South Florida opens 2024 looking economically stronger, more diversified, and more attractive than ever before. What’s next for us as we grapple with cost-of-living pressures, housing shortages, rising insurance risk, and the adaptation necessary to sustain momentum?
Cities all over the world are at a crossroads in which growth and expansion must be balanced against a variety of challenges including the preservation of key natural resources such as water and green space; the mitigation of natural hazards like flooding, windstorms, and fire; rapidly rising insurance costs; and growing shortage of housing at accessible price points. These issues have been at the core of Miami’s past two development cycles and continue to exert greater and greater pressure on those working in real estate to provide effective solutions.
In an effort to deliver those answers, the University of Miami asked, “What’s Next for a Resilient Miami?” as its theme for this year’s Real Estate Impact Conference. Noted leaders with expertise in commercial and residential development, global climate news, infrastructure and civil engineering design, and real estate law and finance pulled back the curtain on an industry undergoing significant transitions, and discussed what efforts are working well, which appear to hold promise for the future, and the problems that must be addressed quickly if cities like Miami are to succeed both socially and economically.
South Florida opens 2024 looking stronger, more diversified, and literally stands as the place to be for real estate,” saidCharles C. Bohl, Professor and Founding Director of the Master of Real Estate Development + Urbanism Program (MRED+U) under the School of Architecture. “It is not, however, without challenges,” he continued in his welcoming remarks. “In facing resiliency and sustainability, the University of Miami seeks to create and next generation of leaders and visionaries - with programs in every field that connects to real estate, including construction, business, law, finance, and beyond.”
University President, Julio Frenk, echoed this sentiment in his own opening speech, highlighting the University of Miami’s unique opportunity to act as a leader and catalyst. “It seems as though it was the university’s destiny to be at the forefront of these issues,” he stated. “We want to drive change, deliver solutions, and collaborate with the community, government, and private industry. We need to educate and provide tools for promoting shared understanding. Just as our mascot, the ibis is a symbol of resiliency, so too, must the University of Miami be a trusted resource in building resilient communities now and in the future.
12:00 PM
REGISTRATION AND NETWORKING
1:00 PM
SHAPING A RESILIENT PATH FORWARD FOR SOUTH FLORIDA
With a growing body of adaptation research and proactive initiatives by the public and private sectors, South Florida is emerging as a leader in urban resilience. Join Diana Olick, CNBC’s Senior Climate and Real Estate Correspondent, as she explores adaptation and risk reduction strategies to preserve and protect real estate value and create thriving, sustainable communities with two of South Florida’s most prominent resiliency thinkers.
In addition to introducing President Frenk, Eric Todd Levin also kicked off the first panel of the 2024 conference. Levin actively serves on the university’s Executive Committee and is a founding donor of UM’s Climate Resilience Academy. He welcomed Michael Berkowitz, current Executive Director for the Climate Resilience Academy and founder of the Rockefeller Foundation’s 100 Resilient Cities network; David Martin, CEO of the Miami-based Terra Group development firm and a life-long Florida native; and Diana Olick, Senior Climate and Real Estate Correspondent for CNBC.
Olick began the discussion with the insight that Miami is at the forefront of resilient development not simply because it wants to be, but because it has to be. She then asked fellow panelists how developers are working with cities to establish and achieve resiliency.
“Let’s talk first about what resiliency really is,” responded Berkowitz. “It’s the ability of communities to survive disaster… robust public and private infrastructure, streets that don’t flood, buildings that don’t fall down after storms. But it’s also a strong middle class job base, neighbors checking on neighbors, surviving and thriving in the face of disasters.” He then went on to explain that Florida is a type of proving ground for resiliency because of its statewide growing economy, wide variety of local governments, and exposure to climate impacts. “If we can solve things here, we should be able to solve them anywhere,” he offered.
Martin suggested that developers occupy pivotal roles in directing the resiliency narrative at local and regional levels. “What’s changing, and needs to continue changing is moving from a project-focused strategy to a neighborhood-based strategy,” he explained. “Can we create new tax revenues? How do we address green and gray infrastructure? How do we make neighborhoods more walkable? Can we be more cradle to career in our approach? How do we increase the overall tax base to fund public works and schools?” The panelists then discussed properties throughout Miami and South Florida that are succeeding in those pursuits, while also talking about the financial implications of doing so.
