MIAMI—It's no secret that construction growth in South Florida has slowed in 2016. A recent report from Dodge Data & Analytics found that the dollar value of new construction contracts in August 2016 dropped by 22% compared to the same month last year.

GlobeSt.com caught up with Rey Melendi, COO of 13^th Floor Investments, to get his take on what's unique about this construction cycle in part one of this exclusive interview. Stay tuned for part two in which he will discuss how the amount of available equity compares to past cycles.

GlobeSt.com: What is unique about this current construction cycle?

Melendi: The development of condos has slowed significantly and very few of the projects that are being built this cycle are new starts. As investors have grown more conservative in a shaky international climate, the majority of new condo projects are relatively small developments in the $20 million to $40 million range that cycle through the market quickly. This means that contractors could potentially be at risk of not having work lined up two to three quarters from now.

Sophisticated developers are now looking towards the future with multifamily and mixed-use developments. Builders are taking advantage of the price compression that has been created in market by negotiating lower costs now for upcoming large scale projects.

GlobeSt.com: What is extent of the role that labor costs play in the timely delivery of new projects?

Melendi: Labor costs are crucial to the successful delivery of a project as they represent anywhere from 40 to 60% of overall cost. This year's dip in construction has actually helped to stabilize the overall market as labor costs have come down to a point that funded projects are now better able to meet their delivery timelines.

As we see the market softening, construction teams are no longer over extended throughout South Florida. The renewed availability of labor is resulting in less delays and production happening on a much timelier basis.

GlobeSt.com: What is unique about this current construction cycle?

GlobeSt.com: What is extent of the role that labor costs play in the timely delivery of new projects?

Instant Insights /

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