Tag: florida

• Branded residences are a luxury good

  Elevate Miami, which I wrote about last month, just announced a number of new speakers and, more specifically, a number of new high-rise development projects that will be discussed at the conference. They are (not an exhaustive list):

  • Dolce & Gabbana Residences, Miami
  • Mercedes-Benz Places, Miami
  • Aman and One High Line Residences, New York
  • Indian Creek Residences & Yacht Club, Miami Beach
  • Edition Residences, Miami
  • AGE360, Curitiba, Brazil

  What should be clear from this list is that Miami is like a different planet. It is one of the places where the richest people in the world go to spend their money, much of it on real estate. Because of this, you can think of this real estate as a luxury good, which is why so many of them are now branded.

  In economic terms, a luxury good is typically defined as a good where demand increases — more than what is proportional — as incomes rise. For example, if a person’s income goes up by 1%, but their demand for a particular thing goes up by 5%, then this thing would be considered a “luxury good,” as opposed to a “normal good.”

  The technical definition is an income elasticity of demand that is greater than 1. More simply, this just means that as someone starts making more money, they will start spending a greater percentage of their income on luxury goods. This is in contrast to “necessity goods,” where it doesn’t matter how much money you make, you only need so much toilet paper, for example.

  What all of this suggests is that as people from all over the world get rich, they are likely to want more branded residences in a place like Miami. However, the flip side of this dynamic is that as incomes fall, the demand for luxury goods should, in theory, also fall more than what is proportional. It works both ways.

  So I’ll be curious to hear — from the developers at Elevate — how things are going right now. We’re at a time in the real estate cycle where everyone is rethinking their strategies. Or maybe, Miami truly is a different planet.

  2024.10.17

• Miami is the top US city for foreign businesses

  

  The Financial Times and Nikkei have just published their inaugural Investing in America report, which looks at the best US cities for foreign multinationals to invest in and do business in.

  To come up with this, they used about three dozen different metrics — everything from openness to quality of life. From what I can tell though, it doesn’t appear that climate risk factored much into this ranking. It should.

  There’s a lot of Florida on this list and Miami comes out on top, largely because, last year, it had the most foreign direct investment per capita of any US city. It also has a well-connected airport, two of the largest shipping ports in the US, and an international population.

  Lots of people and companies are going long Miami right now.

  2022.10.05

• Optimizing for cars

  Vox recently profiled what they are calling the deadliest road in America — a certain section of US-19 running along the Gulf Coast of Florida. It is generally an 8-lane road — 9 at most intersections — and so as you might expect, it is place that was designed for cars.

  From 2017 to 2022, US-19 saw 34 pedestrian fatalities involving a car for every 100 miles. Indeed, this stat makes it the deadliest highway in the state of Florida for people on foot.

  The other telling stat for me is the road’s crosswalk spacing. This is a place that is lined with restaurants, hotels, and many other commercial uses, and yet the crosswalks are sometimes spaced miles apart.

  This kind of street scale is mind boggling for pedestrians. No one in their right mind is going to go out of their way a mile or two just to cross a road, and so it’s no wonder that people are jaywalking and that too many people are getting hit.

  I know that our tendency is to try and solve these problems with things like flashing lights, speed radars, and orange flags that people can unceremoniously waive as they cross the street. But at the end of the day, this is an urban design problem.

  Spaces that are optimized for cars are, by definition, not optimized for pedestrians. The choice is ours.

  2022.08.18

• Miami rents increased 55.3% on a year-over-year basis

  All of the talk of people moving to Miami over the last two years is certainly coming through in the numbers. According to this recent rental report by Realtor.com, residential rents in the Miami-Fort Lauderdale-West Palm Beach metro area increased 55.3% on a year-over-year basis (as of February 2022). And the next 2 metro areas on the list are also in Florida. This is compared to a 17.1% increase for national rents, which is quite a bit lower, but still a massive increase. These are clearly unsustainable numbers and eventually things will settle down. How exactly things settle down is yet to be determined. But for right now, the above figure feels to me like a pretty good answer to the following question: If you had the flexibility to work from anywhere, where would you go? Somewhere sunny, I guess.

