Miami Beach is the absolute worldwide destination for nightlife and beach but it seems that renters are not as attracted as they used to. Would Downtown Miami become the next hot spot for leasing?
Over one year, renters have leased approximately 150 fewer units per month in Miami Beach despite the fact that it was 7% less expensive than in Downtown Miami. That may be due to the new high-rise condos with top amenities that recently got built, thus winning out the competition against Miami Beach condos that lack the new required features from tenants. Owners from out-of-town are more and more attracted by state-of-the-art and impressive constructions.
In 2014, 500 condo units have been leased monthly in Greater Downtown Miami at $2.32/sqft whereas nearly 350 units got rented in Miami Beach at a rate of $2.17/sqft. It corresponds to a 15% difference in price/sqft which is one of the largest historical spread. There is no guarantee so far as to whether rising the rental rate in Downtown Miami would force cost-conscious tenants to go back to the cheaper Miami Beach market.
Indeed, one of the reason why condo units in Miami Beach are cheaper often is because they need a parking space or to be modernized. The ones that are the most upgraded tend to be outside the popular South Beach area. However, despite all these drawbacks, Miami Beach owners keep on asking an average $3.23/sqft as compared to $2.62/sqft for Downtown Miami, without acknowledging the shift towards Greater Downtown Miami. It also shows that Miami Beach landlords are asking for rents that are 50% higher than the price they actually rented for last year. In comparison, Downtown owners were asking for rents that are 13% higher than the actual price they get rented for.
Knowing that 23,300 new condo units are being built in Downtown Miami – in Paramount Miami or Brickell City Centre for example – and foreign investment stands for 85% of the buyer pool, most of these units might very well be made available for rent.
By comparison, 1,550 units are under development in Miami Beach for an estimate of 1,000 luxury rental units given the high land prices.
One question remains: will Miami Beach still be the top destination it used to be considering the impact of 15 times more units being built on the other side of the Mac Arthur Causeway?