“All of these improvements cost more money,” said Olick. “How do developers and the rest of us finance these efforts while also managing risk?” Martin and Berkowitz agreed that municipal bonds and incentives certainly could be an answer, but that developments must essentially create revenue streams to fund such instruments. They also shared the belief that some fundamental changes need to occur in the ways insurers, rating agencies, capital providers and banking entities evaluate and prioritize risk. When Olick asked whether or not that puts more strain on governments in the short term, the panel explored solutions such as Stafford Act reform for FEMA, building back better in the aftermath of disasters, and rethinking where real estate density should be within a certain area.
Data also was revealed as a valuable and necessary tool in accelerating positive change, particularly making the right data available to the right people. “If individual consumers have useful information about flood scores, climate risk, and how that can [increase or lower] their insurance costs, then we’ll see the market start demanding more resiliency in design, construction, infrastructure… everything,” said Berkowitz. “That’s why we look for partnership within the community,” added Martin. “We bring neighbors in for the educational part of the planning process and bring talented people to the table armed with a problem-solving mentality.”
Martin then advocated for setting aside funds for future resilient development now, rather than waiting for the next crisis. “Let’s talk about a development that brings $20 million in new property assessments to the city or county,” he offered. “Our commissioners and officials need to see there is an immediate and lasting financial upside to enhancing property values.” Berkowitz underscored Martin’s comments by describing a likely future scenario. “Whether it’s in a year, five years, 10 years, or more… eventually there is going to be a serious climate event that will force all of us in Miami to change our perception of risk and resiliency. These are the moments with the greatest opportunity to effect change. If a plan is already in place, there will be tremendous investment opportunity for those ready and willing to take advantage of it.”
Now in its sixth year, the research initiative headed up by select University of Miami MRED+U students delivered insights into emerging trends and shifting attitudes at work in the real estate industry.
Sponsored by John Burns Real Estate Consulting, and led by Professor Mark Troen from the School of Architecture, this year’s report focused on five pillars: Education, Technology, Transportation, Accessibility, and Housing.
Respondents in 2024 continued to believe South Florida would see additional real estate development, although residential and commercial markets may be more balanced than in previous years. Part of the reason for this was a growing demand for talented, educated, experienced workers for the many industries relocating or starting up in Miami-Dade, Broward, and Palm Beach counties. The need for workers to have places in which to work and grow their skill sets was identified as a likely driver of shifts in the development cycle, leading to more office, mixed-use, and similar properties in 2024 and beyond.
Concerns over cost of capital, insurance, and other carrying costs continue to represent a challenge to market growth in the minds of respondents, with many seeming to indicate this may “cool” the South Florida market somewhat in the short term. This could have even stronger impacts than in past years on housing markets, which remain strong from a property value perspective, but are still challenging or unattainable for large portions of the population.
The power of technology to shorten development timelines while also lowering overall costs was also examined, with great potential shown in areas such as automated procedures for permitting and documentation, and in-depth data analysis at near-real-time speeds to evaluate planning, financials, and more - all without adding more personnel.
The full 2024 report, including tabulated results, key takeaways, and respondent insights will be available later in the year. The conference presentation of preview findings may be accessed here.
3:00 PM
THE NEXT DOWNTOWN
South Florida has remained a vibrant outlier for office and retail markets, even as post-COVID trends continue to roil markets in US urban cores. Two veteran leaders in creative office and iconic urban centers take up the hurdles that might threaten South Florida’s momentum and discuss innovations and ideas for the future of downtowns in an era of adaptation and renewal.
Thomas Nealon introduced the next panel of the conference, which would delve into the spirit of innovation as it relates to forward-thinking real estate development. Nealon is the Director of the Real Property Development LL.M Program at the University of Miami School of Law, and has spent decades in the worlds of real estate finance, portfolio management, and related fields.
