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The Big Apple’s Biggest Office Flip: Inside New York’s Largest Residential Conversion Project

By Columbus International,27 August 20249 November 2024

In a bold move that could reshape Manhattan’s skyline and real estate market, New York’s most ambitious office-to-residential conversion project is breaking ground. The former Pfizer headquarters near Grand Central Terminal is set to transform into a residential behemoth, potentially offering a blueprint for revitalizing urban centers in the post-pandemic era.

Key Takeaways:

A joint venture between Metro Loft Management and David Werner Real Estate Investments is spearheading the project.
The development secured a $75 million senior mortgage acquisition predevelopment loan from Northwind Group.
Upon completion, the project will yield approximately 1,600 residential units, making it New York’s largest office-to-residential conversion to date.

The Big Picture:

As cities grapple with record-high office vacancy rates and soaring apartment rents, adaptive reuse of commercial spaces has become a hot topic in urban planning circles. New York, along with Chicago and Washington, D.C., is at the forefront of this trend, seeking innovative solutions to address housing shortages and revitalize business districts.

“New York City is a very supply-constrained market,” Michael Ainbinder, managing director at Northwind, told Forbes. “It continues to see rent increases due to lack of supply. This project represents a well-located asset with strong sponsorship.”

The Players:

Metro Loft, founded by Nathan Berman in 1997, has established itself as a conversion powerhouse, transforming over 5 million square feet of office space into residential use in lower Manhattan over the past two decades. Their partnership with real estate veteran David Werner brings together deep expertise in both acquisition and conversion.

The Challenges:

Despite the promising outlook, office-to-residential conversions are not without hurdles. Industry professionals cite issues such as building layout, infrastructure requirements, and high costs as potential roadblocks. Northwind’s Ainbinder revealed that they fund only 10% to 20% of the conversion project requests they receive, underscoring the complexity of these undertakings.

The Trend:

The former Pfizer project is part of a larger movement. Design firm Gensler is set to open Pearl House, a conversion of a 1970s office tower in the Financial District, while SL Green Realty, Manhattan’s largest office landlord, is converting its property at 750 Third Ave to residential use.

Looking Ahead:

With New York estimating about 135 million square feet of outdated office space ripe for conversion, the race is on to reimagine urban landscapes. As Deputy Mayor Maria Torres-Springer noted, about 70 office buildings have already signed on to be part of the city’s office-to-residential “accelerator” program.

The Bottom Line:

As the largest office-to-residential conversion in New York’s history, the Pfizer project represents more than just a real estate deal. It’s a litmus test for the future of urban development, potentially setting the stage for a new era of adaptive reuse in America’s cities. For investors, developers, and city planners alike, all eyes will be on this transformative project as it unfolds in the heart of Manhattan.

Photo: Wikipedia | https://en.m.wikipedia.org/wiki/File:Pfizer_World_Headquarters_Entrance.jpg
Source: CoStar

The Great Migration Reversal: Florida’s Exodus to the Big Apple

By Columbus International,26 August 20249 November 2024

In a surprising twist of real estate dynamics, Florida residents are increasingly trading their sun-soaked paradises for the concrete jungle of New York City. This trend, emerging as a counterpoint to the long-established New York-to-Florida migration, is reshaping the landscape of high-end property investments in the Empire State.

According to a recent PropertyShark study, Floridians have emerged as formidable contenders in New York’s real estate market. In the first half of 2024 alone, they acquired 219 properties valued at a staggering $315 million—a $30 million increase from a decade ago. This surge in Florida-origin investments is particularly pronounced in the luxury sector, with $141 million dedicated to properties priced at $3 million and above.

Several factors are driving this reverse migration. Florida’s skyrocketing insurance rates, now nearly triple the national average, coupled with increasingly unpredictable weather patterns, have prompted many residents to reconsider their tropical haven. While Florida welcomed 739,000 new residents in 2022, it simultaneously bid farewell to 490,000, with 21,300 of those expatriates setting their sights on New York.