  2022.03.30

• Florida proposes stricter condo rules

  In response to the tragic collapse of the 12-storey Champlain Towers South building in Surfside last year, the state of Florida is set to pass new stricter condominium rules around inspections and reserve funds. And according to the WSJ, the requirements would be some of the strictest in the US.

  Under the House bill that has already passed, condominium buildings that are three or more stories would need to be fully inspected and recertified once they are 30 years old. For buildings within 3 miles of a coast (salt water is impactful), the requirement would be 25 years old. Following this recertification, the buildings would then need to be inspected every 10 years. Under the proposed Senate bill, the inspection process would start after 20 years and be required every 7 years. In both cases, the reports that come out of these inspections would need to be submitted to all unit owners and to local building officials.

  If approved, these rules would have an immediate impact on the market given that about 900,000 of the approximately 1.5 million condominium units in Florida are older than 30 years old.

  But is all of this enough? I think the devil is in the details.

  Under the House bill, unit owners would no longer be able to waive the collection of certain building reserves. But under the Senate bill, the requirements for waiver would simply be tightened. How tight? In all honesty, I don’t know the specifics. I haven’t read the bills. But the collection of reserve funds is paramount. And after reading the above WSJ article, I can’t help but feel like these new policies might still be less stringent than what we already have here in Ontario.

  Here are two excerpts from Ontario’s Condominium Act:

  

  

  Put more simply, all buildings and structures need to have regular inspections. Materials and systems naturally depreciate over time and so the point of a reserve fund study is to determine (1) what will need to be repaired/replaced, (2) when it will need to be repaired/replaced, and (3) how much it might cost. You then need to ensure that the money is in place to carry out the execution of said study. In all cases, there should be zero compromises around life safety.

  2022.03.06

• Adam Neumann has quietly acquired some 4,000 apartment units

  So it was announced today that Adam Neumann — the cofounder and former CEO of WeWork — has been quietly buying apartment buildings across the United States. According to the Wall Street Journal, he is involved in entities that have acquired more than 4,000 apartment suites valued at least $1 billion.

  The buildings, which seem to be fairly typical and have at least a few hundred doors, are located in cities like Miami, Ft. Lauderdale, Atlanta, Nashville, as well as in many other US cities. It’s not clear what the exact plan is for this real estate but people who claim to know things are saying that it will involve “redefining the future of living”, or something along these lines.

  Presumably this means catering to young professionals with cool design, fun amenities, and beer taps. Whatever ends up happening, it is interesting to see some of the cities that he/they are targeting. They are the cities that we’ve all been talking about for many years. You know, the ones that are growing quickly and have greater housing supply elasticities.

  2022.01.04

• Sea-level rise projections in the Florida Keys

  Monroe County, Florida, which is the county that includes the Florida Keys, held a public meeting at the end of last month to discuss what they are going to do to respond to climate change. The agenda can be found over here. According to this article in Grist, it was a seven-hour public meeting and the overall tone was something along the lines of this:

  “The water is coming and we can’t stop it,” said Michelle Coldiron, mayor of Monroe County, which encompasses the Keys. “Some homes will have to be elevated, some will have to be bought out. It’s very difficult to have these conversations with homeowners, because this is where they live. It can get very emotional.”

  In attendance at the public meeting was a scientist from the National Oceanic and Atmospheric Administration (NOAA), who outlined that they are expecting an additional 17 inches of sea level rise by 2040. This is the “intermediate high” scenario based on the below chart.

  

  Which is why the county is looking to spend $1.8 billion over the next 25 years to raise some 150 miles of roads and deploy a bunch of other fixes that include things like new drains, pumping stations, and vegetation — all of which are of course intended to mitigate the impacts of sea level rise.

  One problem, which shouldn’t be all that surprising, is that the county doesn’t have the money to pay for all of this. And as the quote at the beginning of this post suggests, part of “this” includes buying out many of the homes. Presumably these are the higher risk homes where there are no clear alternatives.

  This is a problematic situation. Because as time goes on, one would expect the tax base here to start to decreasing. Both as homes get bought out and as overall housing demand weakens. There are also financing and insurance considerations. Already the Keys have some of if not the highest insurance premiums in Florida.

