downtown cbd miami market study

LUMA AT MIAMI WORLDCENTER Proposed Rental Project

CAPSTONE VALUATION ADVISORS | MULTI-HOUSING VALUATION GROUP

A LOOK INSIDE

MIAMI’S CBD URBAN CORE MULTIFAMILY MARKET

AUGUST 2015

PARAMOUNT AT MIAMI WORLDCENTER Proposed Condo Project

AUGUST 2015

MIAMI’S CBD URBAN CORE MULTIFAMILY MARKET STUDY

PREPARED BY

CAPSTONE VALUATION ADVISORS

Gregory J. Vella Vice President Multi-Housing Group Scott R. Tew, MAI, MRICS Executive Managing Director

Orlando | Tampa | Jacksonville | Ft Lauderdale | Tallahassee | Naples

DOWNTOWN MIAMI SUBMARKET MAP 1

DEMOGRAPHICS TELL THE STORY 2

URBAN CORE DEMOGRAPHIC SNAPSHOT 3

A CLOSER LOOK AT THE CBD DEMOGRAPHICS 4

THE DEMAND DRIVERS 6

BROADER ECONOMIC DRIVERS 12

MIAMI’S CBD APARTMENT SUPPLY 13

A CLOSER LOOK AT THE APARTMENT SUPPLY 14

UNDERSTANDING THE PRIVATE CONDO SUPPLY 15

URBAN CORE CONDO RENTAL SURVEY 16

RENT COMPARABLE DATA 17

CBD COMPETITIVE LANDSCAPE 18

STUDIO RENT ANALYSIS 19

ONE BEDROOM RENT ANALYSIS 20

TWO BEDROOM RENT ANALYSIS 21

TABLE OF CONTENTS

DOWNTOWN MIAMI SUBMARKET MAP

MIDTOWN

EDGEWATER

WYNWOOD

OVERTOWN

ARTS & ENTERTAINMENT

CENTRAL BUSINESS DISTRICT

BRICKELL

THE SUBMARKETS

Miami’s Downtown Urban Core Are

Made Up of 3 Submarkets: Brickell,

the Central Business District, and

the Arts & Entertainment District.

THE PIPELINE: There are 6,213 Condo Units & 3,767 Apartment Units Currently Under Construction

DEMOGRAPHICS TELL THE STORY

The population growth has resulted in sub-

stantial new household formations over the

same period. Dating back to 2000 the number

of households formed for Greater Downtown

Miami increased from 17,869 to 41,733 in

2014. That represents a staggering 133.8% in-

crease over a 14 year period, implying an aver-

age annual rate of growth of 9.6%.

The CBD submarket realized the highest level

of growth of any Downtown submarket in-

creasing from 1,712 households to 5,933 in

2010 (215%), to 7,482 in 2014 (39%). The CBD

is projected to increase by 23% (4.6% per year)

from 2014 to 2019, the highest of any Down-

town submarket.

Downtown Miami is growing faster than the

City of Miami. The population and household

growth has and will continue to serve as a pri-

mary catalyst for new residential housing.

Downtown Miami now represents 19% of Mi-

ami’s total population and 25% of Miami’s to-

tal households.

Downtown Miami’s population has and contin-

ues to grow at a very significant pace. Since

2000, the population has doubled from 40,466

to 80,750.

The highest level of growth has been within

the Urban Core downtown submarkets that

includes Brickell, the CBD, and the Arts & En-

tertainment District.

The CBD has achieved extraordinary growth as

a residential neighborhood, with its population

nearly tripling from 4,901 to 14,358. This rep-

resents an increase of 193.0% since 2000.

As well, the CBD, maintained the highest aver-

age annual growth rate of 7.3% compared to a

5.2% for Greater Downtown. area. The CBD is

also poised to capture the highest percentage

of total population growth (20.0%) from 2014

through 2019.

The average annual population growth is pro-

jected at 4.0% and is higher than any of the

Downtown submarkets.

