"We saw the land for large single-family home subdivisions was evaporating, and the margins were evaporating just as quickly. So we rethought our strategy," says Jim Rosewater, partner and project director. "In Florida, the condo market is on fire now, and we've sought out opportunities to do some unique things."
Weitzer is not alone in turning to multifamily developments. Lennar, the state's largest home builder, created a division to build high-density projects in south Florida, and WCI Communities in Bonita Springs has built successful luxury high-rise towers in affluent markets across the state.
The market is so hot right now that many new condo units are being snapped up at the preconstruction stage by investors betting that rising prices will allow them to resell their units at a profit before or after closing. Many speculators now are putting down reservation deposits on several units in one building -- or one or two units in competing buildings in the same market.
Since it can take 18 to 36 months to complete a high-rise condominium, it may be 2005 or later before these investors know whether they have guessed right on market trends.
In the meantime, they are contributing to a buying frenzy that may be misleading some condo developers into overestimating the depth of the market. And there is always the risk that a setback in the national economy or rising interest rates could leave speculative buyers walking away from their contracts or selling at prices below new condos on the market.
In the meantime, however, developers are scrambling to find sites for multifamily units, with many focusing on "second-cycle development" -- tearing down buildings to put up condominiums. They are also converting apartment buildings to condos and repositioning warehouses, shopping centers and other commercial spaces into condominium residences.
Ceebraid-Signal recently completed a condominium conversion in downtown Boca Raton and is studying a 300-unit golf course conversion project in Clearwater. "This is a perfect climate to convert rentals to condominiums," says Vice President Adam Schlesinger. "Interest rates are low, and many people are interested in investing in a condominium. This is the direction the business is going."
Demand for luxury
One of the fastest-growing multifamily market segments has been the super-luxury category, with condominiums priced at $1 million or more. Many developments, such as WCI's BellaMare at Williams Island in Aventura, offer waterfront views, one of the most-valued -- and costliest -- amenities in Florida.
In south Florida, demand for waterfront condominiums from Latin American second-home buyers continues to constitute a large part of the luxury market, says Edgardo Defortuna, president of Fortune International Realty, which has expanded into residential development as well as brokerage. "In many cases, affluent Latin Americans are accustomed to high-rise living," he says. "They are excited about living on the water, but high prices make it almost impossible to afford a waterfront single-family house."
Even non-water developments are attracting high-end buyers. In central Florida, The Regent Hotel, Spa and Residences near Rollins College in Winter Park offers 3,700-sq.-ft. luxury units starting at $1.25 million. "Most of our buyers live in the neighborhood," says Mark Ellert, president of Aztec Leisure in Dania Beach, which is developing the Regent with Capital Partners in Orlando. "These are affluent, discriminating homeowners who are looking for convenience, service and security."
With Las Olas River House, a 287-unit luxury condo near downtown Fort Lauderdale, nearing a sellout, Tarragon Realty Investors is planning new projects like The Metropolitan, a 124-unit luxury condominium in Sarasota.
"Without question, we will be going to other Florida markets in the next few years," says Tarragon South Development Corp. President Richard Zipes.
Condos: Evolving market trends
Buyers: It's not just seasonal visitors or retirees any more. Professionals in their 20s and 30s, empty-nesters downsizing from their suburban homes and even families with young children are choosing to live in condominiums. In the future, moderately priced multifamily developments in the suburbs will increasingly cater to these working-age buyers, with attached town houses, garden apartment condominiums, mid-rise apartment units and rental conversions.
Inside: More units now feature exciting floor plans, gourmet kitchens and luxurious baths, floor-to-ceiling windows and even private elevators. Loft residences, with their high ceilings and open floor plans, have been best sellers in south Florida. Other developers are creating two- and three-story town homes and "coach homes" that offer horizontal living space. These types of products will become increasingly popular replacements for single-family homes as people resist vertical living (mid- and high-rise developments) in favor of large garden condominium complexes.
The neighborhood: The revitalization of Florida's downtowns -- with new shops, restaurants, cultural attractions and pedestrian-friendly lifestyles -- is another factor in the state's condo boom. "People are choosing a more livable environment, with jobs, shopping and entertainment close by," says Jorge Perez, chairman of The Related Group of Florida in Miami, which is developing downtown condominiums from Miami to West Palm Beach.
Major-Market Wrap-Up
South Florida
Palm Beach County is likely to lead the tri-county south Florida market in both new jobs and home construction. The pending arrival of the Scripps Research Institute will provide a badly needed boost to the region's technology industry. In Broward, a lack of raw land will slow the pace of home starts. However, the pace of redevelopment in Fort Lauderdale and other eastern communities is quickening. Miami-Dade County will see slower job growth but continued strong in-migration, primarily from Latin America and the Caribbean. Single-family home construction will be focused on the southwestern suburbs, with downtown Miami as the hub of a red-hot urban redevelopment marketplace.
Orlando
An upturn in tourism and strong defense-related spending will create more jobs and boost demand. New-home growth will be strongest in the western and northern suburbs. "The Orlando metro area is one of our healthiest markets," says Judy Green, CEO of Florida's Coldwell Banker Residential.
Tampa Bay
Residential growth will be the strongest in eastern Hillsborough and southern Pasco counties, as Pinellas is nearly built out. The pace of job creation will pick up throughout the Tampa Bay market, with the exception of Bradenton, where the closing of Tropicana's headquarters will have a negative impact.
Jacksonville
The strongest housing markets this year are likely to be in southern Duval and northern St. Johns counties, although suburban growth is also continuing to the west and north. Jacksonville enjoys a diversified economy, and job growth is expected to be strong. The revitalization of the downtown area is continuing on both sides of the St. Johns River.
Fort Myers/Naples
A strong winter season would signal another growth year for this retirement-oriented market. Job creation is likely to be modest and mostly in the services sector. But positive results in the stock market might encourage more preretirees to invest in seasonal or vacation homes in this market.
Northwest Florida
With new developments under way along the Gulf coast and moderate housing prices by Florida standards, the Panhandle is positioned to become an increasingly important player in the second-home marketplace. "This is clearly a hot spot in the state," says Green, "and we look forward to another robust year." Leading the way are new waterfront developments by St. Joe/Arvida. "Both our vacation-retirement and our primary home communities are doing very well," says Jim Motta, president and CEO. "Demand is coming from throughout the Southern states."
Home Economics
Single Family Homes: Higher prices will cut into demand for new single-family homes. However, the market potential for new development remains strong, particularly for homes priced below $200,000, where pent-up demand still exists. Low interest rates should continue this year, which will partially compensate for escalating prices in almost every major market in Florida.
"We're looking at a very stable state-wide market," says Green. "Average sales prices will increase, but perhaps a little less than in the past few years. The winter season will be strong, which will boost the pace of sales in our coastal areas."
On a national level, David Lereah, chief economist for the National Association of Realtors, says the economic fundamentals are in place for another strong year. "Home sales will be off mildly for the second-best showing ever in 2004," he says. "With the economy improving, consumer confidence rising and jobs being created, a growing number of households will sustain strong housing demand. Only a modest rise in mortgage interest rates will slightly dampen the pace of home sales next year."
Apartments: The majority of new homes in Florida are priced beyond the means of first-time buyers and moderate move-up buyers. While higher prices may reduce the sales velocity of new projects, they should help the state's apartment market recover, after losing a significant share of tenants to homeownership during the past three years.
Lewis M. Goodkin is president of Goodkin Consulting, a strategic alliance with PricewaterhouseCoopers, in Miami.