Friday, Jan. 8, 2010 | 3 a.m.
Simply blame it on Miami.
That was the essence of a Miami Herald article last week comparing the overbuilt South Florida and Las Vegas condominium markets and trying to ascertain which will recover first.
The article, which featured experts from Nevada, talked about how South Florida developers wanted to expand their empire to Las Vegas after Florida-based Turnberry Associates did well with its four-tower project.
The belief among the developers was that Canadians and Southern Californians would rather buy a condo than stay in a high-priced hotel room and that locals, tired of long commutes, would prefer to be closer to the Strip, says Monica Hatcher, the Miami Herald reporter who came to Las Vegas to report on its condominium market.
Hatcher talked with a South Florida consultant who warned developers that Las Vegans have favorite casinos in the suburbs and rarely go to the Strip. Las Vegas developer Irwin Molasky, who built the Park Place condominium tower just off Flamingo Road east of the Strip, weighed in on that argument, she says.
“Outside developers came here and really misjudged this market,” Molasky says in the article. “It is a not a Miami market. We don’t have South American trade, the New York trade, and they just thought, ‘if you build it, it will come.’ ”
Hatcher says there was much hype in Miami about what was going in Southern Nevada, but it never came about as expected.
Las Vegas was fortunate because only about 9,000 of 29,000 planned units were built compared with more than 30,000 in the Miami area, where the population is 2.4 million compared with less than 2 million for Las Vegas.
“When you compare the population of the two cities, you can sense how much overdevelopment we had,” Hatcher says. “Part of the reason Miami built so much was they were banking on seasonal residents.”
Hatcher says it appears much more would have been built here, but the construction of megaresorts puts building and labor costs so high that South Florida developers had to shelve their plans.
Hatcher quotes Jorge Perez of the Related Group in Miami calling the decision to cancel the $3 billion mixed-use Las Ramblas project near the Hard Rock in Las Vegas as one of the smartest decisions he has ever made.
“The market was clearly showing signs of decline, and the demand for construction services was so great that construction prices had been inflated to the point of making our project unfeasible,” Perez says. “Instead of taking the immense risk, I decided to sell the land for a huge profit.”
Hatcher says Miami — which had 8,500 units listed for sale by developers in downtown and nearly twice that in outlying areas — is burning off its excess supply nearly twice as fast as Las Vegas. The reason is that lenders have allowed plenty of short sales, and investors are buying condos in bulk, she says.
“There is a lot of cash out there ready to buy in bulk, but they are ready to buy bulk at a much cheaper price than developers and banks are willing to sell for right now,” Richard Lee, vice president of First American Title Co., said in the article.
As for which market will recover faster, Bruce Weiner, president of Turnberry Ltd., predicted that despite the large number of condos in South Florida, it will absorb them faster than Las Vegas.
Hatcher says it’s hard to get a sense of which market, in the long run, will sell condominiums faster but Las Vegas has an edge because it’s selling more than 4,000 existing homes a month while Miami is selling close to 1,000 a month.
“Las Vegas is finding its footing quicker and clearing out its inventory,” Hatcher says.
Las Vegas has been fortunate because it is a casino resort destination that had a lot of hotel development under way, Hatcher says. If not for that raising the overall cost of construction, more developers would have built condominiums in Las Vegas, and there would be even more of a glut of supply.
“That helped save you,” Hatcher says. “You could have been a lot worse.”
In other news
Habitat for Humanity Las Vegas received a $90,0000 town house from Nevada State Bank for the nonprofit organization to continue its mission of working with families in need. Habitat for Humanity will renovate the town house as part of its partnership with the Youth Build Program that trains at-risk youths in construction trades. Once renovated, the town house will be sold by Habitat, and the proceeds will be used to finance the construction of a home.