As populations grow, everything from job markets to housing to community services and government stewardship must respond. Nowhere is this situation more front-and-center in everyday life than it is right now in Miami. The city continues to see rapid population growth as businesses and individuals flock to the new opportunities and economic sectors that are eager to call Miami home. This year’s University of Miami Real Estate Impact Conference examined how the real estate answer is increasingly becoming the most important tool in addressing those needs. Experts from various real estate disciplines, including development, finance, and hospitality, came together with officials from Miami-Dade County Government to discuss how real estate, in connection with transportation, is shaping the future of the city… a Miami, in Motion.
“There’s no secret why people are coming to Miami,” said Hari Natarajan, Professor and Vice Dean of Business Programs at the Miami Herbert Business School. “Unemployment is at 1.5%. There are more than $3 trillion in assets under management. The city has the highest inbound population growth of anywhere in the country post-pandemic. And with that, technology, talent, and capital are all moving here as well. This serves as an inflection point for our city. We’re about to realize what the future has always promised, and our guests today are leading the understanding of that vision and laying out the next steps.”
He also discussed how the University has already been actively participating in shaping that future by establishing itself as the preeminent institution in the Southeast and beyond for real estate development. “Our accelerated MBA in real estate, finance degree in real estate, the renowned Masters in Real Estate Development + Urbanism (MRED+U) through the school of Architecture, and the Law School’s specialized LLM degree in real property development, are just a few of the many examples of how the University of Miami is carefully curating that talent the industry of tomorrow needs.”
Fellow Herbert Business School Professor and moderator for the conference, Andrea Heuson, added to Natarajan’s opening remarks by reinforcing the University of Miami’s critical role in supporting both this future with education and degree programs specifically designed to prepare students to make immediate impacts in their chosen fields upon graduation. She referenced the University’s new UScale program, business mentorship programs, and the new Real Estate Advisory Council created and chaired by the Atlantic Pacific Companies. She then introduced the conference’s first panel.
MOVING IN MIAMI: A Transit-Oriented Initiative That Will Forever Change Downtown Miami
At the core of all major global cities is a dynamic, connected downtown district that serves as the business and economic hub. Essential to that position is a downtown area that is accessible from all surrounding areas while also having a solid population of residents living within the greater downtown district. Until recently, this had been a shortcoming of downtown Miami, as decades’ worth of previous real estate cycles focused on suburban residential development. Together, Eileen Higgins, Miami-Dade County Commissioner for District 5; Eulois Cleckley, the Director & CEO of Miami-Dade County’s Department of Transportation and Public Works; John A. Buck II, Chairman and Chief Executive Office of The John Buck Company; and Susan Wachter, Professor of Finance at the Wharton School at the University of Pennsylvania, discussed the future of Miami’s growth as a city, and the vital role public transportation and connected neighborhood dynamics will play in the years ahead.
Specifically, the panel reviewed Miami-Dade County’s upcoming plan to redevelop 28 acres of county-owned land in the downtown core. Near the Government Center Metrorail station and the Brightline rail station, the project will most definitely have a transit component, shared by Higgins and Cleckley. Still, transportation is only one facet of the multi-purpose development zone. To create the type of community that serves all downtown residents, including young professionals, families, and aging populations, the downtown neighborhood must answer various essential needs without making a high-traffic commute the only solution. A public middle school, new home for the History Miami museum and the main Miami-Dade County Public Library, community retail, and a mix of workforce, senior, and market-rate housing are just a few cornerstones for the “new” downtown Miami. Wachter and Buck discussed the financial benefits of Miami taking on this project now, while the downtown area is still early in its growth stage before infrastructure becomes to disruptive or too expensive to implement. They also covered why cities need to take an active role in creating these opportunities for development partners so that additional economic growth can occur. The panel reviewed several of the world’s most connected cities and transportation’s role within them. Denver, Oakland, and London all topped the list of model downtown districts in this regard, and the parallels towards Miami showed tremendous promise for what responsible downtown development with minimal commuting can deliver. “If you look at a city like Austin,” said Buck, “it becomes clear that the time to do these projects is right now. Not years from now. What would have cost several million a couple of decades ago will cost billions today and even more tomorrow. The earlier cities take on projects like this, the quicker it delivers impact all around.”
EXAMINING TRENDS: A Preview of UM Student-Led Research into Real Estate Market Conditions
As a follow-up to the opening panel, a group of students in the University of Miami MRED+U program provided context for factors shaping the real estate industry from a stakeholder perspective. With the results of the full research report scheduled for later in Q2 of 2023, students have a preview of some of the attitudes and behaviors being considered by real estate end users, developers, and other decision-makers. Sponsored by John Burns Real Estate Consulting and led by Professor Mark Troen from the School of Architecture, this year’s report, Emerging Trends, and Perspectives on Resilient Development in South Florida examined the following key areas: a general market review and analysis of the greater South Florida area, where we live and why, the impacts of migration, and the broader issue of diversity. Concerns about a recession and economic stability are more present than in previous years. However, across the tri-county area, most respondents believed expansion is still underway, particularly in Palm Beach County. Shifts occurred in types of real estate best positioned for growth, changing from multifamily and industrial in 2022 to medical and senior housing assets being the higher-growth sectors for 2023. These findings underscore a cooler market in 2023, with respondents preferring to hold most assets, except in medical and related properties. Similarly, financial concerns over access to and cost of capital continue to loom largely for investors in the South Florida market. However, a favorable supply/demand scenario is expected to keep pushing property values up in both the short and long term.