This influx of Sunshine State capital is reshaping the competitive landscape of New York’s real estate market. While New Jersey remains the top out-of-state investor with 345 deals, its market share has dwindled from 27.6% in 2014 to 19% today. Concurrently, California has solidified its position, expanding its market presence from just under 10% to 13.4% over the past decade, with investments totaling $352 million in the first half of 2024—a $107 million increase since 2014.

Despite the surge in out-of-state buyers, local New Yorkers remain active participants in their home market. The Bronx, in particular, has witnessed a notable 20% increase in home purchases, bucking broader trends.

This shifting paradigm in real estate investments reflects broader economic and environmental considerations. As climate change concerns and insurance costs reshape the calculus of homeownership in coastal areas, traditionally popular retirement destinations like Florida may find themselves competing with unexpected rivals. New York’s enduring appeal as a center of culture, finance, and opportunity appears to be drawing a new generation of sun-weary transplants, eager to exchange beachfront views for skyline vistas.

As this trend continues to unfold, it will be crucial to monitor its impact on property values, urban development, and the demographic makeup of both Florida and New York. The reversal of this long-standing migration pattern could herald a new era in American urban dynamics, with far-reaching implications for real estate markets, city planning, and regional economies.

Amina Rubinacci Expands U.S. Presence with New Flagship on Madison Avenue

By Columbus International,22 August 2024

Renowned for its dedication to the Neapolitan sartorial tradition, Amina Rubinacci, the womenswear brand beloved by tourists on Capri and the Amalfi Coast, is making a significant leap into the U.S. market with the opening of a new flagship store on New York’s Madison Avenue.

“We’ve had a presence in the U.S. for some time; my mother is credited with pioneering the knit blazers that have become a signature piece, particularly popular among American clients visiting Capri,” stated Alessandro Spada, CEO and son of founder Amina Rubinacci.

With the recent departure of longtime stockist Delle Celle from its historic location at 17 East 67th Street, Amina Rubinacci seized the opportunity to occupy this prime spot. The new Manhattan flagship features a minimalist design with parquet flooring and cream walls, showcasing the brand’s clothing and accessories through prominent street-facing windows.

“We’re investing in retail and flagship stores to consistently and coherently express our brand’s identity,” Spada emphasized.

Founded in 1968 by Amina Rubinacci, whose expertise in textiles laid the foundation for the brand, the company entered the U.S. market seven years ago. It has since established a solid wholesale footprint with around 50 retailers and is now expanding its direct presence. Its portfolio includes stores in Palm Beach, Charlotte, Greenwich, Washington, D.C., and Portland, among others.

“We have strategically avoided major department stores, focusing instead on specialty boutiques,” Spada added.

Globally, Amina Rubinacci operates 350 wholesale stockists, four franchised stores, and 16 directly operated boutiques in key cities including Milan, Rome, Capri, Geneva, London, and Moscow.

“Our family-owned status is both a strength and a limitation. It allows us to grow incrementally while staying true to our origins,” Spada noted.

Looking ahead, the brand plans further expansion with new openings slated for Vienna and Paris in 2025, and is also focusing on strengthening its position in Japan, where it could potentially introduce monobrand stores through its partnership with local distributor Sanki.

In 2023, the brand’s revenue reached €15 million, with wholesale accounting for 60% of this total. Spada anticipates a low-double-digit growth in 2024, driven by strong performance in key markets, including the U.K.

New York City’s retail landscape has not only rebounded from the pandemic but has also thrived, with significant leasing activity and rent reductions. “We’ve observed a robust recovery,” commented Gene Spiegelman of Ripco. “Rents have decreased by 50%.”

Vacant restaurants and luxury fashion spaces have seen rapid turnover, with high-profile brands like Dolce & Gabbana and Prada securing prime locations on Madison and Fifth Avenues, signaling a dynamic shift in the city’s retail market.

