Florida Real Estate Developer Discusses Condo Market
How are the widespread housing market and Florida mortgage concerns having an impact on the construction industry in the state?
To find out, the Miami Herald sought out Tom Murphy Jr., the CEO of Coastal Construction, a general contracting firm building many of the high-rises going up across the South Florida real estate market.
Q: There has been plenty of discussion about a home building slowdown both in both Florida condos and single-family homes. What projects are you now building in this market?
A: Five years ago, our work was 97 percent condos. Now our work is down to 50 percent condos. We are doing quite a bit of schools, rental apartments and a lot of commercial real estate - office buildings.
We are doing a big office building on Brickell Avenue, 1450 Brickell, and are building the new Bacardi office building in Coral Gables.
Hospitality is back again. We did the Ritz-Carlton South Beach, which was the 40th hotel we’ve done in South Florida. We have three hotels coming up that we know we’ll be doing this year.
We also have a luxury home-building business. It’s a niche market. The high-end housing market is way up, even though you can pick up a paper and the overall Florida housing market is way down.
We have six houses under construction right now, and four are in the range of $25 [million] to $50 million in construction costs. You would roughly double that for value. So if you had to buy them, they would be between $50 [million] and $100 million homes.
Last, we have a business that only does very high-end interiors. We did four for Oprah. [Clients] buy a unit or two on the top floor of a condo, and we do the complete build-out of it. We keep about six or eight jobs going at a time.
We still have a lot of condo work. We just broke ground on Trump Hollywood being developed by Related Group. But we are trying to get the [amount] of condo work we are doing below 50 percent. But we’ve taken it from 97 percent down to about 50 percent, so that is pretty good.
Q: So you have reduced the number of condos you are doing as it relates to your overall business. Why?
A: For condos, five years ago the market was absolutely on fire, and we made the decision to try and reduce the amount of condo work we’re doing as a percentage of our business. I think a lot of people built their business on condos because it was easy to get the business.
You try to read the future, but you know one thing for sure when a market is so heated up, it won’t last forever.
Now, the number of condo developers looking for general contractors has shrunk. It has significantly shrunk. Fallen off a cliff when compared to the last five years.
We are fortunate. Five years ago, for instance, we said we would start doing schools. It took three years to get one school job. But last year we got 11 schools to build. With office buildings it was two years in the making. Same thing has happened in all of these sectors.
Q: How would you characterize the current market?
A: Well, Florida mortgage rates are low and everything is increasing in sales activity, except condos - which is by design.
We have three years of upcoming work on the books. The building activity we are doing right now is up 25 percent, and new work we are signing up to build is up about 50 percent. So that is very good. Outside of condos, there is not much slowdown in Miami and vicinity.
Q: So business is good, but for general contractors that are largely focused on condos, is that downturn creating changes in the market?
A: We are seeing a lot of movement because guys that only build condos are starting to feel the slowdown that is coming. A lot of these people see what is happening, and they know the company has never built a school or an office building. It’s kind of like rats jumping off a sinking ship for some of them.
So we have been hiring people since a lot are becoming available. We probably had six big hires in the last 60 days.
Q: Green building is becoming increasingly popular with commercial real estate developers and increasingly encouraged by public officials. For a general contractor, is it more difficult to build a green building?
A: It is not any tougher for home builders. It’s a trend, and I’m sure there is good to it. Time will tell. I remember when solar heaters were the rage. It’s not rocket science. There is a learning curve, and it will cost money. But over the long term it probably won’t cost that much more. It’s a commitment from the developer.
SOURCE: Miami Herald
