Manhattan's Condo Kings are Migrating South

To understand the transformation of South Florida over the past three years, it's worth looking through the lens of commercial real estate investment.

In 2021 and 2022, real estate firms poured $34.2 billion and $29.2 billion, respectively, into the three counties that make up the southeastern edge of the state. Those annual tallies are higher than any year of the previous decade, and they’re likely record-setting, according to data by MSCI Real Assets.

At the peak of this heightened investment, fourth quarter 2021, the dollar amount poured into South Florida commercial real estate was 259% greater than the average for a fourth quarter period between 2015 and 2019. The U.S. was seeing heightened investment too—but at a rate that was 130% greater than its fourth quarter average.

And when real estate developers everywhere pulled back last year, amid rising interest rates, tighter lending, and fears of a recession, South Florida was still surpassing its pre-pandemic investment norms by 45%, according to MSCI.

Developers with global portfolios have been settling into the region, building luxury condos, rental towers and--in a move that would be counterintuitive in U.S. metros with empty work spaces-–office buildings.

Many of these incoming investors have a unique pedigree: they helped drive a New York City construction boom of ultra-luxury condos over the past decade. Those builders of soaring Manhattan and Brooklyn towers, priced at evermore soaring figures, are now sensing similar opportunities (and client bases) in the Sunshine State.

“There are more players in our market now than ever before, which says a lot about South Florida,’’ said Alan Hooper, co-principal and co-founder of Fort Lauderdale development firm Urban Street Development, which is working with Hines to re-imagine an arts and cultural district in that city. “There’s a lot of developers and investors that are coming from outside the market, where before it was just locals working by ourselves.’’

So I spoke with a few of the big-name firms from elsewhere, who are planting a flag, expanding their reach, and testing the limits of the South Florida market.

Savanna
Project: Olara, West Palm Beach
Andrew Kurd, co-chief investment officer

Savanna, an investment firm with a portfolio of office buildings in Manhattan, Queens and Brooklyn,  is now staking its foothold in West Palm Beach, where financial service companies like Goldman Sachs and BlackRock have opened up offices –-and more white-shoe firms are on the way.

It began acquiring parcels near the downtown waterfront in 2021, and now controls about seven acres, Kurd said in an interview.

It’s first order of business: luxury condos. By year end, the firm will begin construction on its debut-Florida project, a 275-unit tower called Olara.

• Condo prices start at $2 million. That’s the upper tier of the market in West Palm, but for Manhattanites who might be browsing, that’s just the median price of new development where they come from.

• About 90% of the units are priced between $2 million and $6 million, Kurd said.

• Amenities include a marina with eight slips and as many as three boats, available for rent by unit owners, he said.

• Buyers have signed commitments on 10% of the units -- about $100 million worth -- since sales started in January, Kurd said.

• 170 luxury rentals will be built in a separate tower, sharing the same base as Olara.

• The New York-to-Florida pipeline is clear from the sales efforts. This month, Savanna’s brokers will hold a marketing event in the Hamptons, the Long Island resort towns that draw Wall Street executives for the summer.

• “These major finance companies are making commitments to West Palm,” Kurd said. “If you look at the amount of office space being built now, it translates into 5,000 to 7,000 new jobs. That’s a pretty strong metric.” 
   

What’s Next:

• Savanna is designing plans for a 300,000 square foot market-rate rental tower on a parcel it owns just south of Olara. The site allows for 550,000 square feet of development.

• Another Savanna-owned site, behind the condo building, allows for up to 1 million square feet of commercial development. The firm hasn’t made the final call on what to build there.

• Savanna is actively seeking to acquire other development sites in the West Palm area. “We’re focused on expanding” Kurd said. “Long term, there’s definitely a lot of room to run.”

Hines, the global firm that’s built skyscraping towers in New York, San Francisco and Shanghai, is part of a team that’s re-imagining two city blocks of an arts district in downtown Fort Lauderdale. In 2021, Hines entered into a joint venture with Urban Street Development – whose principals began assembling the site, parcel by parcel, over a decade ago —to bring new urban density, retail chic and a restaurant scene to the district known as FAT Village. (That’s short for Food Art Technology).

• Construction begins in October on Phase 1 of the now-$450 million project: an office building and two rental towers, with a combined 600 apartments, all within walking distance to the Brightline commuter train, according to Tim Petrillo and Alan Hooper, Urban Street’s co-founders.

•  Timber! The 180,000 square foot, six-story office building will be constructed largely of timber, with visible wood beams and columns on each of the office floors as well as the building’s exterior. 

• Office rents are projected in the mid-$70’s per square foot, Hines’ Kennedy said. That’s a healthy premium over the average asking rate for Broward Class A office space in the second quarter, which was $40.74, according to Colliers. “Trophy office space doesn’t mean the biggest building on the block anymore,” Kennedy said.

• Multifamily rents for the luxury units are projected at an average $3,500 per month. The second building will have more affordable apartments, averaging $2,800 per month. But rent projections have previously exceeded themselves in this market. A 40-unit rental that Urban Street just completed nearby predicted rents at $2.25 per foot but leased at between $3.72 and $3.90, Petrillo said.

• 82,000 square feet of new retail space, including art galleries and four full-service restaurants, said Petrillo, who is also the CEO of hospitality firm The Restaurant People.