Photo via Amina Rubinacci

Miami’s Billionaire Buyers Fuel a Red-Hot Luxury Home Market

By Columbus International,21 August 2024

Miami has long been a playground for the ultra-wealthy, but the last few years have seen an explosion of extraordinary luxury real estate deals in the city. From a $135 million villa in Coconut Grove to the $100 million waterfront estate purchased by Citadel CEO Ken Griffin, multi-million dollar home sales have become increasingly common. What’s driving this surge in the high-end real estate segment? To get an inside look, Bloomberg interviewed Dina Goldentayer, a real estate agent for Douglas Elliman in the Miami area.

Goldentayer states that a combination of factors is fueling the luxury housing boom. A large part of this is due to a continuous influx of high-net-worth individuals, many of whom are fleeing high-tax states like New York and California to take advantage of Florida’s favorable tax climate. The tax benefits of relocating to Florida have been a huge draw, especially for finance and tech executives. At Columbus International, we have seen many people from the Northeast and West Coast move here, often bringing their businesses with them.

However, the ultra-rich are not just looking to save on taxes – they also want homes that cater to their specific luxury preferences. Our clients are seeking sprawling estates with every imaginable amenity, from private beaches and docks to wine cellars and home theaters. These buyers have very specific requirements. They want the ultimate in privacy, security, and high-end finishes. No detail is too small.

When dealing with homes worth tens of millions, the level of service, discretion and attention to detail at Columbus International must be impeccable. Our team is here to address your every need.

Cultivating relationships with wealthy clients and securing the rare multi-million dollar listings also requires a unique approach. It’s all about building trust and rapport. Our clients want to work with someone they feel comfortable with and who truly understands their needs.

The influx of finance and tech leaders to Miami has been a true boon for the luxury market, none more so than the so-called “Citadel effect.” Billionaire Ken Griffin’s buying spree, which includes the $100 million waterfront estate, has helped drive up prices and sparked a frenzy among other ultra-high-net-worth individuals. When someone like Griffin buys a property for $100 million, it sets a new benchmark and shifts the entire dynamic. Many high-end real estate clients want to be able to say they own the home next door to his.

Naturally, Miami’s luxury real estate boom has also had some negative aspects. The surging prices are making it increasingly difficult for the middle class and even upper-middle-class to afford homes in the city. There is certainly a concern about pricing people out. But at the end of the day, a real estate agent’s job is to get the best possible outcome for their clients. The market is what it is.

Looking ahead, we don’t see signs of the luxury housing frenzy slowing down anytime soon. In fact, the next frontier will likely be even higher price points, as Miami solidifies its status as a global playground for the world’s wealthiest. There are those in our network who wouldn’t be surprised to see $200 million homes become the ‘new normal’ in the not-too-distant future.

Photo: Dolce & Gabbana 888 Brickell Ave

Bronx Renaissance: NYC’s 7,000-Unit Housing Plan Signals Borough’s Transit-Led Revival

By Columbus International,20 August 20249 November 2024

In a bold move to expand investment opportunities in New York City, Mayor Eric Adams has given the green light to a transformative plan for the East Bronx, an ambitious project that will add 7,000 new residential units.

The rezoning initiative, centered around four future Metro-North stations, exemplifies the growing trend of transit-oriented development. By 2027, residents of Parkchester/Van Nest, Morris Park, Hunts Point, and Co-op City will enjoy direct access to Manhattan’s Penn Station, reshaping and redefining the real estate landscape of these neighborhoods.

Key points:

7,000 new residential units, including 1,700 permanently income-restricted homes
$500 million investment in local infrastructure
Projected creation of 10,000 new jobs
Rezoning of 46 blocks, allowing residential use in previously commercial and manufacturing areas

This move represents the largest residential (and more) endeavor since the 2021 Gowanus project in Brooklyn. As Richard Tayar, founder and CEO of Columbus International, has often emphasized in these pages, the East Bronx is poised to attract developers and financiers, replicating the success seen in Gowanus, where projects like Domain Cos. and Vorea Group’s 420 Carroll are already operational.

