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Continued growth expected for South Florida CRE in 2018: CCIM conference

2018 CCIM Commercial Real Estate Outlook Conference (Credit: Katherine Kallergis)

Population growth, new jobs and a tight residential market are fueling Florida’s commercial sectors, and that isn’t expect to change anytime soon. That’s how economist Sean Snaith summarized the current market as he kicked off the 2018 CCIM Commercial Outlook conference.

One other major factor was contributing to the rising fortunes, he told the crowd at the Coral Gables Country Club on Wednesday.

“Deregulation is the secret sauce to this [positive] economic outlook,” Snaith said.

That last point could be directly attributed to President Trump, who despite other factors, industry experts say, has been and will likely continue to be good for commercial real estate. During Trump’s first year in office, there have been 22 deregulatory actions for every regulatory action taken. The country is in its ninth year of economic recovery, and the Republican Party’s tax law, which slashes the corporate tax rate, will bolster the industry, Snaith said.

But Tere Blanca, founder and CEO of Blanca Commercial Real Estate, said two issues on the president’s agenda could negatively affect the market: foreign policy and sea level rise. Miami is a safe haven for investors from Latin America, especially Mexico and Brazil, and Trump’s foreign policy pronouncements and plans could hurt that kind of investment, experts said.

“We need to address sea level rise,” Blanca said, referring to the effect it’s already having on the insurance industry in Miami and around the country. “It will impact commercial real estate over the next 20 years if we just sit back and let it be.”

A rundown of the major takeaways from the conference follows:

Office

Blanca said South Florida’s growing population and worsening traffic has boosted Coral Gables, Doral, Aventura and Coconut Grove’s office markets. The reason, she said, is because tenants are choosing to live and work in walkable neighborhoods to avoid the congestion. Rental rates are also on the rise, and the spread between the region’s urban cores and suburban markets has grown to a difference of about $20 per square foot.

Blanca expects rents to continue rising at a slower pace than before. She cited the positive impact of Brightline, which will connect West Palm Beach, Fort Lauderdale and downtown Miami when it’s completed later this year, and new tenants like WeWork, which has leased 250,000 square feet in Miami over the last two years.

Multifamily

Peter Mekras, managing director of Aztec Group, asked the crowd if they thought the multifamiy market was about to bust – few raised their hands.

“Just because someone announced a project does not mean it’s going to get built,” he said. “We’re going to have an absorption challenge but we are not going to create a collapse.”

Rent growth is tapering in South Florida, although workforce units are outperforming the rest.

Investors are buying apartment buildings across all asset classes, but the core plus and value add space is the most crowded. “If you’re going nonrefundable at contract, you’re not buying,” Mekras said. And “if you’re not delivering interest-only financing, you’re probably going to lose the deal.”

The number of institutional investors choosing to buy multifamily properties in South Florida is also growing. At the end of last year, AvalonBay Communities made its first investment in Florida with a $138 million purchase of 850 Boca, a 370-unit development at the Park at Broken Sound in Boca Raton. The Arlington, Virginia-based real estate investment trust paid more than $370,000 per apartment.

Blackstone has also become increasingly active, buying Class A, B and C properties, which “speaks volumes to the demand in South Florida,” Mekras said.

Capital Markets

As of the third quarter of 2017, transactional volumes were down 7 percent year over year, said Danny Finkle of HFF. While sales were down in 217, debt deals increased roughly 15 percent.

Now that it’s late in the cycle, the pace of fundraising has slowed. Finkle expects more mergers and acquisitions of real estate investment trusts. He also said development will remain difficult to capitalize.

Foreign investment has also slowed. In 2015, foreign capital invested in the country’s capital markets totaled $96 billion. A year later, it was $67 billion, a decline of about 30 percent.

Retail

CBRE’s South Florida managing director Arden Karson took the stage to dispel any notion that e-commerce was hurting retail and instead focused on the need for brick and mortar stores to adapt.

Consumers are spending less on clothing, books and hobbies, and at department stores. And they’re spending more on food and beverage, home goods and health and beauty. Despite its massive rise, e-commerce still represented just 9 percent of total retail sales in 2017. But it is expected to continue to climb, and should take about 14 percent of sales by 2021, according to data from CBRE.

Industrial

South Florida’s industrial market has been on fire, thanks in part to e-commerce.