Nowhere is the supply/demand situation in South Florida more visible than in the residential housing market. This year’s team looked at the types of neighborhoods buyers, and residents find most desirable, with the majority of respondents preferring “surban” areas - those that are just outside urban epicenters but not as removed as suburban areas. Nearly 42% of those surveyed preferred surban areas, which was also reflected in their priorities when purchasing a home such as safety, accessibility, schools, and more. Similarly, the team explored whether or not the upward trend in migration to South Florida will continue in a post-pandemic area. Quality of life, business growth, and diversity were all factors behind people moving here. Taking a deeper look at diversity, the team found diversity was not only important to South Florida employers and employees alike but that increased diversity is desirable and on the horizon. Together, these results indicate that positive net migration should continue for the foreseeable future. However, true to this year’s conference theme, the lack of a connected central public transportation system stands as the biggest obstacle to future migration and growth.
How Culture Creates Real Estate Opportunities
Although Miami has seen a great deal of recent real estate attention from the development world, there are a handful of major players in the local industry who have been actively shaping the city’s future for several decades. Armando Codina of Codina Partners and Jonathan Tisch of Loews Hotels & Co. are two such individuals who took time at the conference to share why Miami has had such enduring appeal, as well as the types of companies that are well-positioned to find success as the city takes a greater place on the global stage. Tisch, who now serves as Executive Chairman for Loews, after more than 35 years as the company’s president and CEO, offered an insightful look back at the firm’s landmark Miami Beach property and how it came to be. In the 1990s, Miami Beach was only at the very beginning of what would become a huge development boom, with many of the now must-see neighborhoods of the beach comparatively non-existent. At the time, Lincoln Road, Collins Avenue, and the north end of Ocean Drive were low-rise shop fronts and 40s and 50s-era hotel/motels, not the glitzy resorts and shopping districts they are today. When Miami Beach offered an RFP for the city-owned land on the Atlantic Waterfront, Loews was the smallest firm to submit a bid. However, Codina and Tisch discussed how it was the Tisch family history and first-hand knowledge of Miami Beach and South Florida that allowed them to present a concept that was as authentic to the beach as it was groundbreaking. Not only did they win the bid, but the Loews Miami Beach became a pioneering property for South Beach hospitality, just as the newest Loews property (and the site of this year’s event) has become for Coral Gables.
Codina echoed the importance of authenticity in his own remarks, recounting the basis for Codina Partners’ diverse portfolio of South Florida projects. “I realized early,” shared Codina, “that the future of Miami wasn’t in building office buildings and skyscrapers, though, of course, we have that too. The real future of Miami was, and still is, being connected to transportation… the airport, the seaport, and even within a given area.” Visionary projects like Downtown Doral are an example of the firm’s work in this arena, uniting a huge residential suburb with an accessible city center with excellent proximity to the airport and significant South Florida roadways. Like Tisch, Codina agrees that successful development goes hand in hand with giving back to and being involved in the community. “It creates the trust and cooperation necessary when working with the many different people necessary to bring large-scale multi-faceted projects to reality.”
By the Numbers - Miami’s Real Estate Finance Outlook
Finishing out the 2023 Real Estate Impact Conference was an in-depth discussion of the ever-important question of where the money comes from to support Miami’s future growth. Joining that panel were Ralph Rosenberg, Global Head of Real Estate for KKR and Roy Hilton March, CEO of Eastdil Secured, who shared their expert views on the movement in the financial sector impacting the current real estate environment.
The transition was a recurrent theme throughout the discussion, with recession fears easing around the world as inflation starts to plateau, energy costs coming down in the U.S. and Europe, better checks and balances in place in manufacturing, and overall greater investor confidence. “The soft landing strategy employed by various governments and regulatory groups is working,” said
Hilton. “It’s meant limited liquidity, but it’s repositioned capital to move back into markets and then hold itself to outpacing inflation.” Hilton and Rosenberg also gave a thorough account of the activity that led to the current real estate investment market, not least of which was historically low-interest rates for an extended period of time across almost all asset classes. “Ultimately, that situation is not sustainable for anyone,” said Hilton. Rosenberg agreed, saying, “We’ll start seeing certain asset classes dissolve somewhat as the cost of debt rises with interest rates.” Owners of underperforming assets will not be as eager to borrow money, but banks will not be eager to keep those assets on their balance sheets either. As a result, capital markets, especially non-bank financiers, will become attractive alternatives for those wishing to make an entry into a market like Miami or to expand an existing presence.
The pair also offered some advice regarding what to look for in pursuing commercial real estates opportunities, such as human migration patterns, the logistics of goods and services moving within the global economy, and the influencers of human behavior and attitudes. They stressed that the consideration of these factors and others like them is most definitely a team-oriented activity, and that those interested in future real estate careers need to be prepared to be part of a physically present workforce. As well, Rosenberg added that real estate is a diverse, multi-faceted industry and that future professionals should concentrate on the specific area of real estate that interests them most. “I personally have never picked up a shovel or a hammer on any development our firm has been involved in, but I do work with all the financial details that makes that possible,” he shared. “If your interest is in building and architecture, focus your efforts (and studies) there. The same goes for law, sales, marketing, whatever it is that interests you. Above all, make sure it’s something you can give more than 110% to… because real estate is a competitive sport, and you have to show up, each and every day, ready to compete.”
The UM Real Estate Impact Conference 2022 was made possible through the support of more than 100 sponsors, including presenting sponsors Douglas Elliman Real Estate, the Kislak Family Foundation, RIPCO, and Witkoff.