Vivien Krieger, co-chair of Cozen O’Connor’s zoning practice, describes the plan as “significant and exciting,” highlighting the potential to transform the East Bronx into a regional connector. The rezoning is expected to particularly benefit areas around the new train stations, with Montefiore Health System already exploring expansion opportunities near the Morris Park station.

Revitalizing and expanding the East Bronx aligns with the broader “City of Yes” plan, which aims to add up to 108,850 new residential units over 15 years. It’s a timely intervention for the Bronx, which currently boasts the lowest median monthly rent ($1,280) and the tightest vacancy rate (0.82%) among New York City’s boroughs.

As New York faces its challenges, the East Bronx project stands as a testament to the city’s commitment to innovative, transit-oriented solutions. With its mix of affordable housing, job creation, and infrastructure improvements, this initiative could serve as a model for urban development in the coming years of revival for the City That Never Sleeps.

For investors and developers, the East Bronx presents a unique opportunity to participate in the revitalization of one of New York’s most promising areas. As Mayor Adams put it, “The Bronx bought a ticket to the future.” It remains to be seen how this ambitious bet will pay off for the city and its residents. At Columbus International, we view this wager with both pragmatism and anticipation.

Want to read news and trends of the month? Our Newsroom awaits you HERE.

Preview photo on social media via Unsplash/Becky Phan

America’s Million-Dollar Home Surge: A New Era in Real Estate

By Columbus International,19 August 2024

In a groundbreaking shift in the American real estate landscape, the share of homes valued at $1 million or more has reached an unprecedented 8.5%, according to an exclusive analysis by Redfin provided to the Wall Street Journal. This figure marks a significant increase from 7.6% just a year ago and more than doubles the pre-pandemic level of 4%.

The Driving Forces

The surge in million-dollar properties is primarily attributed to the nationwide boom in home prices. Redfin’s data reveals that the median home sale price climbed 4% year-over-year to a record $442,525 in June. Even more striking, the luxury home market – defined as the top 5% of listings – saw a 9% year-over-year increase, with median prices hitting $1.18 million in the second quarter.

Market Dynamics

Despite rising mortgage rates dampening demand, a persistent inventory shortage continues to push prices upward. Redfin economist Chen Zhao notes, “The housing market is in a pretty unusual spot right now.” This situation benefits current homeowners but exacerbates the affordability crisis for potential buyers.

Geographic Hotspots

California, particularly the San Francisco Bay Area, leads the nation in million-dollar home concentration. In San Francisco proper, an astounding 80.6% of homes were valued at or above $1 million in June, up from 76.4% the previous year. Other California cities, like Anaheim, are experiencing rapid growth in this segment, with 58.8% of homes now in the million-dollar range, up from 51% last year.

The New Normal

“Years ago, if you owned a $1 million home, you would have been considered pretty rich,” Zhao observes. “Now, that’s the entry point for some markets.” This shift is particularly evident in areas like the San Francisco Bay Area, where local real estate agents now consider $1 million the starting point for condo searches, with single-family homes often out of reach at this price point.

Market Outliers

Interestingly, Austin, Texas, bucked the trend, showing a slight decrease in million-dollar homes due to increased new construction. Meanwhile, cities like Detroit, Cleveland, Pittsburgh, and Kansas City maintain less than 1% of their housing stock in the million-dollar category.

Looking Ahead

While inventory levels are slowly increasing nationwide, they remain about 30% below pre-pandemic levels. This persistent shortage, coupled with sellers reluctant to give up low interest rates and elevated construction costs, suggests that the million-dollar home phenomenon may continue to reshape the American real estate market for the foreseeable future.

As this trend unfolds, it raises important questions about housing affordability, wealth distribution, and the changing definition of luxury in the U.S. real estate market. Industry experts and policymakers will be closely watching these developments and their broader economic implications in the coming years.

Source: Wall Street Journal

Miami’s Culinary Landscape: 14 Must-Try Restaurants Shaping the Scene in August 2024

By Columbus International,15 August 20249 November 2024

Miami’s dining scene continues to evolve, offering a tantalizing array of culinary experiences for locals and visitors alike. From reimagined classics to international imports, here are 14 restaurants that are currently defining the Magic City’s gastronomic landscape.

