Boom in short-term rental condo projects in Miami

Developers of short-term rental-friendly condo projects in Miami are seeing rapid sales as investors and end users flock to more affordable units.

The projects offer units at prices as low as $300,000, close to what a first home would cost, in a market that has become out of reach for so many potential buyers and renters. This appeals to investors, who seize it to generate rental income, according to experts.

“With inflation, people like multifamily properties as an investment because rents change every year,” said lawyer Suzanne Amaducci-Adams, who runs the Bilzin Sumberg property practice. “Not everyone can afford a million dollar condo.”

Construction lenders are also keen to lend to developers with such strong pre-sales, although developers face rising construction costs and supply chain issues.

“The only thing that could slow [the market] the real fear of rising construction costs,” said Craig Studnicky, CEO of Aventura-based ISG World. “There is simply no way to control rising commodity prices. Until these costs increase, you are going to see many developers delay starting some of these projects for completely understandable reasons. »

In greater Downtown Miami, more short-term rental condos are now under development than traditional units, according to a recent ISG World Miami Report, which shows nearly 3,000 traditional condos and more than 4,400 short-term rental condos marketed for sale.

At least two more projects will launch soon, bringing that total closer to 5,500 units, Studnicky added.

“There is a high level of competition between these buildings in a neighborhood that has never had before,” he said.

Planned projects with short-term rental options include Related Group, ROVR Development and BH Group’s District 225 Tower. Developers are partnering with Airbnb for the 343-unit condominium building located at 225 North Miami Avenue in Downtown Miami.

Demand has been high. It sold out within two months of launching sales in October, with total sales of around $250 million, said Eric Fordin, managing director of Miami-based Related. Developers expect to break ground in April and line up their construction financing.

Units ranged in price from $300,000 to $800,000 and in size from studios to two bedrooms. Atlantic & Pacific will manage District 225, including listing and marketing units on Airbnb, as well as unit maintenance and cleaning.

The units will be delivered fully furnished and finished, so buyers can easily rent them out. The buyer pool was half domestic and half international, which is different from previous cycles that leaned more toward overseas buyers, but is consistent with the broader market during the pandemic, Fordin said.

“These units are more affordable than the majority of other products out there” and “more streamlined,” he said. “[Buyers] can literally have their dishes set up” before closing time.

Related, which has built more condos than any other developer in Miami, quickly kicked off sales of a second nearby short-term rental condo project called The Crosby at 601 North Miami Avenue. The company has partnered with Motwanis’ Merrimac Ventures to co-develop the 450-unit condo tower at Miami Worldcenter. They opened reservations in January and are 100% booked, Fordin confirmed. Developers are now converting to contracts.

Late last year, former associate executive Carlos Rosso partnered with Alex Vadia’s Midtown Development to launch the Standard Residences in Midtown Miami. Since then, the 12-story, 228-unit condo project is about 60% booked. Prices range from around $400,000 to almost $900,000.

The Standard Hotels brand project has some rental restrictions, limiting rentals to a minimum of 30 days, which has appealed to buyers in New York who are looking for an apartment but don’t want to be a short-term rental property without any restriction. , said Rosso.

The latest round of projects with rental flexibility follows launches and subsequent sales of developments that include YotelPad, Natiivo Miami and Smart Brickell, which sold as the overall condo market was in the midst of a major downturn, before the pandemic.

And more developments are underway, sources say. Blue Road and Fortune International Group are expected to begin selling Nexo Residences, a condo in North Miami Beach with short-term rental capacity, where prices will start in the $400,000s.

Oversized amenities

Like Related’s more expensive condo projects, its short-term rental-friendly developments are packed with amenities, Fordin said. At District 225, the amenity package includes indoor racquetball and basketball courts, a 28-foot-tall rock climbing wall, fitness center, yoga/spinning studios, outdoor patio, pleasure with a swimming pool and summer kitchens, and a shared workspace.

“The oversized amenities have been very attractive to buyers,” Fordin said.

The first new project to sell out in record time was Property Markets Group and E11even Hotel & Residences by E11even Partners, with two 65-storey towers. The buoyant sales were driven by amenities, which appealed to investor buyers who are also end users, developers said.

The first tower, currently under construction, began sales in early 2021 and was nearly sold out two months later. More than half of buyers plan to enroll their units in the project’s short-term rental program, which will operate as a hotel, according to a spokesperson. Prices also started in the $300,000s. After launching sales of the first tower of 375 units, they then launched sales of the second tower, which will connect to the first.

The two-tower development will share Las Vegas-style amenities that include a 20,000-square-foot multi-level E11even Beach Day Club, casino-style sports lounge, members-only rooftop, cabanas, plunge pools and a 2,200- square foot swimming pool. Amenities, housed in the first tower, are also expected to include a gourmet dining room, wellness center, sports lounge, beach club and art facilities. E11even Partners owns the nearby E11even nightclub, which is open 24 hours a day, seven days a week.

Even smaller developments record high presales.

Rishi Kapoor, CEO of development firm Location Ventures, began selling a flexible rental condominium project in Miami Beach and Coconut Grove late last year. Urbin-branded projects, each with fewer than 100 units, range in price from around $400,000 to $2.4 million. Although most developers say they have an influx of American buyers, all of Urbin’s buyers come from overseas, a spokesperson said.

The Miami Beach project is 75% pre-sold and the Coconut Grove development is 40% pre-sold.

“We find the reason is really our leaseback program with hassle-free management,” Kapoor said, adding that buyers like having the option to use units that will be professionally managed.

Buyers can expect to generate a 7% annual return, according to a spokesperson. As with other price levels, buyers are depositing demand deposits as prices continue to rise.

“We’re just seeing really strong tailwinds in the luxury sector, the short-term rental and extended-stay sectors,” Kapoor said.

Contact Katherine Kallergis