URBAN CORE

DEMOGRAPHIC

SNAPSHOT

BRICKELL

MARKET SIZE

LAND AREA: 0.43 Square Miles

HOUSEHOLDS: 12,435

POPULATION: 21,525

PER HOUSEHOLD: 1.73

MARKET INCOME

MEDIAN HOUSEHOLD INCOME: $100,307

AVERAGE HOUSEHOLD INCOME: $125,478

RENTER/OWNERSHIP DEMAND

RENTER OCCUPIED:74%

OWNER OCCUPIED: 26%

MEDIAN HOME VALUE: $294,955

CENTRAL BUSINESS DISTRICT

MARKET SIZE


HOUSEHOLDS: 7,482

POPULATION: 14,358

PER HOUSEHOLD: 1.92

MARKET INCOME




RENTER OCCUPIED:82%

OWNER OCCUPIED: 18%


ARTS & ENTERTAINMENT DISTRICT

MARKET SIZE


HOUSEHOLDS: 6,725

POPULATION: 11,622

PER HOUSEHOLD: 1.73

MARKET INCOME




RENTER OCCUPIED:76%

OWNER OCCUPIED: 24%


THE TAKEAWAY: THE CBD IS THE

FASTEST GROWING SUBMARKET IN

TERMS OF HISTORICAL & PROJECTED

FUTURE POPULATION AND HOUSE-

HOLD GROWTH. THE CBD HAS AN AV-

ERAGE HOUSEHOLD SIZE OF 1.92 PER-

SONS AND 82% RENTER HOUSEHOLDS.

YET THE CBD HAS THE LOWEST IN-

COME PROFILE OF THE THREE URBAN

CORE DISTRICTS WITH AN AVERAGE

HOUSEHOLD INCOME OF $80,472.

DATA SOURCE: MIAMI DDA

A CLOSER LOOK

AT THE CENTRAL

BUSINESS DISTRICT

DEMOGRAPHICS &

THE IMPLIED DEMAND

First we will discuss what the demographics tell us

about demand. The CBD has 7,482 existing house-

holds of which 82% are renter occupied house-

holds. Meaning, there are 6,135 households that

are renting within the CBD. Currently, there are

only 658 rental units within the CBD. The signifi-

cant shortage of rental housing has led to a near

100% occupancy for the CBD (at 0,3% Vacancy).

The existing rental communities were built in

1922, 1951, 1979, 1997 and 2015. The newest

rental community was built on the outer periph-

ery of the CBD submarket along the Miami River

at Flagler Street. Our research showed this project

was capturing rents in the $1.59 PSF range having

an average unit size of 1,147 SF.

The significance of these facts are that an over-

whelming majority of the renter demand are living

in condo units or other housing within the CBD.

Our research shows there are approximately

6,300 condo units within the CBD submarket.

Due to the lack of conventional rental housing,

many of the condo units are investor owned and

rented. Consequently, the presence of this supply

is significant and meeting the current rental de-

mand for the CBD.

However, the demand for the “for-sale product”

has been strong and has effectively reduced the

number of condo units that are available to rent.

It is believed the existing and anticipated future

renter demand will need additional supply as

there is a significant shortage of newer conven-

tional rental housing in the CBD market.

Economist also believe the CBD submarket will

lead the Urban Core Districts in terms of new

population and household formations over the

next several years. As a result, there will be con-

tinued pent up demand for conventional rental

housing in the CBD.

For example, by 2019 ERSI projects there will be a

total of 9,189 households in the CBD. If we as-

sume the same level of renter demand (82%),

there will be a total of 7,355 renter households in

the CBD.

These trends indicate vacancies are being filled

and projects are at maximum occupancy. Conse-

quently, the demand for additional units has been

spurred and new construction has commenced to

allow for future growth.

The CBD is soon to be transformed by three sig-

nificant projects that will serve as major source of

employment as well as add significant retail and

housing for the district. These include the Miami

World Center, Miamicentral/All Aboard Florida,

and the Miami Innovation District.

The transportation infrastructure that serves the

CBD is also key to solidifying and stimulating pop-

ulation and household growth. The district is cur-

rently served by Metromover and Metrorail. All

Aboard Florida, and Maimi Streetcar are either

under development and/or in the planning stages

and will greatly enhance access in and out of

downtown Miami.

THE DEMAND DRIVERS

Florida will soon feature one of the most advanced passenger rail systems in the United States. All Aboard

Florida is preparing a service that will connect Orlando and Miami with train travel that covers 235 miles

in about three hours and 25% less time than when making the same trip by car.

MiamiCentral will connect with existing public transit systems, accessible through the new terminal Get

quick and easy access to renowned beaches, world-class sporting events, outdoor and water recreation,

nature and wildlife tours, shopping, museums and more. Enhance the attractiveness and accessibility of

existing employment centers.