1. Blue Collar: A Local Favorite Reimagined

Danny Serfer’s beloved Blue Collar has reopened in a spacious 4,000-square-foot location, maintaining its charm while expanding its offerings. The mid-century aesthetic and classic cocktails complement an enhanced menu that balances fan favorites with innovative additions.

2. La Màrtola: Mediterranean Oasis in Buena Vista

This newcomer transports diners to the European Riviera with its coastal-inspired menu. La Màrtola’s ambiance and dishes, ranging from fresh oysters to Neapolitan pizzas, offer a slice of seaside luxury in the heart of Miami.

3. Itamae AO: Intimate Nikkei Experience

Chef Nando Chang’s latest venture, Itamae AO, presents an exclusive 10-seat counter experience in Midtown. This intimate setting showcases Chang’s mastery of Peruvian-Japanese fusion, featuring meticulously crafted dishes that highlight local seafood.

4. Maman: Parisian Charm Meets Miami Flair

The NYC-based French café has made a splash with its Wynwood flagship. Maman seamlessly blends French classics with Miami-inspired creations, offering an all-day dining experience in a chic, Instagram-worthy setting.

5. Skinny Louie: Simplicity Meets Success

This 1950s-inspired burger joint in Wynwood proves that sometimes less is more. With just three burger options and classic sides, Skinny Louie has quickly become a local phenomenon, drawing crowds with its no-frills approach to quality fast food.

6. Yann Couvreur Café: French Pastry Mastery

Acclaimed pastry chef Yann Couvreur’s first U.S. outpost in Wynwood offers more than just picture-perfect desserts. The café’s extensive menu and stunning interior design make it a must-visit destination for food enthusiasts and Instagram influencers alike.

7. Brother’s Keeper: Nostalgia and Novelty

This Miami Beach cocktail bar by Lost Boy & Co. blends 1980s New York aesthetics with innovative drinks and eclectic bar bites. Brother’s Keeper’s unique atmosphere and creative menu make it a standout in the city’s vibrant nightlife scene.

8. ViceVersa: Italian Aperitivo with a Miami Twist

Award-winning bartender Valentino Longo’s ViceVersa brings the essence of Italian aperitivo culture to Miami. The bar’s sophisticated ambiance and expertly crafted cocktails offer a refined drinking experience in the heart of the city.

9. Mangrove: Caribbean Fusion in Downtown

Mangrove elevates traditional Caribbean cuisine in a lounge setting, offering a unique dining experience that marries familiar flavors with upscale presentation. The restaurant’s eclectic menu and island-inspired cocktails create a vibrant atmosphere in downtown Miami.

10. Catch Miami Beach: Seafood Spectacle

The arrival of Catch in South of Fifth brings a touch of glamour to Miami’s seafood scene. This expansive venue offers a mix of Catch classics and Miami-inspired dishes in a stunning Art Deco-influenced setting, cementing its status as a see-and-be-seen destination.

11. Felice Brickell: Tuscan Elegance

This NYC import brings authentic Tuscan flavors to Brickell. Felice offers a refined Italian dining experience, featuring a carefully curated menu and an extensive wine list that showcases the best of Tuscany.

12. Gramps Getaway: Tropical Escape

An extension of the popular Wynwood bar, Gramps Getaway offers a laid-back waterfront experience in Key Biscayne. With elevated bar food and tropical drinks, it’s the perfect spot for a casual day out by the bay.

13. RedFarm: Innovative Chinese Cuisine

The New York dim sum hotspot has found a new home in Coconut Grove. RedFarm’s creative take on Chinese classics, including its famous Pac-Man dumplings, brings a fresh perspective to Miami’s diverse culinary scene.

14. Sereia: Portuguese Seafood Excellence

Two-Michelin-starred chef Henrique Sá Pessoa’s Sereia brings the flavors of the Iberian coast to Coconut Grove. The restaurant’s sophisticated menu and elegant interior design offer a high-end dining experience that celebrates Portuguese culinary traditions.

