Why Miami is a Magnet for Multifamily Developers, Lenders

Executives from TSG Group and Centennial Bank shed light on this market’s resilience in a time of crisis.

Wynwood Haus. Rendering courtesy of TSG Group

South Florida’s multifamily market continued its expansion—bolstered by in-migration from major metros and a business-friendly climate—throughout the health crisis.

What’s more, private capital investors are cashing in, banks are closing on sizable construction loans and rental rates are on the rise. Lending and development power players in the area are placing their bets on the multifamily industry and view the sector as pandemic-proof.

In an interview with Multi-Housing News, J.C. de Ona, Centennial Bank’s Southeast Division president, and TSG Group Managing Partner Camilo Lopez share their insights about the sector’s resiliency and bright future. They also shed light on Miami’s hottest neighborhoods in terms of multifamily investment.

READ ALSO: How Migration Trends Impacted Northeast Florida

What are the major drivers for investment in the Miami multifamily market and why is TSG bullish on this asset class?

Camilo Lopez, Managing Partner, TSG Group. Image courtesy of TSG Group

Lopez: A major driver for multifamily investment in South Florida is the stream of migration to the market from around the U.S. due to extended remote work and the influx of large businesses and startups in finance and tech.

We are bullish on this asset class because we are seeing the pent-up demand firsthand, especially for market-rate and workforce housing.

Tell us more about the hottest areas in South Florida for multifamily investment right now.

Lopez: The Wynwood submarket and surrounding Arts & Entertainment District are experiencing tremendous growth. New office space in the area, with confirmed tenants such as Spotify and Peter Thiel’s Founder’s Fund, paired with acclaimed restaurants and retailers, made it ripe for residential development.

Multifamily investors are also eyeing Miami’s Health District, which is home to the city’s largest hospitals with thousands of combined employees.

How have you seen neighborhoods such as Sunrise, Sweetwater and Wynwood change in recent years?

De Ona: These neighborhoods have seen significant multifamily growth because of their direct access to Florida’s Turnpike, large indoor/outdoor malls, grocery-anchored shopping centers, local and national retailers and entertainment venues. For example, Sweetwater saw a nearly 53 percent growth in the latest census and major multifamily, affordable and student housing development largely due to its proximity to Florida International University.

Additionally, Wynwood is having its “multifamily moment” now that Millennials are flocking to this area to live steps away from the famous murals, trendy bars and art galleries.

What are the property features that cater to today’s renter?

Lopez: We anticipate that some behavioral trends from the last 18 months will become permanent fixtures in the lifestyle of today’s renter, including remote work, prioritizing health and wellness, and the desire for outdoor amenities.

Other factors driving the decision-making process are price and convenience. Developing smaller units provides more control over rates, while experiential ground-floor retail, like a coffee shop, is essential.   

Give us some details about Wynwood Haus. How does the project speak to the needs of today’s renter?

Lopez: The amenity programming at Wynwood Haus is designed to cater to the needs mentioned above. The property, which recently broke ground, will feature an extensive rooftop with a pool, yoga room and outdoor dining area, among other offerings. For residents committed to remote work, private workspaces, a conference room and coworking stations will be available, plus Wi-Fi throughout.

Is Centennial Bank putting a stronger emphasis on lending in the multifamily sector over the commercial and industrial sectors?

J.C. de Ona, Southeast Division President, Centennial Bank. Image courtesy of Centennial Bank

De Ona: Although we have many deals currently in underwriting in the multifamily sector, the bank is still actively seeking and identifying healthy commercial, mixed-use and industrial deals.

However, because of the mass migration to South Florida from the Northeast and West, many of our existing clients identified strong multifamily opportunities and investments. The demand continues to stay strong, but it’s all about secure underwriting, knowledge of the market and established client relationships.

Tell our readers more about other lending trends in the region.   

De Ona: In South Florida, there has been a push for more affordable and workforce housing. As a community bank, we actively seek deals that offer solutions for individuals and families from all backgrounds.

What was the biggest surprise to emerge from the pandemic?

Lopez: The biggest pandemic-spurred surprise is the sheer volume of transplants to South Florida. Despite claims that the housing market will start to slow or the return to work will keep executives in their current market, the influx of residents, record-breaking home sales, rising rentals and office leasing activity remains exponential.

What do you see as a significant challenge for the Miami multifamily sector in the coming years? 

De Ona: The cost of land and construction materials has significantly increased, making project logistics, timelines and planning more difficult. I anticipate this challenge will become the norm as migration to South Florida continues at a steady pace.

Please share your predictions for Miami’s multifamily market going forward.

Lopez: Miami’s business-friendly environment and local government campaigns to attract talent will continue fueling the city’s multifamily market and demand for modern rental residences in core neighborhoods. 

De Ona: Overall, I anticipate the South Florida market will remain healthy, even if we see transactions, deals and acquisitions slow down. There is a lot of capital in the market begging to be deployed. Interest rates will continue to go up, which may slightly impact the multifamily market, but Miami is as resilient as it gets. 

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