Will the Rental-to-Condo Conversions Trend in South Florida Last?
S2 Development's founder & president zooms in on this redevelopment trend.
The number of apartments converted from office space has been increasing across the country, but other types of conversion projects have also been gaining momentum, though on a smaller scale. In South Florida, for example, rental-to-condo conversions are fairly popular, particularly due to the area’s shortage of newer condominium inventory.
Demand for condos built in the past 30 years is high, according to an ISG World report, and new construction is unable to keep up. This has put residential-to-condo conversions into the spotlight as a faster and often more affordable alternative that allows developers to focus on finishes, amenities and buyer-ready details.
S2 Development, a company with more than 1 million square feet of multifamily assets under management, has been on the lookout for such conversion opportunities. The Florida-based firm recently transformed Atlantica at Dania Beach, a 124-unit community in Dania Beach, Fla., into a condo property with one- and two-bedroom residences that range from 703 to 1,159 square feet.
In this interview with Multi-Housing News, we asked Founder & President Marc Schmulian to expand on what this trend means for the region’s housing landscape and how it could evolve.
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Where do condo conversions fit into the South Florida housing landscape?
Schmulian: Condo conversions can help bridge the inventory gap, but it’s not as straightforward as it seems. Not all rental properties are suitable for conversion. Condo buyers are far more discerning than those seeking a year-long apartment lease. They have higher expectations for finishes, amenities and maintenance costs.
Identifying the right rental properties to convert, like Atlantica, is challenging but crucial. If done correctly, conversions can significantly help bridge the gap between older condo inventory and new projects that won’t be delivered for years.
What are some of the key advantages of such conversions?
Schmulian: The main advantage of condo conversions is the availability of market-ready units. South Florida has a significant demand for new condos priced between $500,000 and $1 million, and conversions can meet this need quickly. Currently, there’s a shortage of new condos in this price range east of U.S. Route 1, with Atlantica as the only alternative.
Atlantica at Dania Beach is close to various shops, restaurants and entertainment venues. All images courtesy of S2 Development 
The property comprises six three-story buildings. 
The unit mix features one- and two-bedroom units. 
Amenities include a resort-style pool, clubhouse and dog park, among others.
Can you walk us through this property’s transformation?
Schmulian: Atlantica was a dream project to convert. Initially planned as a rental community, we got involved before construction due to its prime location, so close to the ocean. This allowed us to ensure high-quality finishes and amenities that appeal to condo buyers.
The property is brand new and the units, which have never been lived in, feature spacious layouts, European-style cabinetry, natural stone countertops in kitchens and bathrooms, stainless steel appliances and 24- by 48-inch tile throughout.
The property also boasts a gym, clubhouse with a conference room, resort-style pool deck and dog park. We collaborated with the renowned Interiors by Steven G to enhance the amenity spaces and model units, showcasing the property’s full potential to buyers.
The current market conditions, including falling interest rates, seem to favor condo conversions. What’s your take on this?
Schmulian: Falling interest rates positively impact all real estate sectors, including condo conversions. As rates are expected to further decline, we’re seeing previously hesitant buyers that are now eager to act. By having product that is ready to go, it lets buyers immediately benefit from these lower rates through a swift mortgage and closing process … Additionally, lower rates let our corporate team take more aggressive leverage on deals, enhancing equity returns due to increased buyer activity.
READ ALSO: Can South Florida Condo Demand Endure?
Tell us more about the financial advantages of these conversions, especially when compared to ground-up construction.
Schmulian: Converting newer or nearly complete multifamily buildings into condos can significantly reduce overall project costs. Construction financing for multifamily projects is generally less burdensome and many of the soft predevelopment costs associated with new condos can be avoided. For instance, most rental buildings typically don’t incur the expenses of hiring a starchitect or meeting the same stringent insurance requirements of ground-up condo developments.
Do you expect this trend to last?
Schmulian: I don’t see condo conversions as a long-term strategy. They are a convenient way to quickly provide more affordable housing, especially as buyers look to take advantage of falling interest rates. Once prime properties like Atlantica are sold out, future conversions will become more challenging. Property sellers will likely raise prices, making ground-up development more attractive again.
Do you have other plans for similar conversion projects in the region?
Schmulian: For the right deals, condo conversions offer fantastic opportunities. However, finding unicorn deals and ideal properties for conversion is challenging … We’re always on the lookout for new opportunities but remain very selective with our choices.