These 14 establishments represent the dynamic and diverse nature of Miami’s culinary landscape, offering everything from casual bites to fine dining experiences. As the city continues to attract world-class talent and innovative concepts, Miami solidifies its position as a global gastronomic destination.

Photo & Source: Eater Miami

Manhattan Office Market Shows Signs of Life: Leasing Surges Amid Gradual Return to Work

By Columbus International,14 August 2024

In a surprising turn of events, Manhattan’s office market is showing resilience and adaptability in the face of ongoing challenges. Recent data suggests a notable uptick in leasing activity and a gradual return of workers to offices, offering a glimmer of hope for the beleaguered commercial real estate sector in New York City.

According to a report by brokerage Colliers (CIGI), Manhattan saw a significant boost in office leasing volume last month. July witnessed a 58% increase in leasing activity compared to June, with 3.87 million square feet of office space signed. This figure not only represents a month-over-month improvement but also outpaces last July’s volume by an impressive 67%.

The surge in leasing activity coincides with a gradual increase in office occupancy. A joint report by Avison Young and analytics firm Placer.ai reveals that select Manhattan offices were 29.3% busier on Mondays in June compared to the same period last year. This trend suggests that while the traditional five-day office week may be a thing of the past, employees are slowly but surely returning to their workplaces, particularly at the start of the week.

However, the recovery is not uniform across all of Manhattan. Lower Manhattan, for instance, has seen limited growth in office leasing during the second quarter. The Alliance for Downtown New York reports that leasing in this area increased by only 1% compared to the first quarter and remains 17% below pre-pandemic levels. Year-over-year, leasing in Lower Manhattan has plummeted by 48%.

Despite these challenges, certain sectors are driving demand in the Lower Manhattan office market. Technology firms led the charge, accounting for 36% of the total space leased in the second quarter. Legal and finance industries followed, each representing 15% of leased space.

The largest lease of the quarter in Lower Manhattan was secured by financial and software firm Stripe, which took up 147,509 square feet at 28 Liberty Street.

New York City’s office market remains the largest in North America, with nearly 730 million square feet of office space across its five boroughs, according to CoStar data. Manhattan alone accounts for 82% of this inventory, primarily concentrated in prime business districts south of 59th Street.

The market is highly segmented in terms of price and quality. Premium “trophy” office spaces in Manhattan command average asking rents of around $100 per square foot, while Class B and C spaces in Manhattan and the outer boroughs are priced at $54 and $40 per square foot, respectively.

As Manhattan’s office landlords navigate this complex landscape, they face the dual challenge of attracting tenants in a competitive market and encouraging a more consistent return to office work. The recent uptick in leasing activity and gradual increase in office occupancy offer encouraging signs, but the road to full recovery remains long and uncertain.

In this evolving scenario, landlords and tenants alike are likely to continue adapting their strategies, potentially leading to innovative lease structures, enhanced office amenities, and flexible work arrangements that balance the benefits of in-person collaboration with the flexibility that workers have come to expect in the post-pandemic era.

New York’s Sky-High Rents Show Signs of Leveling Off, But Don’t Celebrate Just Yet

By Columbus International,13 August 202413 August 2024

In a city renowned for its stratospheric living costs, a glimmer of hope emerges for New York’s beleaguered renters. Recent data suggests that the Big Apple‘s notoriously high apartment rents may have finally reached their zenith, offering a potential respite in one of the world’s most competitive housing markets.

According to the latest monthly leasing report from Douglas Elliman, compiled by appraisal firm Miller Samuel, Manhattan’s median rental price in July dipped to $4,300, marking a 2.3% decrease from the previous year. This $100 drop, while modest, signals a potential shift in the market’s trajectory. Similar trends were observed in Brooklyn and Northwest Queens, with median rents falling to $3,600 and $3,450 respectively.

Jonathan Miller, president and CEO of Miller Samuel, confirms this turning point: “Rents have peaked,” he stated in an email to CoStar News. This assertion is backed by several key indicators, most notably the declining average size of rented apartments across the three boroughs.

