With 82 Percent of New Brickell Condos Sold, Market Change Nears

Miami Today
3/23/2011

By Marilyn Bowden

About 82% of new condos along the Brickell corridor have been sold, and with sales velocity picking up and foreclosures and short sales being absorbed quickly, some experts forecast a return to a balanced market in less than two years.

Brickell led the county”s urban markets in the addition of condos during the building boom, with 32 new buildings adding 10,326 units to its inventory, according to the 2011 annual update of the Downtown Closing and Occupancy Study prepared for the Downtown Development Authority by Goodkin Consulting and Focus Real Estate Advisors. The report looks at housing in the Central Business District, Park West, Omni and WynwoodEdgewater as well as Brickell.

Of those new Brickell con dos, 8,466, or 82%, had closed and 1,860 remained unsold as of Dec. 31, 2010.

In the fourth quarter of 2010, 592 of the 1,026 units sold in the Goodkin-Focus report”s study area were in Brickell.

“Over the past 12 months, sales velocity has ranged 65 to 95 units a month,” said Craig Werley, president of Focus Real Estate Advisors, “which comes out to between 29 and 20 months” supply. That means, since sales velocity has been creeping up, Brickell could reach full sell-out in less than two years.”

The bulk of the remaining inventory, he said, is in Icon, Infinity, Axis and, to a lesser extent, The Plaza, all of which are leasing well. Due to the high rate of rental activity in new Brickell buildings, he said, full occupancy could come in half the time. “There are 1,342 vacant units left,” Mr. Werley said, “and the velocity of leasing activity has been running at an average of 180 a month during the past quarter, which would suggest seven to eight months left for full occupancy.”

Chris Basick, managing broker at Esslinger Wooten Maxwell”s Brickell office, said 318 condo sales are pending in the Brickell market.

Breaking down sales activity into foreclosures, short sales and first-time sales, he said, shows encouraging trends.

“In the past three months,” he said, “an average of 44 foreclosures were listed for sale and the same number sold. So essentially, as soon as they”re listed, they sell.”

Short sales activity over the same period has been reduced 26%, Mr. Basick said, but the number on the market plummeted from 400 to 200 over the past 12 months, and pending transactions are up 48%. “That shows that more and more banks are accepting those short sales,” he said.

Subtracting short sales and foreclosures from the Brickell resale market leaves 1,033 units, Mr. Basick said, selling at a rate of 43 units a months ­ a 23month supply.

“The majority of our buyers come from either Europe or South America,” he said, “and most of the deals are still cash deals.”

Mr. Werley said it”s hard to judge how much of the inventory has been bought by investors who will re-inject their units into the market as soon as prices move.

“It”s definitely a concern,” said Christian Kawas, a Realtor-associate at Douglas Elliman Florida. “But it seems that the clients who are buying anywhere from one to 20 condos in the area are very different from those who came during the boom, and their strategy is completely different.

“The number that is most important now is return on investment, not rate of appreciation. That indicates they are not thinking of flipping, but seeing it as a vehicle for low-risk investment.

“If they can rent it out getting anywhere from 4%-8% return on investment, it”s an investment tool that”s better than having money in the bank, which tells me they are likely to keep it long-term, say five to 15 years.

“Undoubtedly some will sell their units sooner, but there won”t be an avalanche.”