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This past year was one of growth in real estate, not only in South Florida, but all over the country. 2013 marked the first time since the collapse of the market that people truly started to feel a recovery. Putting the microscope over South Florida’s commercial real estate market, the year was littered with events that signaled the current and future expansion of our area. It was difficult to narrow it down, but below we have put together a list of the top five stories of 2013 according to the Top Commercial Blog.

5. Record Setting Deal on Lincoln Road

Lincoln Road is becoming the home for flagship retail and folks are looking to cash in on the trend. This December, Tristar Capital purchased 530 Lincoln Road for $30 million, setting a new record. At 10,000 rentable square feet, the deal amounted to $3,000 per square foot. The expectation is that Tristar will add more two-story, single tenant retail to accompany Forever 21, H&M, and Zara.

4. Swire Proposes 80-Story Tower

It wouldn’t be a countdown without mentioning Brickell CityCentre. This fall, Swire announced that they plan to add an 80-story tower to the already massive project to act as a gateway to the development. One Brickell CityCentre, as it would be called, would add more Class-A office space, condos, retail and even another hotel to the project. Phase one of the Brickell CityCentre is still currently set for completion in 2015.

3. All Aboard Florida Applies for Federal Loan

This past March, All Aboard Florida applied for a loan from the Federal Railroad Administration to begin work on their vision of a passenger rail service from Miami to Orlando. The train would also make stops in Fort Lauderdale and West Palm Beach. Commercial real estate would be a large part of the project, with around $325 million being dedicated to develop about 1 million square feet of commercial real estate. The planned opening of the service would be in 2015.

2. David Beckham Eyes PortMiami for Soccer Stadium

In November, all anyone was talking about was David Beckham’s plans to bring a new Major League Soccer team to Miami. The famed footballer was touring the city, looking for a location to build a new stadium. Then we discovered that Beckham was eyeing PortMiami. A soccer stadium in the port would fit right in with their  master plan for the southwest corner that would include a hotel, retail and office space. If this idea moves forward, Beckham and his team will have to figure out how to better flow traffic into Dodge Island.

1. The Miami Beach Convention Center Saga

If there’s one story with enough action, drama and significance to come out on top of this list, it’s that of the Miami Beach Convention Center. First there was the showdown between South Beach ACE and Portman-CMC for the development deal, but ACE’s victory only marked the beginning. The convention center project became a top issue in Miami Beach politics, leading up to a heated election in November. The vote resulted in more difficulties for the convention center, as any new leases would need to be approved by a super-majority. The drama here is expected to continue well into 2014.


The Federal Bureau of Economic Analysis recently released new numbers indicating that the real estate sector accounted for nearly a third of South Florida’s economic growth last year. The $274 billion economy expanded at a rate of 3.5 percent, the largest that the tri-county area had seen since 2006 and well past the national average of 2.5 percent.

Miami-Dade, Broward and Palm Beach have the real estate sector to thank for their exceptional rate of expansion. In 2012, real estate accounted for $52 billion contributed to the South Floridian economy. That number represented an 8.4 percent growth from real estate’s contribution in 2011.

Much like the overall numbers, real estate also experienced it’s best year since 2006, displaying the close-knit relationship that the sector has with the area’s economy. South Florida also experienced the sharpest growth rate of all of Florida’s largest economies.


Condo prices have seen strong increases in each of the past 26 months

This report comes on the heels of more good news for the real estate sector in Miami-Dade. The month of August brought another double-digit surge in the year-over-years numbers for prices and sales in the area. Single-family home sales experienced an increase of 15.1 percent from August of 2012, while condo sales also gained 7.9 percent from last year.

The median sales price of a single-family home in Miami-Dade increased 2.2 percent to $235,000 from July to August. That price represents a 20.5 percent surge from the previous August. The price of condo sales saw a spike, as well. The new median sales price of $180,500 represents a 5.3 percent increase from last month and 27.5 percent year-over-year growth. Condo prices have seen strong increases in each of the past 26 months.

Real estate, however, was not the only contributing factor to the surprising growth rate in South Florida. Sectors such as trade, finance, retail and information also played an integral role in the area’s progress. The success of the retail sector speaks volumes for commercial real estate prospects in the South Florida area.

“A planned passenger rail service would be an ideal way to link the nation’s most visited city with Florida’s gateway city for business and leisure travel.”