In Manhattan, the average square footage rented in July shrank by 9.5% year-over-year to 945 square feet, marking the 11th consecutive monthly decline. Brooklyn and Northwest Queens experienced similar contractions, with average sizes decreasing by 7.3% and 14.5% respectively. Miller attributes this trend to a post-pandemic normalization of space preferences and tenants’ efforts to reduce costs.

The rental market’s cooling may also be influenced by shifting dynamics in the homebuyers’ market. With the Federal Reserve expected to cut interest rates, potentially lowering mortgage rates, some renters are revisiting the prospect of homeownership. This reversal of the previous trend, where prospective buyers flooded the rental market, could help ease rental demand.

Furthermore, the supply side of the equation is showing signs of expansion. Manhattan’s listing inventory surged by 44% year-over-year to 10,634 units in July, while the vacancy rate inched up to 2.87% from 2.63% a year earlier.

However, industry experts caution against expectations of a dramatic market correction. “It’s still a landlords’ market,” Miller emphasized, noting that one in five renters continue to pay above asking price. In Manhattan, listing discounts remain at near-record lows, often representing premiums above asking prices.

The resilience of New York’s rental market is underpinned by the city’s robust economy. With 54,000 jobs added over the past year and a diverse economic landscape, renter demand remains strong despite the eye-watering costs.

As the New York housing market enters this new phase, both renters and investors will be watching closely. While the days of relentless rent hikes may be waning, the road to truly affordable housing in America’s largest city remains long and winding. For now, New Yorkers can take solace in the fact that, at least for the moment, the upward spiral of rental costs seems to have found its limit.

Source: CoStar News

Miami’s Condo-Hotel Boom: A Risky Bet for Investors?

By Columbus International,12 August 2024

The allure of short-term rental income is driving Miami’s latest real estate trend, but experts warn of potential pitfalls.

In the sun-soaked streets of Miami, a new kind of real estate gold rush is underway. Developers are betting big on short-term rental-friendly condos, rebranding them as condo-hotels to capitalize on the booming demand from investors. But as the market floods with these units, industry insiders are raising red flags about the long-term viability of such investments.

The Numbers Game

The scale of this boom is staggering. According to recent data:

Approximately 11,000 units across 36 planned or under-construction condo developments from Miami’s Coconut Grove to Hillsboro Beach in Broward County will be available for short-term rentals.
This represents about half of the entire new development condo pipeline in the area.

Supply and Demand: A Delicate Balance

Craig Studnicky, a veteran brokerage chief, doesn’t mince words when describing the future of this market. “It will become a bloodbath of competition,” he predicts. The influx of units is expected to put significant pressure on daily rates, potentially eroding investors’ returns.

The Oversell Dilemma

Industry experts, including Studnicky and Roman Pedan, CEO of short-term rental operator Kasa, point to a concerning trend: developers overpromising on potential rental income. This discrepancy between expectation and reality can lead to frustrated buyers and, ultimately, impact resale values.

Historical Performance Raises Concerns

Condo-hotels have a checkered past when it comes to maintaining value. Studnicky notes that of all condo resales in 2023, a mere 2% were condo-hotel units, highlighting their potential lack of appreciation.

A Buyer’s Perspective

Not all investors share these concerns. Matthew Birnholz, owner of finance company Capital Infusion, recently contracted to purchase a one-bedroom condo at Rilea Group’s Rider Residences for just under $1 million. Birnholz sees the dual benefit of personal use and rental income as appealing.

“I hope the unit appreciates in value by 35 to 40 percent by the time Rider Residences opens,” Birnholz says, echoing the optimism of many buyers in this space.

The Bottom Line

While the short-term rental condo market in Miami is booming, potential investors should approach with caution. Studnicky offers a stark comparison: “You’d be better off buying Amazon or Tesla stock.”

As with any investment, due diligence is crucial. Prospective buyers should carefully consider factors such as location, design, price, and management before jumping into Miami’s condo-hotel pool.