Dive Brief:
- Developer Related Group has scrapped plans for its luxury mixed-use project, the Auberge Residences & Spa Miami, according to the Miami Herald.
- Only 15% of the 60-story tower's nearly 300 units sold during the presales period in August, and, according to The Real Deal, Related returned buyer deposits in December.
- Related launched the project about a year ago, just as the Miami luxury condo market began to weaken, reportedly partly due to an oversupply. The lack of a waterfront location and a dearth of foreign buyers also contributed to the project's demise, according to the Herald.
Dive Insight:
Back in August, Related — one of the largest condo and multifamily developers in Miami — announced that it would delay the project temporarily because sales had failed to hit the two-thirds goal to move forward with construction.
Miami is not the only market to slow down its high-end condo development. Retail developer Simon Property Group postponed construction on the 52-story Copley Place tower, which is part of the $500 million Copley Place mall expansion. Simon officials said there was a glut of luxury units on the market and that construction costs were too high.
Regulators have also taken an interest in the reported oversupply of luxury condo projects, as well as the construction and development (C&D) loan industry. A CoStar report last month found that the issuance of C&D loans in 2016 rose 14% from 2015, beating out the growth rate of all other loan categories. This followed a 13% increase in C&D loans between 2014 and 2015. However, banks have kept C&D activity at 3.4% of total loans, which is a good sign of restraint. Before the Great Recession, this type of lending accounted for 8.4% of all loans.
In February, the Fed questioned the pace of lending for luxury condominium projects and also expressed concern that the market could be approaching a bubble. Adding to Fed worries was a Fitch Ratings report that forecast an increase in commercial mortgage delinquencies by as much as 2.4% this year.