Facilitate improved access to cultural and entertainment destinations in and around downtown Miami

Stimulate new retail, commercial, and residential demand that will be fulfilled at and around this site as

the area around us completes its development. MiamiCentral station will be located at NW 1st Ave be-

tween NW 3rd Street and NW 8th Street.

Development Plan: Apartment: 800 Units Retail: 217,000 SF Office: 880,000 SF

There will also be a 2-acre

multi-use gateway complex,

3 MiamiCentral, in Historic

Overtown at the corner of

NW 2nd Avenue and NW 6th

Street to include mixed-use

development with retail,

commercial and parking. The

apartments, retail, and office

are approved for the CBD

project. It is believed these

uses will be delivered to the

market sometime during in

the next two-to-five years.

Development Plan: Mall: 765,000 SF Multifamily: 1,500 Units Hotel: 1,800 Rooms Commercial: 90,000 SF Parking: 3,000 Covered Spaces

Miami Worldcenter is one of the largest pri-

vate master-planned projects in the United

States, featuring a diversity of urban land use,

including retail, hospitality, and residential

space. Located in the core of downtown Mi-

ami, the ten-block, mixed-use development is

situated immediately north of the Central

Business District and is surrounded by world-

class amenities and boasts convenient access

to transportation

Maimi Worldcenter will feature 765,000 SF of

best-in-class retail, destination dining and en-

tertainment. The mall will be anchored by a

120,000 SF Bloomingdale’s, and a 195,000 SF

Macy’s. In addition, Miami Worldcenter will

include the 7th Street Promenade to offer

90,000 SF of restaurants and entertainment

highlighted by a pedestrian only roadway that

travels through the southern section in an

east-west direction anchored by the Ameri-

can Airlines Arena.

Miami Worldcenter will also be home to the new

Marriott Marquis World Convention Center Hotel,

featuring approximately 1,800 rooms and 600,000

square feet of meeting, exhibition, and convention

space. This modern tower will have resort ameni-

ties, including an expansive pool deck with views of

the bay, the American Airlines Arena, and the

downtown skyline, as well as an 80,000-square-

foot outdoor event deck.

Miami Worldcenter is to also offer ultra luxury liv-

ing in both rental and for-sale condominium prod-

uct. The residential towers are designed specifically

to offer unmatched views of South Beach and the

Atlantic Ocean As well, the residential develop-

ments will offer extensive amenity packages that

rival the best of the ultra luxury product in the mar-

ket. Paramount and Luma will deliver 470 condo

and 429 rental units, respectively in 2017.

The Miami Innovation District is a relatively newly an-

nounced mixed-use development that will be located

just a few blocks to the north and west of Miami

Worldcenter. Not much is known with regard to the

project, as we believe it is still very early in the devel-

opment/planning stage. However, the project will

serve as a major employment center for the Luma

development in the mid-to-long-term. The District is

projected to provide over 13,000 high-paying jobs

and generate 1.2 million visitors every year.

The development is to comprise an area of approxi-

mately 10.4 acres. It is generally bound by NW 12th

Street and the I-395 right-of-way to the North, NE

Miami Court and NE 1st Avenue to the East, NW 10th

Street to the South, and NW 1st Avenue to the West.

NW-NE 11th Street and N Miami Avenue are the

main thoroughfares within the district, and their in-

tersection is celebrated as a major center of public-

space and streetscape improvements within the dis-

trict.

Development Plan: Office Tech: 3.85 Million SF Residential: 2.4 Million SF Micro Units: Not Known

The development calls for nearly 7.0 million

square feet of new development to include for

sale and rental multifamily product that includes

micro apartment project (economy apartments

under 300 SF). The project is also to include 3.85

million square feet of office space that will be de-

signed to provide large, flexible open floor plates

for high-tech office users.

The Miami Innovation District is intended to cre-

ate a connected live-work-play ecosystem for in-

novation and entrepreneurship that comple-

ments and enhances the local community and

strengthens Miami’s positioning as a world-class

city. The Miami Innovation District will cater to a

synergistic mash-up of start-ups, middle-market

and international corporations in an innovative

mixed-use development that complements the

local community while driving productive, inclu-

sive, and sustainable economic growth.

The primary office uses of the project will com-

plement the other nearby projects, which are pri-

marily retail and residential.

BROADER ECONOMIC DRIVERS

DEMOGRAPHICS:

Downtown Miami is home to one of the most diverse, multilingual populations in the Unit-

ed States.