This is the sales pitch to citizens that can be found on the website for All Aboard Florida, the new railway project that hopes to create an Orlando-to-Miami passenger train service. The train would provide the vital mass transit that so many have longed for in this large state. Stops would include Miami, Fort Lauderdale, West Palm and, of course, Orlando.

The project would create tens of thousands of jobs, not only in the railway industry, but by connecting major cities and granting Floridians more flexibility to travel to work. However, another industry that would benefit greatly from All Aboard Florida is commercial real estate.


Rendering of All Aboard Florida train

All Aboard Florida is currently in negotiations with Miami’s Community Redevelopment Agency to acquire land in downtown Miami to build a large transportation hub. As a matter of fact, a compromise was reached yesterday and is currently awaiting approval from the county. The transportation hub would include restaurants, retail, office space, and residential apartments.

Commercial real estate is extremely important to revenues for All Aboard Florida. The project will dedicate $325 million to develop about 1 million square feet of commercial real estate. They are expecting a yield of around $35 million in rent.

The money being put into the $2.4 billion project by All Aboard Florida will amount to about $125 million, or around 5 percent of total costs. A large sum of the money will be provided by institutional investors, paying up to $600 million for a preferred investment. The organization is counting on the federal government to play a part in the development as well. All Aboard Florida is expecting a federal loan to aid them with the $1.5 billion in infrastructure costs.

The next step for All Aboard Florida would be the most important, bringing in revenues through ridership. All Aboard is currently projected to attract 4 million riders by 2018, a mark that took the Tri-Rail service about two decades to hit. If All Aboard Florida can achieve these numbers, it would yield a return of $785 million.

Global CRE Advisors Point Out What They Like about U.S. CRE Markets

By Mark Heschmeyer
June 22, 2011

What better time than the summer solstice to shine a light on current commercial real estate market conditions. CRE firms and organizations released a broad array of mid-year market overviews and viewpoints this past week – all of which cast conditions with a fairly sunny outlook.

We report on the views presented by four respected analysts, including Credit Suisse, which is telling global investors to follow other world currencies flowing to the United States. Also, Maximus Advisors and Fannie Mae both say the U.S. multifamily market is poised for a four-year upswing. And RREEF Global Real Estate Investment says U.S. investors would do well to look closely at the industrial and retail property sectors.

We’ve summarized their reports below.

Credit Suisse: Follow the Money

After suffering through the credit crisis, commercial real estate macro indicators are beginning to show signs of improvement, according a paper from the Customized Funds Investment Group (CFIG) of Credit Suisse’s Asset Management division.

Entitled, “Commercial Real Estate: Has the Tide Turned?” authors Kelly Williams, head of CFIG, Nadim Barakat, CIO of CFIG, and Peter Braffman, a partner on the CFIG Real Estate team, discuss the sector’s uneven global recovery, and how the U.S. commercial real estate market may well provide the most compelling opportunities in the first phase of the recovery.

“We believe that the U.S. commercial real estate market will likely provide the most compelling opportunities in the first phase of the recovery,” the authors write.

This is a result of:

  • Stabilizing debt markets and the re-emergence of commercial mortgage-backed securities (CMBS) issuance;
  • Property demand improvements, as shown in vacancy and absorption trends;
  • Favorable commercial property valuations;
  • Macro-economic tailwinds; and
  • Significant level of capital ready to be deployed for U.S. real estate.

“Many of the world’s largest investment firms, institutional investors and pension plans have been increasing allocations to this asset class. Starting in 2009 and throughout 2010, institutional capital poured into core and stabilized real estate in primary U.S. market regions in search of reliable, long-term yield,” the authors write. “Public pension plans, such as California Public Employees’ Retirement System (CalPERS), have been restructuring their real estate initiatives to include a greater allocation to core commercial property.”

“This investment activity has led to a meaningful recovery for these properties as yields re-approached pre-financial crisis levels,” the authors write. “The growing liquidity has also made possible the re-opening of the initial public offering market for real estate ventures.”

Of note, the authors point out that Archstone, one of the largest real estate firms focused on the development and management of multifamily (apartment) properties, has been exploring the possibility of a $5 billion IPO, which would be the largest real estate IPO in history.

Low interest rates in the U.S. have also been instrumental in containing the cost of capital for real estate investors and making property returns attractive in comparison to other asset classes, such as fixed-income instruments.