Top deals include the $40 million sale of PepsiCo’s regional headquarters and distribution center in Doral, said Mike Silver of CBRE. Terra and Terranova picked up the industrial property and will likely redevelop it into a mixed-use project. He also mentioned plans to convert the former Calder Race Course practice track into an 850,000-square-foot industrial park in Miami Gardens. EastGroup properties paid $26.5 million for the 61-acre site in 2016 and unveiled plans for the property last year.

One challenge the region is facing is a shrinking land supply. South Florida has 386 million square feet of industrial space and 56.6 million square feet of developable space remaining, data from the brokerage shows. Over the next five years, projected demand will call for about 40 million square feet.

Wynwood’s transformation into a restaurant and retail haven has also pushed industrial tenants out of that submarket, Silver said, something that could happen with other neighborhoods.


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Got Bitcoin? You could buy these Columbia Heights condos with the cryptocurrency.

Four units in a Northwest D.C. condominium building have hit the market — and in an unusual move, the seller will accept payment in Bitcoin.

The team behind the St. James Place Condos, a four-unit residential development at 1471 Girard Street NW, announced Thursday it would accept the cryptocurrency as well as conventional dollars, in what appears to be a first for this market, said Alex Venditti of the Alex Venditti Group of Coldwell Banker Residential Brokerage, the listing brokerage for the…

Source: http://feeds.bizjournals.com/industry_21

CRANE WATCH Update: The Triad's top construction projects (PHOTOS)

Nearly extinct only a few years ago, cranes and other heavy construction equipment can be spotted across the Triad as we enter a new year with economic optimism.

Triad Business Journal’s Crane Watch report is filled with locations and important information about developments ready to impact the Triad as we know it. Triad Business Journal launched the interactive online tool last spring, and the past year has yielded dozens more projects reflected in the current map.

Much of the buzz that has transpired…

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Brookfield and Onex could pay up to $3.7B for WeWork rival

From left: IWG’s Mark Dixon, Brookfield Asset CEO Bruce Flatt and a IWG space

From TRD NYC: Brookfield Asset Management and Onex are planning to bid about $3.7 billion for IWG, a WeWork rival based in Switzerland.

IWG, formerly known as “Regus,” confirmed in December that it had received an “indicative proposal” from the two companies, but no final decisions have been made yet, according to Bloomberg. Shares of IWG were up 8.3 percent in trading early on Wednesday. When news first broke of Brookfield and Onex’s interest, shares rose 30 percent.

IWG has almost 3,000 worldwide locations compared to 283 for WeWork, but WeWork’s value is significantly higher at $20 billion.

Brookfield and Onex, both private equity firms based in Canada, have until Jan. 20 to make a final call about whether or not to make an offer for IWG under the United Kingdom’s takeover rules.

Brookfield is also said to be preparing an increased bid for retail-focused real estate investment trust General Growth Properties, after its initial $15 billion bid was rejected. [Bloomberg]Eddie Small


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Housing inventory plunges in San Jose as prices balloon

The number of homes available for sale in the San Jose metro area plunged by 41 percent in 2017 while the median price ballooned by 21 percent to $1.17 million, according to real estate information company Zillow (NASDAQ: Z).

The company recently named San Jose its No. 1 hottest housing market in the U.S. in 2018, based on a mix of variables including home value and rent forecasts for the year and income growth estimates. San Jose’s median home value, according to Zillow, is $1.1 million —…

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How would Amazon HQ2 hit Denver real estate?

A $5 billion, 50,000 employee campus would have a significant impact on the cost of living. Should we be worried ?

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Design changes to Miami Worldcenter’s retail portion approved

Miami Worldcenter, Nitin Motwani and Art Falcone

The developers of Miami Worldcenter just won a key design modification to the massive project’s retail component.

On Wednesday, the Miami Urban Development Review Board granted a request by the Nitin Motwani and Art Falcone-led development team to tweak the facades for the $2 billion mixed-use project’s retail structure, also known as Block D.

The changes will allow Miami Worldcenter Associates to install artwork by Berlin artist Franz Ackermann on the east facade of Block D facing the Metromover tracks. In addition, the south and east facades will have an integrated projected panel system, while the north and west facades will have an extended artistic metal fin system.

Ackermann’s work has been exhibited in France, Germany and Tokyo and some of his paintings have a permanent home in New York’s Museum of Modern Art.

“This is an exciting opportunity for Mr. Ackermann’s unique and cutting edge work to be displayed prominently in the city of Miami,” Bailine wrote. “His works are regarded as ‘riverting’ abstraction, and include a wide array of colors, shapes and textures.”