AIR & SEA:

The city of Miami’s air and sea connections to the world’s major markets make it a natural

choice for international and domestic businesses.

TRADE:

The city of Miami is a global center for international trade, and both imports and exports

have been rising in recent years.

WORKFORCE & LABOR MARKET:

Miami serves as the international hub for many large corporations. Global Trade Magazine

points out that 1,400 multi-national corporations use Miami as their Latin headquarters

including Exxon, AIG, Microsoft, Visa, Walmart and others.

Downtown Miami is home to the largest concentration of international banks in the United

States, and many large national and international companies. Currently home to over 60 inter-

national banks and nearly 100 alternative investment companies, Miami’s financial district is

drawing financial institutions from around the world. The Civic Center is a major center for

hospitals, research institutes, medical centers, and biotechnology industries.

For more than two decades, the Port of Miami, known as the "Cruise Capital of the World,"

has been the number one cruise passenger port in the world. It accommodates some of the

world's largest cruise ships and operations, and is the busiest port in both passenger traffic

and cruise lines.

MIAMI’S CBD APARTMENT SUPPLY

ONLY ONE NEW PROJECT HAS BEEN BUILT

IN THE CBD SINCE 1997: FLAGLER ON THE

RIVER WAS DELIVERED IN EARLY 2015 OF-

FERING 300 UNITS IN A 32-STORY HIGH

RISE.

FLAGLER ON THE RIVER. WHILE LOCATED

IN THE CBD, IS VIEWED HAS HAVING AN

INFERIOR LOCATION WITHIN THE CBD SUB-

MARKET. THE PROJECT IS QUOTING AN

AVERAGE RENT OF $1.59 PSF HAVING SIG-

NIFICANTLY LARGER AVERAGE UNIT SIZE

OF 1,147 SF.

MONARCH AT MET 3 & MET SQUARE ARE

TWO PROJECTS UNDER CONSTRUCTION

SLATED FOR DELIVERY IN 2016/2017 ADD-

ING 853 UNITS. DEVELOPERS REPORTED

BASE QUOTED RENTS WOULD AVERAGE

ABOVE THE $3.00 PSF RANGE.

FLAGLER ON THE RIVER MONARCH AT MET 3 MET SQUARE

DELIVERED IN 2015 UNDER CONSTRUCTION UNDER CONSTRUCTION

DATA SOURCE: COSTAR

The CBD submarket is severely underserved in terms

of luxury professionally-managed residential rental

properties, as competitive properties are currently

99.7% occupied. Condominium developments have

absorbed excess demand, pushing rents for competi-

tive private condominiums as high as $2.78 PSF .

Submarket-wide, condominium rentals on Brickell

Avenue are exceeding $3.00 PSF. The private condo

market in the subject’s CBD submarket have rents

that range broadly from $2.00 PSF to as high as

$4.00 PSF.

It is our opinion that any new apartment rental sup-

ply will compete directly with private condominium

stock offering similar amenities.

With the exception of Flagler on the River (300 units

delivered in 2015), there has not been any other

supply added to the CBD submarket in many years.

Consequently, there is very limited supply that will

directly compete with the private condo market cur-

rently serving the rental demand for the CBD sub-

market.

Market participants note renters would prefer to

lease units from a conventional rental project for a

number of valid reasons. While initially the renter is

wooed by the luxury appointments of the condo

unit, the tenant generally will become quickly frus-

trated with renting a privately owned condo unit

versus renting in a professionally managed commu-

nity.

From not having full access to the amenities, or the

same privileges as a condo-owner, to having to put

down significant deposit prior to moving in (four

months, or around $10,000 to $12,000), and having

to deal personally with any maintenance issues as

the condo owners are mostly out-of-state, and/or

out-of-country investors that do not have the unit

professionally managed. Consequently, while the

condo supply has served the rental demand, market

participants believe once similar luxury style rental

apartments are added to the CBD submarket the de-

mand from the private condo market will serve to

absorb the majority of the new supply. As well, when

considering the aforementioned demand drivers,

and the expected population and household growth

will also serve to solidify demand for the subject’s

Luma project and other rental projects in the pipe-

line.

Meaning the dearth of higher quality rental towers

in the CBD and Downtown Miami will attract signifi-

cant demand from the private condominium market.

