While South Florida’s residential builders would like to ramp up production in 2017 to meet pent-up demand, they must overcome two challenges: finding suitable land in highly populated markets and constructing affordable and attractive products.
Builders also face competition from residential resales, as well as from institutionally owned single-family and townhouse rentals. Blackstone’s recent offering indicates that institutional investors look favorably on acquisitions of these real assets.
The limited supply of approved and properly zoned land will continue to restrict single-family and townhouse projects in South Florida. The tighter supply also places landowners in a strong position as builders pay high prices to acquire their parcels. While there is equity financing available for builders and their joint venture partners, finding sites for good projects will continue to be a challenge.
Higher land costs make it difficult to construct reasonably priced housing for the starter-home and move-up markets. However, careful planning and design can help to overcome the affordability issue, while still incorporating a sense of “wow” for the buyer. In other words, builders today need to innovate, rather than imitate.
To address affordability, builders will focus on high-density single-family detached and townhouse products, including duplexes, patio homes and zero-lot-line houses. Some sites may also be suited to low- and mid-rise garden-style condominiums that offer buyers the benefit of lower fees and maintenance costs.
But we strongly believe there are more creative ways to design new products that grab the attention of buyers craving luxury features in a moderately priced home. For example, built-in closet shelving and dressers can add both beauty and functionality without sacrificing living area. Higher ceilings, and innovative exterior treatments are just two of the many ways forward-thinking builders can distinguish their products from the resale and rental competition.
In an era of limited land supply, South Florida builders need creative approaches combined with solid market research to meet the growing need for moderately priced housing. Planning is truly the key to offering a superior product that hits the “sweet spot” in today’s market.
By Lewis Goodkin