Gil Dezer said last November no one was buying luxury condos in South Florida for anything less than $1,000 per square foot.
The developer’s statement at The Real Deal’s Miami forum shined a spotlight on the demand for high-end condos in the Sunshine State. But Dezer said it has more to do with the other side of the pricing equation.
“It’s not so much that no one’s buying them [for less than that price]. It’s that no one is building them for less than $1,000 a foot,” he said.
Months after issuing his take, Dezer sat down with TRD’s Deconstruct podcast to discuss the changes in South Florida’s condo market, the intricacies of luxury development and the current state of construction financing.
He was quick to point out that skyrocketing condo prices in the state have much more to do with costs than anything else.
Pandemic-induced disruptions in the supply chain led to increased expenses for materials like lumber. Even as prices have moderated over the past year, they still sit well above pre-pandemic levels. Then, there’s the increasing cost of labor. Altogether, it’s squeezed profit margins for developers, driving up listing prices for luxe condos.
“I was happy to sell my units at the Armani Casa for $1,500 a square foot. That was in 2020,” Dezer said. “Here we are four years later, and we can’t sell for $1,500 a foot. We’d be going bankrupt.”
It took some time for buyers to adjust to the higher prices, but buyer expectations have changed to accept that bigger price tags are here to stay.
He also admits that pandemic-era migration patterns played a big role in his and South Florida’s recent successes. A boom in condo development before Covid might have created an oversupply, but the influx of residents helped balance the market.
“There is a population shift, and we are on the fortunate end of it,” Dezer said.
Dezer has made a name for himself recently by attaching high-end brand names to his condo towers. First, it was the Porsche Design Tower and Residences by Armani/Casa. Now, Dezer is working on his latest branded condo project: Bentley Residences.
A nationwide slowdown in construction financing hasn’t deterred Dezer, whose latest project recently kicked off construction. “There’s definitely money out there. It’s safe money,” Dezer said, pointing out that lenders were much more likely to make construction loans to projects with extensive pre-sales and buyer deposits.
At the Bentley tower — where the average price point is $7 million — Dezer is taking a 50 percent deposit for pre-sales. The tower has generated 87 pre-sales thus far, representing about 40 percent of its 216 units.
Despite all of that, Dezer has yet to secure a construction loan for the project — at least partly by design. The project will take about three years to complete, and Dezer said he would like to be able to pay off his debt early to save on interest costs. So, he’s waiting until later, when more sales have closed, to secure a loan.