The authors say that investors may be able to take advantage of the changing real estate conditions in the U.S. by considering a number of specific strategies, including income-generating value-added commercial property, opportunistic distressed commercial property and certain other niche income-generating real estate such as senior housing, student housing, medical offices and self-storage.

Despite compelling opportunities, the paper also addresses the risks associated with the commercial real estate market and how investors should consider developing real estate investments in the context of their aggregate portfolio.

Maximus Advisors: 4 Years of Improving Multifamily Conditions Coming

As the U.S. economic recovery gathers sustained momentum and spending returns to pre-recession levels, fundamental shifts in consumer behavior are expected to have lasting effects on numerous real estate sectors, according to the latest national economic and property ratings report by real estate research and consulting firm Maximus Advisors.

“As we have previously predicted, the U.S. apartment market has been recovering at an astounding pace,” said Dr. Peter Muoio, senior principal of Maximus Advisors. “The sector will continue to benefit from the growing preference for renting over homeownership as well as rapid growth of the young adult population. We predict that vacancies will continue to decline while effective rents grow robustly during the next two years due to limited development of new multifamily properties during the recession.”

Key findings from the report include:

  • The apartment market will continue to improve over the next four years as renting remains more attractive than homeownership and there is little in the pipeline in terms of new construction.
  • The office/commercial market recovery has begun as supply and demand have crossed over. Office absorption has been positive for the past two quarters, driven by gains in office employment. However, further labor market weakness could inhibit recovery in the office segment in the short-term. According to Muoio, the market has bottomed and will see vacancies decline more rapidly in 2013 and 2014.
  • Retail real estate stands to benefit from consumer spending stabilization, though higher gasoline prices this summer will inhibit this trend. Additionally, the rise of online retailing will apply downward pressure on in-store demand, further threatening the retail segment.
  • The industrial segment is bottoming but demand appears to be picking up as industrial output continues to rise and exports are at all-time highs.

Maximus Advisors is an affiliated research provider of CW Financial Services, a vertically integrated commercial real estate debt platform.

Fannie Mae: Multifamily Demand/Supply Imbalance

Overall housing starts are at historic lows and multifamily new construction is no exception. However, Kim Betancourt, director, multifamily economics and market research for Fannie Mae, says that portends well for the multifamily segment.

Looking at the construction data, there are less than 230,000 multifamily and condo units under way. As a result, year to date completions through May 2011 totaled just 31,312 units — well below historic averages.

“Despite the oversupply of single-family housing, demand for multifamily rentals is outpacing supply quickly in many metros,” Betancourt wrote in a commentary this week. “Even at the national level, apartment rental demand has been quite robust, resulting in rising rents and declining concession rates.”

There are an estimated 77,600 apartment and condo units expected to complete in 2012, but beyond that timeframe the number of completions plummet, Betancourt writes that those numbers do not represent enough supply to meet demand.

With overall multifamily completions abating, developers have taken notice, she writes, noting that in metros such as Washington, DC, there are nearly 11,000 apartment units under way and 16,000 units under way in New York.

RREEF: U.S. Property Selection Should Be Overweighted to Industrial, Retail

Real estate fundamentals are improving globally and, with only a few exceptions, all property types and regions are in recovery, according to RREEF Global Real Estate Investment’s latest outlook.

The United States will continue to produce appealing risk-adjusted opportunities in the near term and benefit from having a deeper investable universe, RREEF said. In addition to office and shopping center properties, institutional investors can invest in the industrial warehouse, R&D space and multifamily sectors in the United States.

The United States real estate market is among the most transparent and liquid in the world. This is especially true for tier one markets, where international investors are most likely to place capital, RREEF said. Within the U.S., property type selection should have an overweight to industrial and retail properties and underweight to the apartment and office sectors relative to the NCREIF Property Index and a moderate overweight to the East and West regions with corresponding underweight to the Midwest and South.

Coastal, supply constrained, markets tend to have higher volatility than those in the interior, but will also tend to outperform during the next five years, RREEF said. It will be longer before meaningful amounts of construction commence in the supply-constrained markets and so vacancy will be able to compress further in these markets.

Seattle and Miami-Ft Lauderdale retail will outperform, with lower volatility. Office space in San Francisco, New York and Boston will also likely outperform, as will industrial space in Los Angeles, New York and Seattle.