As South Floridas condo market rapidly moves toward another new construction boom, now is the time for the real estate industry to adopt measures to reduce the chances of another bust.
Nearly a dozen new towers with a combined 3,600 condos have formally been proposed for the South Florida region despite more than 4,700 units remaining unsold as of Sept. 30 from the last real estate boom and bust in Miami-Dade, Broward and Palm Beach counties.
The proposed new condo projects range from Martin Z. Margulies ultra-luxury tower Bellini at Williams Island to Jorge Perezs Apogee Beach on the sand in Hollywood and Gil Dezers futuristic Porsche Design Tower in Sunny Isles Beach to the Melo Groups affordable 23 Biscayne Bay in greater downtown Miami.
Swire Properties, which developed practically all of Miamis Brickell Key, is proposing a pair of condo towers part of a mixed-use project called Brickell Citicentre on the mainland just west of Brickell Avenue.
The Genting Groups plans for a massive downtown Miami resort and casino development includes a pair of condo towers with a proposed 1,000 units, according to press reports.
Spurred by the proposed new projects, private equity groups and institutional investors are actively pursuing and purchasing development sites that had been earmarked for new condo construction prior to the crash. These land buyers are betting that a new wave of condo construction is in South Floridas future.
As developers, buyers, real estate professionals, and lenders prepare for the next building cycle, this is the time for the industry, the legislature and the regulators to adopt a series of safeguards to reduce, if not prevent, the chances of yet another condo boom-and-bust period in Florida.
Timely, accessible, and verifiable information should be the foundation for South Floridas condo industry going forward.
As part of a commitment to accurate information, the industry should adopt these five measures in hopes of providing transparency to the South Florida condo market that too frequently glosses over the details without considering the repercussions.
•First, all newly proposed condo projects should be required to generate an inventory list of every residential and commercial unit within a project. This inventory list should include the proposed architectural and engineered square footage for every respective condo unit.
The architectural square footage is the total living area, including the space behind the walls, of a unit while the engineered square footage is the actual usable space where furniture can be assembled.
Often times, the architectural square footage is about 10 percent greater than the engineered space, which leads to problems at the time of the sale.
•Second, all preconstruction sales activity that developers publicize (in hopes of creating a buzz and attracting additional buyers) should be verified by a third-party entity.
This auditor-like entity would not have to be a regulator but rather an independent accounting firm with no vested interest other than a fee in the project. The auditor-like entity should be required to sign off on the sales statistics much like what is done with financial reports by publicly traded companies.
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