Moderating the discussion between Michael Phillips, Principal, Chairman, and President for Jamestown; and Paul Darrah, Chief Workplace Officer for Citadel (and new South Florida resident); was Avra Jain, the visionary Miami developer specializing in new and emerging markets, historic preservation, and adaptive re-use.
They began with a look at the dynamics of the modern workplace, since downtown development relies largely on a strong commercial/office presence. At the core of the conversation was the future of an office market that has recently been in turmoil, but is beginning to re-emerge through a return to in-person work, new best-in-class buildings purpose built for today’s collaborative work environments, and the shift away from “the desk” as the key element to successful office space.
The trio of experts agreed that adaptive reuse holds a lot of promise for upcoming development and redevelopment,largely because of their desirable locations near urban cores, and a growing demand amongst tenants for interesting character and architecture. Pre-WWI buildings in particular seem to be most attractive for adaptive re-use, while conventional office buildings of the 1960s through 1990s with larger footprints and deeper floor plans are more challenging to adapt to new workplace attitudes. In all, about 50% have adaptive reuse potential, but valuations based on past occupancy and leases make only about 1 in 5 of these are financially feasible at current valuations.
Phillips and Darrah added they have both seen a tremendous push to return to in-office work and hands-on collaboration. “Innovation has to happen in the office if you want to make strides in leadership, mentorship, and professional development,” said Darrah. “It’s important for retaining talent because people are less invested in a company if they do not have any personal relationships.” Phillips noted that the pandemic definitely strained the connections between people and businesses. “It’s so much harder to get consensus when everyone is split apart or remote,” he said. “Real estate truly is a hyper-local focus… which is why we have offices in eight countries. Being together is important, and it’s coming back.”
Jain then asked how much ESG (Environmental, Social, and corporate Governance) initiatives are influencing the future of downtown. “How much does it matter to employees, tenants, and clients?” she questioned. “And should we be building that into the equation more as developers?”
“Depending on your stakeholders, it’s very important,” replied Phillips. “If you have European and Chinese investment in your portfolio, ESG needs to show up. It’s been more difficult to justify that expense in American markets, but it is changing.” Darrah added that you can see developers leaning into ESG with policymakers following close behind. “It’s already becoming policy in places like New York City, and developers would be wise to be ahead of the game [in their respective cities].”
The panel then turned their attention to the roles creativity and placemaking have in today’s development strategy, and whether or not these efforts can be quantified on a balance sheet. “What’s the secret sauce?” Jain asked. Phillips stated that whether it's readily recognized or not, real estate that ‘inspires’ does so because the developers behind a project have a very clear view or message they wish that property to convey. “Aspirational and inclusive environments reflect how people see themselves in the world,” he explained.
Darrah highlighted the acclaimed Pier 57 project where Google selected Jamestown to develop and manage the ground floor leasing and programming as an example of creativity being the basis of successful development. “It was a derelict pier, and now it’s a hit destination. It’s artistic, culinary… with amazing skyline views… a beautiful park… and open to the public. It’s like a living room for New York,” he said. Phillips then explained, “even though that place is full of culture and belonging, there’s a ton of office space on upper floors that you don’t immediately notice. That’s how you make it work on the financial level.”
The panel also addressed concepts for future developers in the audience. Learning to be okay with mistakes and a willingness to test, iterate, and improve was championed by all panelists, as was the need to leverage resilient development principles into cost-saving strategies. “You can’t solve a $50 million carrying cost due to insurance and interest rates with changes in finishes or simply raising leasing and sales prices,” said Phillips.
Diversity was another factor the panel agreed would influence future downtown areas.”Diverse cities help sustain larger companies like ours,” Darrah said. “We get better access to a larger range of talents, all of whom want to come together and be part of something bigger. For me, the cities [at the epicenter] of that movement are New York, Miami, and London.”
4:00 PM
NETWORKING BREAK
4:30 PM
MAINTAINING A HEALTHY HOUSING MARKET
The right balance between housing options and population growth helps other commercial real estate sectors thrive. Our two CEOs of preeminent housing firms will share their thoughts on both micro and macro trends for the housing market, and the prospects for the “American Dream” going forward.
