The Second Building Boom in Miami: how, where, why? … by gimleteye

You have to pinch yourself.  Less than four years after the worst collapse of real estate since the Great Depression, Miami is in the midst of a second construction boom. It was only two years ago I wrote an essay for the blog, "The Twelve Days of Christmas"; detailing the players and hubris of the massive boom in the early 2000's. It's a trip down memory lane …

How is it possible that so soon after the crash another boom -- and likely another speculative bubble -- has taken off in downtown Miami? 

Last night, before dark, I walked with a friend around the area of lower South Miami Avenue near Mary Brickell Village. The place was sparsely attended. Locals have taken flights home for the holidays while new buyers from the Americas and Europe are spending Christmas and New Year's at home before getting on airplanes and flying to Miami for vacation.

Millions of square feet of housing and commercial space are sprouting up. If I close my eyes, it seems just yesterday that the only restaurants were Perricones and Rosinellas. 

Is this growth real or not? Last time around, the Fed's money purse (ie. taxpayers) was wide open, and before the crash, rogue banks like US Century were handing out mortgages like paper flyers on election day. The Fed rate remains super low, but unless I'm missing something, the banks have tightened hard on mortgage requirements.

I've heard and read that construction financing has also tightened, but many of this bubble's downtown Miami projects are mostly subscribed before the construction begins. Can excess liquidity swamp the equation of supply and demand? It happened in 2002-2006. I can't say if the same is happening now.

Increasingly I ask the question of the whole of downtown, but especially of the Brickell area. To be sure, the frightful traffic and diminished quality of life in the suburbs -- thanks to horrendous zoning decisions pushed by insider lobbyists and their cohorts on the county commission -- are pushing people toward the urban center. But there are no parks, and day by day the traffic becomes more congested.

Are there enough locals -- people who live and work downtown -- to sustain the massive construction boom? And how will buyers who only a few years ago bought condominiums with Biscayne Bay views feel about their property values, now that they realize they live in a condo canyon?

Remove the investment from the Americas, and Miami's economy would be flat on its back. But as my friend said, you can't change the fact. Miami -- a center of flight capital for the Americas since the cocaine cowboy days -- never stopped taking flight itself thanks to the exodus of billions of dollars from around the world. Today European economies are in a slump. Western capitols are comparatively expensive. Miami looks like a deal from the outside, but from the inside there are signs to the contrary.

And Miami has always sold itself cheap. Not just Miami, although we perfected the formula as a way to combine personal wealth of the Great Destroyers with political power. "Affordable" sprawl was the gold dagger in the heart of the state's natural attributes; willfully and deliberately mis-priced to make the formula work. But that is not exactly what is happening in downtown Miami.

I'm really not sure how many of the thousands of units that were built in the first boom and now in the second will ever be lived in, by their foreign owners. The shuck and jive detailed in the 2011 "Twelve Days of Christmas" is still happening, with many of the same players back in charge. 

Last night, I was really sure of only one observation. The workers busy on three shift details and there for one reason. The equity owners are racing the time clock because they know what follows a Miami construction boom. They want to take some if not all of their chips off the table before the next bust. 

That's why 24/7 construction. It's all hands on deck so long as buyers flood in, or as my father used to say, you have to make hay while the sun is shining. Shining it is, in Miami.