An influx of shovel-ready sites for sale is emerging across Miami, signaling a shift among developers who once aimed to partake in the city’s building boom.
As the market landscape becomes increasingly unpredictable, many developers are opting to cash in on properties they have painstakingly entitled rather than invest further in a climate marked by rising construction costs and fluctuating interest rates.
Brad Capas, executive vice president of multifamily sales and land development at CBRE, noted, “We see it quite frequently where, in many cases, would-be developers are calling us because they’re trying to figure out their best next steps. They’re not in a position to break ground today.”
The decision to sell rather than build has been underscored by recent activity from North Carolina-based Evolve Cos. The developer has listed two sites, initially acquired in 2022, which were intended for the construction of 246 apartments.
Wynwood 35, a development site at 535-585 NW 35th St., was set to be the first phase of that ambitious project. With plans to complete the eight-story structure featuring 141 units by the end of 2024, Evolve has now put the property on the market for $14 million.
In addition to Wynwood 35, Evolve also listed a Midtown property at 475 NW 36th St., priced at $12 million. The company had purchased this 31K SF lot for $9 million, and intended to erect an eight-story project with 150 units that ultimately did not materialize.
George Belesis of Dwntwn Realty Advisors explained, “They like Miami and South Florida, but when push came to shove, these development sites aren’t part of the core business.”
Another project in the Wynwood area, Wynwood Easel, initially proposed by developers Scott Robins Cos. and Philip Levine in 2020 for a hotel and residential units, has also been affected by the changing market conditions.
After reassessing the viability of the hotel project, the duo revised plans in 2022 to include 203 multifamily units and additional retail space. The property at 35-83 NW 27th St. is now listed for $26 million, with approval already in place.
Tony Arellano, one of the listing agents from Dwntwn, mentioned the objective of assembling, entitling, and then selling the site was still on track.
The current environment has created pressure on developers, as many hoped to break ground on projects one to two years ago. Capas revealed that developers might face lender or partner pressure to sell, or seek to reinvest their capital in different opportunities.
Conditions in the development landscape are expected to worsen, with rising interest rates and increased costs for construction and insurance impacting decision-making. Capas emphasized, “In some cases, they may have lender pressure or partner pressure to go ahead and sell, or they may just want to deploy that money elsewhere.”
South Florida is especially vulnerable to fluctuations in interest rates and tariffs, according to Virgilio Fernandez, vice president of Colliers South Florida Capital Markets.
Currently, the yield on 10-year Treasury bonds is 4.4%, a notable increase from around 0.6% in April 2020 and the 2% to 3% range throughout 2022.
Alongside interest rates, construction costs have surged, rising by 40% over pre-2020 figures, as noted by Construction Dive. These costs are poised to escalate further due to recent tariff implementations, such as a 10% universal tariff and substantial tariffs on steel, aluminum, and Chinese goods.
Fernandez pointed out, “There’s developers that see the opportunity to sell and make a nice premium rather than taking the risk of developing in this environment.”
With the target return on cost for developers being 6.5%, and the difficulty in achieving that figure, many might find themselves in a position where selling is the only feasible option.
Capas succinctly stated, “They’re going to see if they can sell their site and go do something else, because their business plan did not materialize the way they had intended.”
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