The final panel of the 2024 Real Estate Impact Conference brought the idea of resilient real estate development full circle with a discussion covering the housing market and how it is intrinsically linked to the economic strength and sustainability of any city.
Introduced by Herbert Business School Professor, Andrea Heuson, and Board Chairman for the Herbert School’s Real Estate Advisory Council, Randy Weisburd, who also serves as President and COO of Atlantic Pacific Companies, the Housing Market panel featured two of the most prominent figures in residential development today, Stuart Miller, Executive Chairman and Co-CEO of Lennar; and Dallas Tanner, the CEO of Invitation Homes.
Miller opened with the powerful statement that any discussion of a healthy housing industry must begin with the understanding that “we haven’t done ANY of what’s needed… not locally, and certainly not nationally.” He said, “Talk to mayors everywhere and they’ll tell you meeting the need for housing and a way of life that’s better for our workforce is essential. And yet, across the country, for a variety of reasons, we’ve not been able to meet that need or drive that supply. What people fail to realize is how critical [housing] is to the economic situation almost everywhere. Housing costs that are 40% of income are major components of what is driving the country, economy, and everything else, even if it isn’t what we always talk about.” He then invited Tanner to explain how his company, Invitation Homes is actively working to change the housing paradigm for the better.
As the pioneer behind corporate Single Family for Rent and Built to Rent residential real estate, Tanner began in Phoenix, AZ during the 2008 mortgage crisis. “There was a huge loss of equity in Phoenix, as there was everywhere,” Tanner shared. “But we didn’t believe that meant there was a loss of housing need. Rather, we believed there was a strong leasing market that was virtually untapped.” Tanner and his partner were correct, often leasing properties without needing to make property investments or improvements. Invitation Homes started with 30 homes that were purchased for roughly 30 cents on the dollar, and with investment from Blackstone, rapidly scaled up to 30,000 homes in just 18 months. Today, the company owns and manages roughly half a million homes in their rental portfolio nationwide.
“So, private capital was instrumental in correcting the busted housing bubble at that time,” said Miller. “No one could activate these properties because banks and traditional lenders wouldn’t take it on their balance sheets. Private capital wisely stepped in and saw assets they could acquire for below replacement costs.” Tanner agreed that private capital continues to make the corporate leasing relationships possible for Invitation Homes’ tenants.
“The reality of our business is that it really only works with corporate-style management. We don’t have any two floorplans that are the same. We have 500 vans that do 7.5 service and maintenance visits a day, and we’d like to get to 8. We want happy customers, because happy customers renew. And that takes economies of scale you only get with size.”
Tanner and Miller then reviewed the prevailing housing shortage in the U.S.. “We’re short about 2 million to 5 million homes nationwide, and growing” said Miller. “And the production cycle is about 1.3 million per year. So, we have a deficit that keeps increasing.” Reasons for this, the pair said had a great deal to do with interest rates, the challenges of debt and saving up for down payments, cost of labor and materials, and ongoing difficulties with land entitlements. “There are so many elements working against housing,” Miller continued, “and it’s never the same issue twice.” That’s why solutions like Invitation Homes hold such promise, the two agreed.
“We’re able to drive affordability through strategic partnerships,” explained Tanner. “We bundle internet for our tenants at rates that are 20% below anything in the individual market. Same with HVAC filters which we drop ship to our tenants’ front doors. We don’t make those deals without the inventory we have.”
Lennar is also working with scale to drive down costs and improve affordability, but from a different direction. Miller said the company’s focus is about creating consistent product lines, streamlining building costs, and working smart at the infrastructure level.
As for the future of the industry, Miller issued a challenge to future real estate professionals. “People don’t realize that housing is so critical to our economy and how many good careers there are to be had in this field. Lennar has a Division President in Las Vegas who started with us as a receptionist. She now makes a seven-figure salary because this is an important side of the industry. Come on in, the water’s warm.”
5:45 PM
NETWORKING RECEPTION
Registration
Invited guests have received a link to register via email. Please email reimpact@miami.edu with any questions.
Media Requests
Any member of the media interested in registering for conference credentials should email Megan Ondrizek with University Communications at m.ondrizek@umiami.edu.
