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Miami boosted by construction frenzy

Le Figaro Economie – Edition December 27, 2013

Asian capitals and wealthy South American clients are jostling in the ambitious metropolis of Florida.

It is still only a futuristic sketch, an artist’s view: a skyline worthy of New York or Shanghai, a forest of sparkling skyscrapers, still dotted. This project that everyone is talking about in Florida is called “Miami 2020“. It concentrates more than $10 billion of investments, 171 major projects, glass and steel buildings with clean lines. It should transform the seafront of Miami. So far known for the dolce vita under its palm trees and its nightlife atmosphere, to make it one of the most modern and attractive cities on the planet.

This real estate boom is driven by foreign investments, mainly from Asia. The vertiginous influx of capital reassures considerably the developers, much less dependent in return from massive loans, or just like the implication of the most famous architects of the planet, like Zaha Hadid, Rem Koolhaas, Herzog and de Meuron or Bjarke Ingels, all anxious to leave their mark on this new Mecca of innovation, named “city of the future” in 2011 by the magazine FDI (Foreign Direct Investment).

Foreign investors involved in 75% of the most largest projects, are no longer content to collect their dividends like it was the case before. Attracted by the perspectives of the real estate market, Chinese, Malaysians, Indians seem to stay and now ready to spend fortunes to erect towers combining luxury condos, offices, hotels and shops. Like the Brickell City Center, built by Bouygues (french company) on behalf of Swire Properties (from Hong Kong) and estimated at $1.05 billion.

The buyers as well, have completed their moult: in Miami, where the “subprime” crisis occurred in 2007 and the bankruptcies in cascade led to the drying up of bank loans, we pay “cash” the down payments of 50%, even 60%. Which is not a problem for the customers who 90% are from South Americans: Venezuelans, Brazilians, Argentines and wealthy Mexicans, also attracted by a less volatile environment than Caracas or Buenos Aire

In addition of the abundance supply, it makes the hectic Miami a city surprisingly affordable still but maybe not for too long.
“The price per the square meter remains cheaper than in Sao Paulo, Mexico City, Rio or Bogota, and much lower than in New York or Los Angeles” adds Alexis Boudrand from the Jones Lang Lasalle group (JLL). And for Europeans, the dollar exchange rate makes supply always attractive.”

Most of these “immigrant investors” are Chinese

The luxury condos in skyscrapers under construction or in pre-construction sell like hotcakes. Out of 118 residential towers under construction, including 41 in downtown, only 35 have already emerged from the ground, according to the firm Condo Vultures LLC. In the flamboyant Porsche Design Tower, available in 2015, 90% of the 132 lots are already gone, sold between $4 and $50 million. The Crimson Tower by the sea at Edgewater, targets in priority the customers with the EB5 Visa, which allows the issuance of a Green Card (U.S. permanent residence) in exchange of an investment of at least $550k. Beside a few French people, most of these “immigrant investors” are Chinese, notes the developer Fernando Levy Hara from McKafka firm.

“The real estate boom is the secret of the Miami’s success” where the relative “lack of visibility” should not last much longer, predicts the business lawyer Séverine Gianèse-Pittman. Thanks to a very favorable taxation to entrepreneurs, an ideal strategic location that is between North and South America, and a great cultural offer with especially, the much awaited Perez Art Museum that opened its doors December 4. Culture is a major economic sector in Miami, which generates $1 billion in turnover per year.

The luxury sector but also the aeronautics thrive

The field of possibilities of these enthusiastic migrants gets far more beyond tourism. Its corollary, the luxury sector, will soon have its exclusive district: The Design District, where LVMH acts as a locomotive and drains the other big names established in Bal Harbor so far.

Less known, aeronautics generates $1.2 billion annual sales in Florida, thanks to the presence of Boeing, Airbus, Latécoère, Lockheed Martin as well as SMEs specializing in drones. Finance, biomedical, start-ups and port activities are also thriving.

The only risk in the current context is a possible slowdown in demand, which could stop the construction frenzy. “There is nothing to predict a such a scenario in the near future, corrects Alexis Boudrand of JLL. The craze for Miami, perceived as a city of the highest importance, continues to grow.”

