2021 Is Turning Into One of the Busiest Construction Seasons in South Florida

The first half of the year has already proven to be on of the busiest construction seasons in South Florida. Attorney Luis Flores, managing partner of Saul Ewing Arnstein & Lehr’s Miami office, has more than $250 million in financing deals in the pipeline.

Like most growth markets, inward migration is driving the construction trend. “Florida is seeing unprecedented demographic growth. Between 2010 and 2020, Florida’s population grew by 2.7 million residents, according to U.S. Census data. The pandemic accelerated this growth with an estimated 329,717 new residents settling in Florida between April 2020 and April 2021,” Flores tells GlobeSt.com.

Multifamily and condo projects specifically are booming, but natural barriers have made it challenging to bring these properties to market in the past. “Development in South Florida is constrained by the ocean to the east and the Everglades to the west, so the only option for developers is to go vertical,” says Flores. “Limited land options coupled with population growth is creating significant demand for more residential properties. We are also seeing increasing demand for commercial space as companies follow the population trends and relocate to Florida or establish a regional headquarters here.”

Flores recently secured on a $37.7 million construction deal on behalf of borrowers TSG, Lineaire Group and Bridge Investment for Wynwood Haus, a 224-unit multifamily property in Wynwood. “The partnership secured the loan from Arkansas-based Bank of OZK, which is one of the most active construction lenders in Florida,” says Flores. “The 20-story project will deliver much-needed apartment residences ranging in size from studios to two-bedrooms with floor plans from 394 to 945 square feet. This type of product is needed as Miami continues to see increasing job growth and migration. Additionally, the low inventory of homes for sale is also contributing to the strong demand for market-rate rentals.”

The activity is a stark contrast to the slow construction lending market just before the pandemic. While there is strong demand from the borrower side, banks are still cautious on construction deals. “While we’re seeing a surge in construction loans, banks continue to remain cautious,” says Flores. “Developers must have strong financials and a solid business plan in place in order to obtain financing. Borrowers are expected to show how they would weather whatever storm comes next as a result of the pandemic. Meeting those requirements is not always easy so many developers are not getting the financing they need to move forward with their projects. That will help prevent a possible overbuilding of certain asset classes. Not every developer will be able to obtain financing at this moment.”

Still, Flores expects construction activity to continue to gain momentum over the next 12 months. However, he says there is also reason to be cautious. “We are mindful the pandemic isn’t over yet and there could be another slow down as coronavirus variants continue to spread,” says Flores. “The good news is that we overcame many of the obstacles we faced at the start of the pandemic and have learned a lot since March 2020. We saw an increase of people who resided in colder climates choose to migrate to, and shelter in place in Florida. That trend will continue if the pandemic stretches on as we head into winter. The construction pipeline will continue to grow as long as people, and companies, continue relocating here.”