• Blanca Commercial Real Estate has been hired to market the office space. It's too early for lease commitments (the project won’t be complete until mid-2026), but brokers are reaching out to potential tenants in the legal and tech sectors.

• “We talked about making it like a Google campus that the little guy can come rent in,” Hooper said. “It feels creative.”

What’s Next

• Phase 2 of the FAT Village project will be either a second office building or a third rental building, based on market demand, Kennedy said. “In about two years we’ll decide which direction we’re going to go,” he said

• Hines is also importing its New York luxury condo experience to South Florida. The developer- which built a 1,050-foot tower adjacent to New York City’s Museum of Modern Art — is planning a 106-unit condo development in West Palm Beach where prices start at $10 million and go up to $75 million. That would set local price records.

• The waterfront condo project, South Flagler House, was designed by Robert A.M. Stern, the go-to architect for New York developers seeking to build for the world’s wealthiest real estate shoppers.

As the former chief executive officer of New York-based Fortis Property Group, Jonathan Landau knows his way around a luxury condo development.  His old firm built several of them – including one of Brooklyn’s priciest towers.

Last year, Landau and his family started their own development company. Its debut project is a boutique condo and private yacht club in Miami, with units priced at a level that guarantees exclusivity.

“What interested me was the fact that now you have, for the first time probably in the history of South Florida, a year-round market that includes huge relocations of massive companies with high paying executives,” Landau said in an interview. “There’s a shortage of high-quality homes and services. There’s a tremendous appetite for top-of-the-line product.”

• Eight-story waterfront project with just nine condominiums for sale, including two duplexes and two full floor penthouses.

• Unit asking prices average $2,000 per square foot, which Landau said “we’ve achieved” with the first few sales commitments.

• Purchase commitments signed on two units so far, Landau said.

• $29 million construction loan secured last month from Miami-based lender BridgeInvest

• Amenities include: a private yacht club and marina exclusive to unit owners; six boat slips, five of which will be for sale and the other for community use.

• Site demolition could start by the end of the month. Completion is expected in the 3rd quarter of 2025.

What’s Next:

• Landau’s firm is pursuing two other projects in the Miami area: an office building and a second residential initiative, which he declined to describe just yet.

• Offices are compelling in Miami, he said, in that brand new towers like 830 Brickell, are fully leased before completion and are getting takers at rents higher than what many Class A spaces in Manhattan are achieving, Landau said.

• ``In the office context, there’s no better case study for lack of supply and surge of demand than what we’re seeing now in South Florida,” he said.
  

And there’s more. 

A veritable Who’s Who of the Manhattan development world is busy assembling parcels, joint venturing with local investors, and filing plans for ambitious projects in South Florida.

• Naftali Group, which found success selling out pricey new condos on Manhattan’s Upper East Side, has assembled a development site in Miami and filed plans to build a 65-story tower with nearly 800 residential units. It would be the firm’s first Florida venture.

• Aby Rosen, who’s RFR Holding owns New York’s landmark Chrysler Building — filed plans this summer to build a 104-story hotel and residential tower in downtown Miami.

• Witkoff, no stranger to the Miami market, is fortifying there now. Last month, the firm and its partners secured a $430 million construction loan to redevelop Miami Beach’s Shore Club, where condo pricing starts at $6 million, and units so far have sold for an average price of $20 million.

• Harry Macklowe, the 86-year-old titan of New York City real estate, is assembling a development site in North Bay Village, between Miami and Miami Beach. He’s also filed plans to build an apartment complex near Dadeland Mall, on a site he purchased last year.

  It’s the first foray into Florida for Macklowe, whose name is more synonymous with grand New York projects. His 432 Park tower on Manhattan’s Billionaires’ Row had, for a time, set a sales price record for a single condo; and he’s currently undertaking the city’s biggest-ever office-to-residential conversion with his 566-condo project at One Wall Street.

“Everyone who’s got a project in New York seems to have something going on in Florida,” said Jonathan Miller, president of appraiser Miller Samuel, who tracks housing data in both markets. “It’s a combination of diversification and linkage: one of the biggest demand drivers for Florida is people from the Northeast, so it makes sense for developers who are established in those markets to have a foothold in the sunbelt states.”

For South Florida Homebuyers, Cash Deals are the Norm

The share of Miami Beach home buyers paying cash for their purchases was the highest in seven years during the second quarter – another sign that luxury deals are dominating the sales market.

“Luxury real estate has become a bigger part of the Miami story and cash buyers illustrate that trend,” said Jonathan Miller, of Miller Samuel Inc., whose firm reported the data with Douglas Elliman Real Estate. “As you move higher in sales price, the probability of having a cash buyer increases.”

The share of buyers who completed deals in Miami Beach without financing was 66.3%, the highest in data going back to 2017. The data measures sales of both condos and single family homes across Miami Beach and the barrier islands – an area where the median house price was $2.89 million in the quarter.

In the Miami Beach market, where there are currently 56% fewer listings than there were in the second quarter of 2019, offering cash is one way to be competitive in a deal, Miller said in an interview. It’s also indicative of a market that’s rapidly pricing buyers out.

More than half of all home purchases were completed in cash across several South Florida regions during the second quarter:

• Palm Beach: 89%

• Delray Beach: 65%

• Boca Raton: 57%

• Fort Lauderdale: 53%

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