The Cruise Terminal turns into a Commercial Port

The feat is huge, and it’s French. May 2014 will be inaugurated the Port of Miami tunnel which will eventually unloading goods from offshore freighters and bypassing downtown Miami, stifled by increasing road traffic.
Behind this technical performance, Bouygues, endowed with a contract of $663 million (480,000 million €uros), drilled 1.1 km on complicated ground which required the injection of mortar to stabilize a porous and unstable coral layer. The feat, notes a French decision maker “it should give Bouygues a good position” on the Miami site, where opportunities are increasing with the influx of foreign capital (see above).

Miami has no choice. Already being under assault by cruise ships where passengers made it as a privileged tourist stopover, the city knows that the very modest size of its port facilities, yet ideally located in deep water, will soon no longer be able to follow the frenetic pace of its urban and commercial development. $2 billion are already devoted to modernization works, between the acquisition of giant cranes from China and deepening of the access channel.

The stake of Panama

In addition, Miami anticipates the widening of the old and undersized Panama Canal, which should throw super-containers from China into its arms, starting in 2015. One out of five containers imported from China gets in the United States by the East Coast, therefore via the Panama Canal. Smelling the opportunity to establish itself as the Latin America & East Coast gateway, Miami is on the ranks to establish itself as THE port of unloading of Asian goods on this same coast.

But the competition will be hard: Charleston (South Carolina), Savannah (Georgia), and New Jersey have made massive investments to win the bet. The West Coast will not easily let it go either with San Francisco and Long Beach (South of Los Angeles) with its geographical advantage on the Pacific coast. With its ideal strategic location and its current vitality, Miami nevertheless has excellent assets to dream of a real port future.

A Silicon Valley blossoms under the Florida palm trees

It is not yet San Francisco, nor even New York, Boston or Austin. But the Miami “tech” scene timidly shows up, moved by young creative entrepreneurs and inspired by the contagious surrounding energy. In the “arty” district of Wynwood, with walls covered with ephemeral and colorful works, a sketch of Silicon Valley emerges among the workshops of outdoor artists. “It is time to realize that Miami is not just hotels or palm trees, smiles Michael McChord, of the start-up Learner National, there is a real business community here, that works hard.”

Miami has let its talents gone away so far, hired from Silicon Valley on the West Coast or the Flatiron District in Manhattan. “They must be able to stay here and find the same access to the same kind of community as in San Francisco or New York,” said Daniel Lafuente, one of the founders of the Lab, “a coworking space”, a shared workspace in full expansion. Covering nearly 1,000 square meters, this nursery on 26th Street hosts 54 start-ups. It is the first of its kind in Miami and is inspired by General Assembly, in the Flatiron District in New York.

For Lafuente, “there was a lack of an entrepreneurial ecosystem allowing people to interact”, “techies” (engineers, programmers), designers and academics. The Lab, founded in 2011 in the form of a “virtual campus” has gathered young inventors, business angels and “VC” (Venture Capitalists), and sponsored investors with strong backs. Starting with the Knight Foundation, named after the founding brothers of the media empire whose flagship is the Miami Herald, put $650,000 on the table from the start of the Lab. This year, the Foundation has invested a total of $4 million across the city, whether to promote a mobile application to link South American farmers to banking services or a video transcription program to written documents.

Until Google

To avoid the young brain drain, the city of Miami and Dade County announced in 2012, $1.5 million in grants to new entrepreneurs as part of training organized by the local university. A major tech conference planned for May 2014 is expected to attract attention to Florida’s Silicon Valley. “We are just at the point where the ecosystem is about to take off, assures Brian Breslin, who has been organizing “Refresh Miami” tech meetings since 2006.

The Floridian scene is just missing a success story of the scale of Google for San Francisco or Tumblr for New York. “We need a concentration of inspired investors, why not South Americans” who are putting enough money on the table to reach critical mass, assures Matt Haggman of Knight. “And there you will see what our start-ups can do.”

Source – Le Figaro Economie