This year has been more challenging than many real estate specialists initially predicted. For those in the condominium sector, 2023 was particularly difficult, mainly due to the prolonged monetary tightening, combined with stricter legislation in several parts of the country.
The high mortgage rates—a by-product of the Federal Reserve’s effort to tame inflation—the ample divide between buyers and sellers, and a limited amount of listing inventory have all led to a slowdown in sales.
Many housing market experts forecast mortgage rates to remain elevated for the remainder of the year and through the first part of 2024. Noam Ziv, the CEO of El-Ad National Properties, believes that buyers will soon adapt to high mortgages, and eventually jump back in the market as supply slowly increases.
Alina Residences, a luxury condominium development in Boca Raton, Fla. All images courtesy of El-Ad National Properties. ALINA 220, one building of ALINA Residences will include a state-of-the-art fitness center. Phase two of ALINA includes a master bathroom with his and hers sinks. Phase 2 of ALINA 210 building will include kitchens with high-end appliances. ALINA 210’s swimming pool. ALINA 220’s terrace offers ocean views.
“As condo inventory rises and new listings increase, we should begin seeing a more balanced seller-buyer condo market,” Ziv told Multi-Housing News.
South Florida has remained one of the most sought-after areas for condominium development, and Ziv expects the market to remain strong, backed by demand coming from cash buyers and out-of-state in-migration. In Boca Raton, Fla., El-Ad National Properties is currently developing ALINA Residences, its first ground-up new development. The 303-unit condo project is set to encompass three buildings, with the first structure already completed and sold out. The second phase of the project is currently underway, 70 percent sold and expected to deliver ahead of schedule next summer.
A bit to the south in North Miami Beach, a partnership of Fortune International Group and Blue Road recently broke ground on Nexo Residences in North Miami Beach. The development is also 70 percent sold, and continues to attract buyers due to its short-term rental offerings and EB-5 investment component.
But the success of these developments doesn’t mean that condo developers in general have been immune to higher construction costs and supply chain issues that impacted the whole multifamily industry.
“Builders and developers have been working diligently to minimize the challenges and move forward with their projects,” Ziv commented. “As the supply chain normalizes and budgets are kept tight with minimal waste, we should see more projects moving forward and staying on schedule,” he added.
Increased expenses on the horizon
Many big cities—from New York City to Miami—are implementing more stringent energy codes and benchmarking requirements to reduce reliance on fossil fuel, and curb carbon emissions. To keep costs under control and abide by the new standards imposed, condo associations and owners need to make their properties and residences more energy efficient—from transitioning to LED bulbs, smart thermostats to weatherization projects—these changes can reduce energy costs overall, according to Kelly Dougherty, president of FirstService Energy.
“We’re also seeing communities come together to invest in sustainability programs, from installing EV chargers to investing in water conservation measures,” Dougherty said. “These low-hanging fruit projects will not be enough to meet their climate goals and larger, more expansive projects like the conversion to electricity of heating and domestic hot water production will have to be planned,” she added.
Most of these changes and updates will come at an added cost. Issues regarding climate change and flood protection, particularly the rising sea water levels for buildings on the waterfront and on low-lying land, are putting increased pressure on new projects.
In Florida, another factor that will add to condo associations and owners’ expenses is the statewide recertification of condominiums over three stories tall, a new legislation passed as a response to the Surfside condominium collapse in 2021. The law requires many buildings’ initial milestone inspection be performed before the end of next year, which will be adding to condo owners-operators’ costs.
“We’re dealing with the legislature imposing new requirements around structural integrity and reserve funding, insurance premium increases, mandates on energy consumption and so many other external factors that are out of the property manager’s control,” Hector Vargas, the president of the High-Rise Division at FirstService Residential Florida, told MHN.
Focus on amenities: What’s next for condos?
And while developers strive to find creative ways to overcome all these challenges, those who are looking for a condo apartment have refined their needs and wants. Before COVID-19, location was among the most important factors for buyers searching for a home. While that still matters, preferences changed post-pandemic, and buyers are now more interested in having top amenities and modern residences. Fitness centers, swimming pools, work-from-home spaces and dog parks are still among the most sought-after, but health and wellness amenities are becoming more of a priority for residents, Ziv noticed.
“Another condo trend we’re seeing is a desire for high-level concierge services and amenities. In the wake of the pandemic, people have refined the meaning of home,” Robert Smith, region president at FirstService Residential Florida, told MHN.
Buyers expect the same level of service, amenities and conveniences at their residences that they find at resorts and hotels—from five-star Forbes Hospitality Training standards to food and beverage options, and the latest in tech and fitness, according to Landy Labadie, vice president of community solutions for the same company.
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“Let’s not forget about creative kids’ clubs, pet programs and so much more…Think grab-and-go food concepts, trash valet services, dog walking services and technology for ease of payment, scheduling and tracking,” Labadie told MHN.
And with buyers increasingly interested in benefitting from the perks of hotel living, it is no wonder that another trend is gaining popularity in the condo sector: hotel-branded residences. These developments are mainly built for high- and ultra-high-net worth individuals who seek an elevated lifestyle, with all they need readily available.
“Condominium trends seen in 2024 will continue to push boundaries on finishes, amenities and lifestyle offerings whether in a branded or non-branded building,” believes Terra’s CEO David Martin.
Last month, Terra broke ground on THE WELL Bay Harbor Islands, a luxury condo and office development in Miami’s Bay Harbor Islands that will be the first THE WELL-branded condo and office development. The eight-story residential building is set to encompass 54 condominiums and a 102,000-square-foot, four-story office component. More than 22,000 square feet of amenities will be available to both residents and office users, including a wellness center, community gardens, a rooftop decks and outdoor fitness classes programs.
Martin expects communities with a focus on ample indoor-outdoor living spaces and tech amenities to be in high demand in 2024 and beyond.
“I believe smart appliances and home automation systems will only become more essential for buyers of luxury condos,” he stated.