Block D, which is under construction and topped off last month, is a seven-story structure that will have 81,000 square feet of retail space and a 1,100-space parking garage. It is located on Northeast Second Avenue between Northeast Eighth and Ninth streets. The Urban Development Review Board initially approved the project in 2016.

Earlier this year, the developer closed on a $43 construction loan provided by Fifth Third Bank.

Also under construction is the 60-story, 512-unit Paramount Miami Worldcenter luxury condo tower with ground-floor retail. The developers are also planning a 45-story office tower, two apartment buildings with more than 800 units, another 200,000-plus square feet of street retail, and the Marriott Marquis convention center hotel in partnership with MDM Group.


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Master-planned community north of Austin remains one of nation's top sellers

Austin isn’t known for its master-planned communities — at least not in the same way as Houston or Dallas.

But as the population of the Austin metro continues to grow and the region attracts the interest of national and international real estate developers, that reputation could be changing.

That can be seen with the inclusion of Siena, north of Austin in Round Rock, for the past two years on a nationwide list of the 50 best-selling MPCs.

The ranking, compiled by John Burns Real Estate Consulting,…

Source: http://feeds.bizjournals.com/industry_21

South Florida’s resi markets bounce back from Hurricane Irma: Elliman

South Florida Skyline (Credit: Pixabay)

Residential sales may be on the rebound in South Florida following a dismal third quarter, thanks in part to pent-up demand from Hurricane Irma, according to the Q4 Elliman Reports.

In Miami Beach and the barrier islands, closed sales jumped 14.2 percent year-over-year to 757. New contracts signed also increased 16.1 percent to 274. Properties spent 52 fewer days on the market and sold for bigger discounts. The median sale price in Miami Beach rose slightly, by 2.8 percent to $406,000.

“The general overview is the fourth quarter showed more activity, and more strength at the upper end of the market after being less active,”  said Miller Samuel CEO Jonathan Miller, author of the reports. “Essentially what’s happening in a lot of these markets is sellers have been holding out for several years and now they’re more amenable to actual market conditions.”

While the fourth quarter was the strongest for South Florida in 2017, overall residential sales were down in some markets. For the full year, sales fell 3.7 percent to 3,033 in Miami Beach and the barrier islands.

The Miami mainland experienced a slower fourth quarter. Sales fell 10.2 percent for the quarter, year-over-year, to 3,180 and fell 7.2 percent for the full year to 14,352. Homes and condos spent a whopping 40.5 percent less time on the market in the last quarter of 2017, down to 44 days from 74 days the previous year.

“The bigger discounts represent the sellers traveling farther to meet the buyer because the buyers have been holding firm,” Miller said. “In many of these markets, days on market is relatively high.”

In Fort Lauderdale, overall sales fell 6.8 percent to 851 closings in the fourth quarter. Single-family home sales were responsible for the bulk of that with a 12 percent decline in closed deals. The luxury sector, which Elliman defines as the top 10 percent of sales, reported double-digit growth in Fort Lauderdale. Luxury condo sales rose 17.1 percent to 48 closings and high-end home sales were up 18 percent to 59.

Father north in Palm Beach County, the number of sales dropped in Jupiter and Palm Beach Gardens. Weaker markets like Wellington and Palm Beach saw improvements, Miller said.

In Wellington, total residential sales were flat. While condo closings took a dive of more than 20 percent to 74 sales, home sales increased 8.6 percent year-over-year to 253. Inventory fell slightly for single-family houses and more so for condos. The average size of homes sold also grew in Wellington, which Miller said is a sign that the luxury sector is recovering.

Palm Beach saw a reversal from the previous quarter. In the fourth quarter of last year, condo sales fell nearly 31 percent year-over-year to 36 closings while single-family sales increased 31 percent to 21. The inventory of both condos and houses declined while both spent more time on the market.

A number of high-end sales boosted the median sale price of single-family homes in the tony town more than 125 percent to $6.75 million. Meanwhile, the median condo sale price dropped 31 percent to $505,000.


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Now accepting nominations for OBJ's 2018 Residential Real Estate Awards

It’s time to celebrate the best in Central Florida residential real estate.

Nominations now are being accepted for the OBJ’s 2018 Residential Real Estate Awards. The nomination deadline is Feb. 23. Honorees will be recognized in the newspaper on April 6 and at an April 5 event.

We are looking for standout projects for Orlando Business Journal’s 2018 Residential Real Estate Awards. Nominations are welcome from all sources, and companies/projects are eligible for nomination in more than one…

Source: http://feeds.bizjournals.com/industry_21

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