Miami Herald: Is There Room at Top of Luxury Condo Market to Bargain?

Miami’s luxury market may have softened, but high-end condo buyers shouldn’t expect any bargain-basement prices.

At the newest luxury-appointed condominium development on exclusive Fisher Island, Palazzo del Sol’s Penthouse 1 comes with 6,644 square feet of 18-foot ceilings, panoramic water and city views, a private rooftop terrace and a sculptural Boffi tub — and a $26,411,500 price tag.

That sums out at about $3,979 per square foot — a figure that would likely rank in a Top 10 list for recent Miami-Dade sales if it fetches its listing price. Most of the highest completed sales for new construction within the past 12 months were located in Faena House in Miami Beach and closed between $3,766 and $5,295 per square foot, according to data supplied by Cranespotters.com, a Miami real estate consultancy.

Other eye-popping sales included a $3,538 per-square-foot sale recorded in November 2015 for 1 Hotel & Homes and a closing this year at Beach House for $3,016 per square foot and Palazzo del Sol at $3,236 per square foot.

Nearly all of these prices date to a time when the market was hotter, prior to this spring’s cool down. While developers’ asking prices for new construction are not being slimmed down — developers are sensitive to what existing buyers paid — what buyers actually pay is lower, say experts.

“A year ago, asking prices were not negotiable but now they are,” said Jeff Morr, broker associate with Douglas Elliman Real Estate and chairman of the Miami Master Brokers Forum. He’s seeing deals come down 5 to 10 percent.

Miami’s luxury waterfront market has turned from a seller-names-the-price scenario to one where buyers hold the final say, Morr said. “People still want to live in Miami — Miami is still a value relative to other cities in the luxury market. Our dollar is strong, Brazil is not strong, Russia is not so strong, China is just starting to come, but they are not really interested in the luxury market yet.

“We are working with people who want to be in Miami, locals, Americans, and foreigners who have a lot of money regardless. But they are all looking for some kind of deal.”

Palazzo del Sol, designed by architecture firm Kobi Karp, exemplifies the trends powering Miami’s luxury real estate scene. South Florida developers now are often peddling larger luxury residences, often with fewer residences per floor and direct private elevator entry, along with high-end design and finishes and building amenities. Three quarters of Palazzo del Sol’s buyers are island residents who wanted to upgrade and 30 percent are families, said Dora Puig, who heads Palazzo del Sol’s sales and marketing.

Still, the exclusive Fisher Island building had to up its amenity game to compete with off-island five-star projects like Continuum, Faena House, Icon and Ocean House, all on Miami Beach. That also helped it stand out on Fisher Island, where most buildings have limited flourishes beyond the island’s common amenities: club in a 1935 Vanderbuilt mansion, restaurants, 18 tennis courts, two marinas and a golf course, beach and spa, all upgraded in a $66 million renovation.

At Palazzo del Sol, residents have exclusive access to an aperitivo bar, Italian butler, massage room, salon, gym, movie theater and children’s playroom within the building, and outside, a zero-edge pool, terrace lounge and cabanas available for purchase. “We are trying to be the VIP club on the island,” said Puig. “A velvet-rope reserve.”

Puig says Palazzo del Sol’s high-level amenities have spurred other Fisher buildings to upgrade. “In the beginning it was our little slice of Palm Beach,” Puig said about the 216-acre island, during a recent golf cart tour. “I still think it is, but I think it is so much younger and hipper.”

Palazzo del Sol, developed by PDS Development and completed this spring, boasts 10 stories with 43 units, ranging from three to seven bedrooms and measuring 3,800 to 9,800 square feet. About half of the units have closed, including a penthouse purchased by lawyer James Ferraro for $21.5 million, or over $3,200 per square foot, a Fisher Island record. Last year, an unnamed Russian buyer paid $35 million, or roughly $3,602 per square foot, for the building’s trophy penthouse, a transaction expected to close this fall, Puig said.

While Penthouse 1 for sale is “decorator ready,” a model residence at Palazzo del Sol shows off what can be done. The seven-bedroom, seven-bathroom home was designed by Solesdi, a local showroom, and outfitted with a Boffi kitchen, 8-foot doors and high-end finishes such as Henge light rings, Oak Creta wood flooring, bookmatched marble and Cage shelving. Puig calls it “relaxed island chic.”

While the unit may turn heads, it will have to compete not only with other new constructions but with resales, too.

That may be why sales prices were 3 to 16 percent lower than the list prices among 24 of the 30 most expensive resales by square foot, according to MLS data analyzed by Cranespotters.com, .

“The high end of the luxury market is basically swamped; there is an excess of two years of supply,” said Peter Zalewski, a principal with Cranespotters who closely tracks the condo marketplace.

“It’s a market where the buyers buy, they aren’t sold. If something catches a buyer’s fancy … they may pull the trigger, but there is no urgency to get in because there aren’t foreign buyers from Russia and Brazil nosing around, trying to pick things off like they were a few years back,” Zalewski said. “The smart money is still sitting on the sidelines, which I think will only contribute to more of a slowdown.”