hyperbolic era of rate increases.”

Below is chart showing the share of fourth quarter cash sales in several South Florida locations:

Source: Miller Samuel Inc.

Postcard from the Nation’s Bizarro Office Market:

A terrace at 848 Brickell (Photo: Sterling Bay)

It’s January 2024, and office vacancies in the U.S. are at an all-time high of 19.6%. Companies are scaling back their workspaces and owners of large urban office towers are seeing rents fall and the value of their properties plummet.

But not in Miami. The city —where financial firms hunt for premium office space and developers are planning to build even more— still feels like a funhouse mirror, reflecting a world of stability in stark contrast to the harsh commercial real estate realities everywhere else:

🏢 Office rents in Miami-Dade County jumped 6.3% in the fourth quarter of 2023 from the same period a year ago, pushed up by “persistent” demand from tenants to lease space, according to a report by brokerage Colliers.

🏢 Miami’s office market “continues to defy the narrative” with a vacancy rate of 9.5% and 3.2 million square feet of new office space under construction, Colliers said.

🏢 Sterling Bay, a Chicago developer, announced this week that it will partner with Key International to co-develop a 51-story office tower in Miami’s financial district. The planned tower, called 848 Brickell, will have 750,000 square feet of office space and include amenities like outdoor terraces, padel courts and a “luxury fitness center,” the firm said.

“Miami is the nation’s new epicenter for commercial growth,” Andy Gloor, Sterling Bay’s CEO, said in a company statement. Brickell, its financial district, is “the hottest submarket in the country right now for commercial office development,” he added, for extra superlative.

🏢 Empira Group, a real estate development firm based in Switzerland, opened a new 10,000-square-foot office in Miami last month that will serve as the company’s U.S. headquarters. The office, on the 46th floor of the Southeast Financial Center, can accommodate 50 employees, which will help the company’s plans to grow from its current 15 in the U.S, according to Rafael Aregger, Empira’s head of U.S. investments.

The search for the right office space—in a Class-A building, with premium views, in a central location — took about nine months, longer than expected, Aregger said.

“It’s actually not an easy task,” he said. “There’s not a lot of office space available.”

As a developer, Empira has plans to break ground this year on two rental apartment towers in Miami, including a 310-unit building in the Brickell neighborhood. That area, he contends, does not have enough rental housing to accommodate the influx of employees moving in and seeking to live near work.

“All the office development is indicative of a tremendous amount of economic growth,” he said. “We feel really good about the demand profile of the Miami market.”

Boardroom at Empira Group’s new U.S. headquarters in Miami (Photo: Empira Group)

Tall Tower Tussles II: The Mall Brawl

In last week’s newsletter we chronicled the loathing that Florida’s municipal officials have for the state’s new affordable housing law.

The law, known as the Live Local Act, was supposed to incentivize construction of rental housing that middle-income Floridians can afford—at a time when home prices and rents are soaring.

This week, it incentivized a lawsuit.

A luxury mall owner is suing the village of Bal Harbour for refusing to consider — and possibly derail — plans for a hotel and 528-unit apartment building that would include affordable units.

The plan, by Bal Harbour Shops, seeks to build towers five times higher than what local zoning rules would permit. And that’s allowable under the Live Local Act, so long as 40% of the proposed units are priced at below-market rents.

Bal Harbour officials and residents don’t seem to like the plan. At a public and very angry meeting this month, village leaders discussed a moratorium on all new construction as a way of arresting the mall owner’s development.

“The clear message from that meeting was to do everything humanly possible to stop our application,” said John Shubin, the lawyer representing the developer, Bal Harbour Shops.

The mall owner’s lawsuit seeks to compel the village to consider its plan, and evaluate its compliance with state law— regardless of whether village officials like it.

This is the first time that a developer has asked a court to enforce the tenets of the Live Local Act over local objections, Shubin said.

“This is really the only property eligible for the Live Local Act in Bal Harbour,” Shubin said in an interview. “So if not this property, what Bal Harbour has done is opt out of what is effectively a legislative mandate. Which is what they are trying to do.”

That’s it for today!

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