Price cuts in the 7,000 unsold condos have drawn college students, young professionals, and empty nesters, revitalizing the city's core
Brandon Klein has done what few Floridians can: go weeks without driving. The 26-year-old tax accountant walks three blocks from his condominium across the street from Biscayne Bay in Miami to his office at Deloitte. On weekends, he and his friends hang out on the pool deck or share a cab to a local Irish pub.
He lives in Downtown, a neighborhood north of the Miami River where young people are renting condos built during the 2004 to 2008 boom to attract affluent second-home buyers. The newcomers enjoy a lifestyle made possible in part by developers and banks seeking to recoup some of their losses. Klein and two roommates pay less than $2,800 a month for a three-bedroom unit that has a view of Biscayne Bay, a wraparound balcony, and access to a gym, spa, and steam room. "Five years ago you wouldn't have kids fresh out of college living in luxury like this," says Klein, sitting in the three-story lobby of his building, 50 Biscayne, while coordinating happy-hour plans by text message. Similar apartments sold for as much as $809,000 during the boom, according to Peter Zalewski, a principal with consulting firm Condo Vultures in Bal Harbour.
Many of Klein's friends live nearby in the Met I, which has 447 luxury units and a steakhouse on the first floor. They refer to their building as "Deloitte Dorm" because it's home to so many employees of the accounting and consulting firm.
The 7,000 unsold condos in Miami's core are filling up and giving life to Downtown, an area known for its courthouses, warehouses, homeless shelters, and the American Airlines Arena, where LeBron James will play next season with the Miami Heat. The renewal is even more pronounced in the adjacent neighborhood, Brickell, just south of the Miami River. "I'm a big city person, and I always thought Miami didn't have a real city," said Dejan Krsmanovic, a 39-year-old biomedical engineer who was on a first date at Segafredo, a busy Italian restaurant and bar that opened in 2008 in the Brickell area. "This is beginning to resemble a city."
The new vitality can be seen at Juan Chipoco's sleek Peruvian restaurant, CVI.CHE 105, on Northeast Third Avenue off East Flagler Street, in the heart of Downtown. Chipoco, who recently expanded the restaurant to 220 seats from 65, says lines sometimes form on weekends despite a $10 valet fee and limited parking.
Diners can choose from more than a dozen restaurants north of the Miami River that stay open after 7 p.m., compared with two or three a few years ago, says Jose Goyanes, 42, a longtime Downtown business owner who, with his partners, converted a luggage store into Tre Italian Bistro a year ago. The flood of college students, young professionals, and empty nesters has softened the impact of the recession. "It's like a bungee cord pulling Downtown businesses up," he says.
Alfred Spellman, 31, a documentary filmmaker and lifelong Miami resident, says the new residents and businesses are good for Downtown. He doubts the area will ever be a destination for affluent buyers, though: "In three or four years, when a wealthy couple walks into the lobby of one of these buildings and sees a bunch of college kids, will the owner of the unit get the price hoped for during the boom? Don't think so."
The influx of renters intensified about 18 months ago when banks that financed the condo projects agreed to let developers slash sales prices by as much as 40 percent, says Zalewski. That spurred demand from foreign buyers and all-cash investors, many of whom are renting out their units until prices rebound, he says.
The Miami Downtown Development Authority estimates that the population of the city's core jumped to about 70,000 from 40,000 since the 2000 Census, with much of the increase coming in the past few years. The Miami rental market is one of the strongest in the country, according to Ronald G. Johnsey, president of Axiometrics, a research firm in Dallas. That's true even though unemployment is more than 11 percent, compared with 9.5 percent nationally, and developers are adding to supply by leasing units built for purchase.
Builders haven't given up on finding buyers. At the Axis on Brickell, developed by Brack Capital Group, about 85 percent of the 718 units are rented, says Albert Piazza, the project manager. One-bedrooms go for about $1,400 to $1,600 a month; two-bedrooms cost $1,800 to $2,200. The firm has sold about 239 condos and lets tenants put half their rent toward purchase. "The goal is still to sell out," Piazza says.
"We were trying to build a city in perhaps what was too fast a time period," says Jorge M. Pérez, chairman and chief executive officer of the Related Group. The company has built more than 6,500 units in Downtown and Brickell. Pérez says the Related Group lost $50 million to $100 million on the $1.25 billion Icon Brickell, completed in late 2008. The 1,800-unit project has a boutique hotel and a two-acre sundeck 140 feet above Biscayne Bay, featuring three pools, an outdoor fireplace, and an oversize floor chess board. "What we did in building those buildings, was it wrong?" Pérez says. "I wish there wasn't the suffering on a personal basis, on a banking basis, and individual basis. But have we made Miami a much better city? Absolutely, yes."
The bottom line: By lowering prices, Miami developers have found a way to fill up empty condo towers while waiting for the economy to rebound.