The rents these renters are paying for a private con-

dominium will also serve as the primary indicator of

rent for the proposed Luma project. Simply, there

are no luxury rental projects in the CBD at this time

that could be used as the basis for establishing rent

for the Luma project. Accordingly, the next best

method would be to analyze the rents these tenants

are paying in the private condo market.

We are aware of five new projects (2,213 units) that

are expected to be added in the next one-to-three

years. These include two projects (853 units) that

are under construction known as Monarc at Met 3

and Met Square; as well as three proposed projects

(1,360 units) that include Riverside Tower, Luma,

and Liquid Lofts.

Attempts were made to obtain their initial quoted

rental pricing. However, the developers were unwill-

ing to divulge this information so early in the pro-

cess. But what we were able to determine was that

the new projects in the pipeline were all looking to

set the base rents at or above the $3.00 PSF mark.

This level of rent is also consistent with the rents

that are being paid by renters in the private condo

market.

A CLOSER LOOK AT THE APARTMENT SUPPLY

UNDERSTANDING THE PRIVATE CONDO SUPPLY

The Greater Downtown Miami area has approximately 36,000 condo units with over 24,000 units in the

pipeline of which 9,685 units are under construction, or those with contracts and/or reservations. The

Brickell submarket leads the way with nearly 21,000 units and 9,000 units in the pipeline to include 4,600

units under construction, or those with contracts and/or reservations. The CBD submarket has 6,300 units

with 7,900 units in the pipeline that includes 975 units under construction or those with contracts and/or

reservations.

BRICKELL

CURRENT TOTAL: 21,000 UNITS

ASKING RENT: $2,700

LEASING DEMAND: 150 UNITS/MO

TOTAL PIPELINE: 9,000 UNITS

UNDER CONSTRUCTION: 4,600 UNITS

BRICKELL TEN

ECHO BRICKELL

1010 BRICKELL

CBD


ASKING RENT: $2,400



UNDER CONSTRUCTION: 975 UNITS

PARAMOUNT MIAMI

CENTRO

KRYSTAL TOWER

ARTS & ENTERTAINMENT


ASKING RENT: $4,700



UNDER CONSTRUCTION: 600 UNITS

CANVAS

1000 MUSEUM

The existing condo supply for the CBD submarket is largely serving the rental market given the significant

shortage of rental units. As we have discussed, the one new rental project in the CBD, has a location that

would be viewed as inferior relative to the known locations of the anticipated new supply coming on line

in the next one-to-three years. Consequently, this new project (Flagler on the River) will shed very little

light on the type of rent these new rental projects will be able to achieve given their superior location

within the CBD. Therefore, we will analyze the rents being reported for the private condo market in Down-

town Miami, specifically the CBD submarket.

DATA SOURCE: COSTAR, MLS, & MIAMI DDA

DOWNTOWN URBAN CORE CONDO RENTAL SURVEY

The rental figures for the condominium rental

supply clearly demonstrate the level of rent

tenants are willing to pay for higher quality

product located in the Urban Core submar-

kets. The rental data also denotes the lower

quality of the apartment rental stock in the

three Urban Core submarkets.

Our conversations with various market partici-

pants reported each of the three submarkets

offer varying appeal to the different renter

profiles. For example, the typical renter profile

for the Brickell product targets residents who

are seeking more of a “lifestyle” with access to

an affluent neighborhood with ultra luxury ap-

pointments and amenities. The majority of the

private condo rental stock consist of luxury

units with excellent water views of Biscayne

Bay.

Similarly, the renter profile for the Arts & En-

tertainment submarket is also about “lifestyle”

and “affluence” as well as renters seeking a

“trendy” place to live. The average household

income levels reported for both the Brickell

and A&E submarkets are $125,478 and

$105,915, respectively, compared to $80,475

for the CBD.

Consequently, it is not surprising to see these

two generate the highest level of rent of the

three Urban Core submarkets.

The typical renter profile for the CBD was re-

ported to be less about “affluence” and

“lifestyle”, but rather more about access to

transportation, neighborhood amenities, and

proximity to workplace.

DATA SOURCE: COSTAR, MLS, & MIAMI DDA

RENT COMPARABLE DATA

MIAMI CBD COMPETITIVE

LANDSCAPE

RENT COMPARABLES

STUDIOS

STUDIO UNITS

RENT COMPARABLES

ONE BEDROOMS

ONE BEDROOM UNITS

RENT COMPARABLES

TWO BEDROOMS

TWO BEDROOM UNITS

downtown cbd miami market study

Real Estate