In madcap development boom, a little less Christmas spirit
Written by Michael Lewis on December 17, 2014
US consumer confidence charged to a post-recession high this month. In Miami, we didn’t need the uptick report in Saturday’s Wall Street Journal – we could see the confidence written all over projects ready and willing to be painted on our skyline.
While recession has barely eased its grip on parts of Miami – the areas where the middle class and working folks reside – the upper end is firmly gripped once more by a euphoria that creates our boom-bust economy over and over and over again.
This is a developmental economy driven by outside money that is building for outsiders, especially those who live in other nations, although also for the wealthiest of our own nation.
These have been the buyers in the current condo boom. But the building boom has now gone beyond both condos and merely confidence.
We’ve reached the point in the cycle where anything at all is considered not only possible but unquestionably logical. If someone says a project is going to bring millions of visitors a year or create whole new industries, why ask questions?
The past week alone has brought plans for a 14-soundstage filming studio center, an 80-story luxury condo tower whose floors rotate around a center axis, a 650-foot-tall circular rotating tourist attraction over Biscayne Bay, and a 77-story World Trade Center of the Americas on Biscayne Boulevard.
Who knows what’s coming next week?
The parade of potentials meets a parallel panorama of similar-sounding offerings already here, including the City of Miami’s own film studio center that just broke ground, a bevy of luxury condo towers, the 1,000-foot Skyrise Miami tourist attraction also planned and permitted over Biscayne Bay, and towering offices that will be part of the All Aboard Florida real estate-transportation complex downtown.
Already rising is Brickell City Centre, the largest privately funded development in the Southeast. The competitive Miami Worldcenter plans a similar array of mixed-use content just a couple miles to the north on the other side of downtown.
Any one of these projects would have been a godsend during the recent recession. All taken together, however, godsend isn’t the right word.
If these plans were just for condos, some would talk of a bubble. But this is a broader array. Many of the newest entries aren’t based on market need, which is not to say that they won’t succeed. In days of euphoria, many things can be sold that are far from necessities.
Much of what’s being presented is outside the box – and outside of the average Miamian’s world.
Take the tower with 80 rotating floors, a project still seeking a site. Its architect-developer says he’s looking at pricing condos at $3,000 to $5,000 a square foot, in dwellings of 3,000 to 10,000 feet. That works out to 80 stories of condominiums with the cheapest $9 million, going up to $50 million each.
Or the film studio, with 14 sound stages in a county that probably needs several stages, which the city is already building. Success of both projects will require a quantum leap in the film business.
A common thread through many of the planned but not yet begun projects is that they were absolutely going to rise 100% with private funds – until developers later asked for government grants or loans running $9 million up. The film studio wants county money plus land.
Another common thread is that at this stage of the boom developers unknown here are coming forward touting massive projects, yet they’ve never done anything similar – some not any development at all. If profitable developing was so easy, we’d all be doing it.
It’s a plus that developers seek the unique, but some of the latest offerings feel like me-too efforts paralleling what’s already in the works.
It might be easier to fund unique projects in this boom than in the down-cycle years when just keeping things going was success. If all are funded, some developers will profit and also provide useful economic infrastructure.
On the other hand, one successful local developer notes a 30% rise in construction costs. Rookies who can’t handle fast cost changes could be in for rough rides.
Faced with a flock of developers with their hands out, county government should keep a firm grip on its wallet. If everyone already plans to build here, after all, why is government giving away millions in order to get them to do it?
Save any grants for projects that will generate later economic growth and that wouldn’t rise without government funds. For some of the present crop, county aid is whipped cream, not meat and potatoes.
In this era of “anything is possible,” government doesn’t need to make it possible. It already is.
Consumer confidence is high. Developers are confident by nature or they wouldn’t develop. The money government is handing developers now is a gift from taxpayers, whose taxes will be raised to fund the gifts. A little less Christmas spirit, please, at county hall.