  As I understand it, the Florida Keys are one of the most vulnerable areas in North America when it comes to sea level rise. And so unfortunately, the public meeting that took place two weeks ago could very well be considered a leading indicator for what’s to come.

  2021.07.01

• US migration patterns according to one-way U-Haul truck transactions

  

  One of the ways to try and keep tabs on where people are moving is to look at the number of permanent address changes. Another way is to look at the number of one-way U-Haul trucks that enter versus leave a particular state. And it turns out that if you’re U-Haul, you do care to track where all of your trucks are going. Each year in the United States there are about 2 million one-way truck transactions.

  Looking at the data from 2020, the top inbound destinations — that is, the states that had the largest net gain of one-way U-Haul trucks — were (1) Tennessee, (2) Texas, and (3) Florida. This is a big jump for Tennessee as it was 12th in 2019. Texas and Florida, on the other hand, were similarly in the top three last year. In last place on this list is California, meaning that it had the largest net loss of one-way U-Haul trucks leaving the state.

  Overall, this data continues to reinforce a shift that is taking place toward more affordable housing markets, such as those in the southern United States.

  For the full U-Haul article, click here.

  Photo by Tanner Boriack on Unsplash

  2021.06.29

• The Surfside tragedy

  What happened in Surfside, Florida this week with the partial collapse of a 12 storey building is a horrible tragedy. My heart goes out to everybody who has been affected. I can’t imagine how this must feel. The New York Times is reporting that some 159 people are still unaccounted for, as of last Friday night. At least 4 people have been killed in the incident.

  The focus right now is on saving as many human lives as possible. Without a doubt, that is priority number one. But this situation also raises a critically important question: How the hell could this happen in North America? When I saw the terrible news this week, I immediately flipped the article to one of our structural engineers with a note asking basically this.

  As many of you know, buildings are typically designed and built with lots of structural redundancies. This is so that these sorts of tragedies can be avoided. It is too early to know exactly what happened here, but there are going to be questions around the building’s original design and construction, its maintenance program (saltwater is awful for buildings), and much more.

  I am sure that all of this will come out in the fullness of time. And it is important that it does.

  2021.06.26

• Where people are moving in the US

  

  Another day, another set of announcements about large companies and rich people moving to lower cost US states. Yesterday it was announced that Oracle will move its corporate headquarters from Silicon Valley to Austin, Texas. (If you remember, Elon Musk also recently announced that he had moved himself to Austin from California.) The company has said that the move puts Oracle in the best position to grow and to give its employees greater flexibility about where and how they work.

  While these sorts of moves are making headlines right now, it’s important to keep in mind that this is not necessarily a new phenomenon. In fact, depending on how you look at it, you could argue that these headlines are a lagging indicator for trends that have been underway for some time. Below is a chart from New Geography showing the top 50 state-to-state moves last year. Number one is the move from California to Texas with 45,172 net movers. And number two is the move from New York to Florida with 38,512 net movers.

  

  According to New Geography, California saw a net domestic migration loss of 912,000 people from 2010 to 2019. And the most popular receiving states are what you would expect: Florida (1,230,000 people) and Texas (1,146,000 people). A big part of this story obviously has to do with housing affordability and the search for an overall lower cost of living. As well, since companies are always in need of young and smart talent, it makes since for them to locate in places where young and smart people want to live.

  But urbanists like Richard Florida have also pointed out at this relocation of companies could be a leading indicator for something else: the decline of innovation in America. Here, he argues that in the nascent stages of a new invention, there tends to be a tight clustering phenomenon. Think steel in Pittsburgh, cars in Detroit, and computing in Silicon Valley. However, as the industry matures, the tendency to centralize seems to decline and companies then start moving around.

  I’m not yet convinced that this is what’s happening. Because there seems to be a pile on happening in specific cities like Austin (which, by the way, I hear is terrific). Even before this pandemic, there was a growing sense (from the outside, mind you) that the Bay Area had simply gotten too expensive, both for individuals and for companies. It would seem that when you greatly restrict the supply of new housing and make it unattainable for many, people go find housing somewhere else. Sometimes in other states.

  Photo by Tomek Baginski on Unsplash

  2020.12.12