Short-term rental projects are proliferating across Miami, with more rental condos than traditional units planned in the urban core and Miami Beach.
Courtesy of Related Group
The Crosby Miami Worldcenter, a 450-unit short-term rental project at the 27-acre development, fully sold out before construction began. It is expected to deliver in 2025.
Across Downtown Miami, Brickell, Edgewater and Miami Beach, 8,467 short-term rental condos are planned across 26 projects, 55.6% of the total 15,216-unit development pipeline in the area, according to a report from the South Florida real estate firm ISG World.
Economic and political uncertainty across much of Latin America has fueled the growth of short-term projects, with developers capitalizing on foreign buyers who are looking for places outside their borders to invest capital, ISG World CEO Craig Studnicky said.
“Developers knew they could sell that really fast to the nervous-flight capital coming out of Latin America,” he said.
Studnicky said he tracked the development of around 7,900 short-term rental units in Miami-Dade and Broward counties in the three decades ending in 2020. In the last four years, he has counted 8,200 units added to the region’s inventory.
“It was a carpe diem moment,” Studnicky said. Developers “seized the day, they seized the opportunity to grab a lot of capital. Most of those projects Downtown have sold very, very well.”
The number of short-term rentals under development has more than doubled since June, when a Bisnow analysis counted 12 short-term rental projects with 4,312 total units either planned or under construction across all of Miami.
The vast majority of the planned projects are on the mainland, with only four projects planned in Miami Beach, according to ISG World. Short-term rentals account for 64% of the 12,275 condos planned or in pre-construction in the Downtown core.
International buyers accounted for 47% of home purchases in South Florida in the year ending in July, according to data from Miami Realtors, with 62% of those buyers coming from Latin America and the Caribbean. Studnicky described the projects as a “convenient place for a South American investor to park money.”
But Cervera Real Estate Chairman Alicia Cervera said she has seen rising interest from American buyers.
The projects are filling a void in the market by providing more affordable units compared to traditional condos, she said, which saw prices leap 10.9% year-over-year in August.
Short-term rental condos are traditionally smaller units, oftentimes studios, in buildings with a wide range of amenities meant to cater to both residents and travelers paying to stay in the units. Some of the apartments are smaller than 350 SF.
“The population is exploding, and so are prices,” said Cervera, whose firm is the exclusive sales agent on several short-term rental projects from Newgard Development Group. “Smaller, more affordable housing is necessary, and so what we’re calling short-term rentals may very well become long-term homes.”
Courtesy of ISG World
Miami’s Downtown core has 22 short-term rental projects in its development pipeline.
There continues to be a steady flow of new arrivals to Miami from other states, Cervera said, and the tiny units in buildings replete with amenities that dominate the short-term rental marketplace are serving as what she described as transitional homes.
“You may want to do this and not give your rental dollars to a landlord but rather invest in your own property,” she said. “Since you’re coming and going, you can monetize it in the transition.”
Developers are responding to the strong demand by proposing a broad range of projects with varying degrees of rental restrictions, including several projects that have moved forward since December.
Merrimac Ventures and Aria Development Group secured a $95M construction loan this week to build 600 Miami Worldcenter, a 42-story condo tower with 606 fully furnished units marketed for short-term rentals that are sold out ahead of a planned groundbreaking next month, according to a release.
Nitin Motwani, managing partner at Merrimac Ventures, said in a statement announcing the construction loan that the project was one of the firm’s fastest-selling developments, with sales driven by “heightened demand for the project’s ideal location and fully furnished turn-key residences.”
That project, located at 600 NE First Ave. in the 27-acre Miami Worldcenter mixed-use project Downtown, has no short-term rental restrictions, giving buyers flexibility over how they use their units. In Brickell, a different type of project is moving ahead.
Urban Network Capital Group and Vertical Developments locked in a $24.5M construction loan in December for Visions at Brickell Station at 1136 SW Third Ave. The condo-hotel is slated to deliver 111 studio and one-bedroom units in 2025 that are more than 50% pre-sold, with unit owners restricted to staying at the property for a maximum of 30 nights per year.
Newgard, which is building the Lofty Brickell and Natiivo Miami short-term rental condos, also announced this week that it was expanding the concept to Broward County with plans for a 40-story tower dubbed Natiivo Fort Lauderdale.
The project will include 384 fully furnished units at 200 W. Broward Blvd. in Downtown Fort Lauderdale. Broward County has 2,692 traditional condo units in the development pipeline, according to ISG World, but the Natiivo project is the county’s first development proposed specifically as rental condos.
Cervera, who is handling sales for the latest Natiivo project, said demand for short-term rental units remains strong, with pre-sales helping developers lock in construction loans. But Studnicky said “there’s a lot less liquidity in the world today” and there are fewer buyers in the market than there were a year ago.
Despite the ebb in demand, Studnicky said he still expects nearly every project in the pipeline to break ground as interest rates come down and construction financing becomes more attractive. Developers will continue to collect deposits while they wait for that moment, especially from Latin American buyers.
“Latin Americans love pre-construction because they get their money out slowly,” he said. “A million-dollar condo, you have to put down 20%. That’s $200K, so a Latin American will say, ‘How about I send you $20K a month for the next 10 months?’ Developers will take that deal all day long.”