🏝 Lux, Loss and Leasing

Insurance woes, a pricey waterfront, and a sorta office slowdown

Happy Saturday Highest & Best! We’re hitting some pretty big South Florida themes this week. Here’s the playlist:

🚨 Florida’s home insurance crisis

💎 Puttin’ on the Ritz in West Palm Beach

🤔 Miami’s office market — slowing AND surging?

Miami’s a mining town

Mortgage Rates? Meh. Home Insurance is the Problem

AI illustration by Highest & Best

Home insurance costs are rising everywhere, but they remain the highest in Florida, where the average annual rate was $10,996 last year. And they’re going higher!

Homeowners in the state could see insurance costs rise by another 7% in 2024 to an average of $11,759, according to rate tracker Insurify.

And that could push Florida homeownership even further out of reach for those already burdened with ever-rising prices and U.S. mortgage rates that topped 7% this week.

A pair of recent reports highlights the state’s insurance crisis and its potential impacts on the housing market:

😯 70% of Florida homeowners said their insurance costs rose or their coverage changed in the past year, according to a survey commissioned by brokerage Redfin. (Nationally, only 45% of homeowners reported the same).

😲 Of the Floridians who reported a change in their insurance, 12% described that “change” as being dropped by their insurer. Another 28% said they fear their insurer will drop them.

😳 Of Floridians who said they planned to move in the next year, 12% cited high insurance costs as a reason, Redfin said.

😳 The majority of small home insurers operating in Florida are “low quality” companies that are financially shaky or at greater risk of going out of business, according to a report this week by the Tampa Bay Times.

The newspaper cited a draft report by researchers from Harvard, Columbia and the Federal Reserve Board which found that Florida’s insurance market is dominated by new firms that emerged after national carriers pulled out of the hurricane-prone state.

😳 The “vast majority” of these new insurers would not meet federal standards required of carriers who cover homes with mortgages —loans that are later bought by U.S. housing finance agencies Fannie Mae and Freddie Mac.

Below is a chart from Redfin’s insurance survey:

Catch up on recent Highest & Best issues:

Behold! An Ultra-Lux Patch of Sand in West Palm Beach

Future site of South Flagler House, West Palm Beach (Photo: Oshrat Carmiel)

The Mayor of West Palm Beach and Related Cos. — the city’s largest commercial property owner— gathered this week to celebrate this 3.4 acre, scenic sand patch along the Intracoastal Waterway ⬆️ ⬆️

🎉 Well, the celebration was more about what will eventually be built there: a pair of ultra-luxury condo towers, where the starting price for buyers is $5.9 million.

💵 The 108-unit South Flagler House is Related’s first luxury condo in Florida. It’s designed by Manhattan’s architect to the billionaires, Robert A.M. Stern, and will seek the same stratospheric Manhattan prices, in a nod to the wealth that’s migrated to the West Palm Beach region since the pandemic.

💵 The uppermost price point for a unit at South Flagler House, if you’re asking, is $72.5 million.

Rendering of South Flagler House (Photo: Related Cos)

West Palm Beach Mayor Keith James with Related’s Stephen Ross (LILA PHOTO)

New York-based Related has had a nearly three-decade presence in West Palm Beach, betting through its office investments and the construction of a retail and restaurant district, that the area would be a magnet for well-heeled newcomers and high-paying jobs.

“We saw this 28 years ago, but unfortunately we had to wait a long time,” Related chairman and founder Stephen Ross said at the condo’s groundbreaking ceremony this week.

Related’s condo push suggests the wait is over. And so does tax data:

Newcomers to Palm Beach County between 2020 and 2021 brought an additional $7.03 billion in taxable income — more than any other place in the U.S., according to the Economic Innovation Group.

“I really believe this is the best place in the United States,” Ross said of West Palm Beach.

Related Cos. Chairman and Founder Stephen M. Ross (Photo: Oshrat Carmiel)

Miami’s Office ‘Slowdown’ is Every City’s Fantasy

Demand for prime office space in Miami is slowing down — in the kind of way that would make other cities jealous.

Out-of-town firms aren’t seeking offices in Miami like they used to, so the volume of leasing declined in the first three months of this year as compared to a year ago, according to a report by brokerage CBRE.

Still, more space was leased than vacated in Miami— about 79,000 square feet more. But much of it was claimed by tenants already in the city, rather than headline-grabbing newcomers from New York or Chicago.

And that’s the extent of the slowdown (for now). Which kind of pales against the report’s other findings:

📈 Office rents jumped by at least 5% in every commercial neighborhood in Miami-Dade County.

📈 Asking rents for premium offices in Miami’s financial district, Brickell, surged 12% from a year ago to $100.56 per square foot.

📉 There’s still less available Miami office space now than there was before the pandemic.

💸 Out-of-state companies are expected to resume their Miami office hunting as newer and fancier office towers become available in the coming year, according to CBRE.

🦁 In other workspace news: developer Black Lion bought a Miami Beach office building for $62.5 million. (The sale price was a loss for the seller, who paid over $109 million in 2016).

Black Lion plans to spend $50 million to enhance the office with hotel-like vibes, adding a spa, a meditation room and a Japanese restaurant to break up the future work day. The developer calls this “Class X” office real estate.

A new luxury “Class X” office imagined for Miami Beach (Photo: Black Lion)

Mining in Miami

I never thought of Miami as a mining town.

So when a firm called Florida Rock Industries makes a huge land purchase, I’m thinking ROCK! 🎸 and not, you know, rocks 🪨.

But no.

Jacksonville-based Florida Rock bought a 590-acre mining site in Miami-Dade County last week for $98.1 million, according to property intel firm Vizzda.

The site, west of the Florida turnpike in an area where no development is allowed, is apparently a mining location for materials used to make concrete. Couldn’t ask for a more fitting quarry to have near development-crazed Miami.

And the sale price reflects that. That $98.1 million is more than five times what the seller paid to acquire the property back in 2004, according to records.

Rock on.

That’s it for today!

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