Craig Studnicky:
Good morning everyone. It’s Craig Studnicky from ISG and RelatedISG. Reporting to you this morning with our Q3 updates of the Miami Report, but from Mr. C in Miami Coconut Grove. Look at this magnificent view we have in the background. It’s been another interesting quarter, I’m about to show you some very interesting results that may surprise most of you. I’m really excited though, because in a few minutes I’m going to be accompanied by Mayor Francis Suarez, who will talk to all of us about his vision of Miami and where he thinks Miami’s going, and more particularly what he did to convince 122 companies to relocate their offices here in South Florida.
Let me give you first some background and a little bit of a setup to the interview we’re about to have with the mayor. The feeder markets of Miami, these is something I think we all need to keep top of mind. There’s lots of chatter out there about rising mortgage rates and how it could affect real estate values and so on. The engine that keeps Miami moving, Miami being all of South Florida, be it commercial, residential, residential or commercial, are the feeder markets. The first one that we’ve enjoyed forever, at least I have for over the 30 years I’ve been living here in Miami, is our climate. The climate is what attracts so many second home buyers, whether they’re from North America or South America. It’s always been one of the most popular features. It always has been, it always will be.
The second market that we’re noticing now more than ever, is the Latin America market. And I say more than ever. We know that the Latin market kind of slowed down for all of us in 2017, ’18, ’19, mostly due to the rising value of the US dollar. However, as we will explain in this, as we are explaining right now, all of Latin America has shifted to the left. There’s a very good chance that by the end of this month, Brazil reelects, president Lula, their former president. Who’s also a leftist, a socialist as their new president. Assuming that’s true, that means that the entire continent of Brazil has now shifted to the left, but seriously to the left, which is not good for currency valuations. It’s not good for the GDPs of all of those respective countries. As a result, we’re seeing a renewed flight capital interest coming to Miami, specifically Miami.
Wealthy families from South America love real estate as an investment. Their city of choice is, will probably always be Miami. Major feeder markets this year, Argentina, Columbia, Chile, Peru, and Mexico next year, Brazil. But that’s the second feeder market. The third is the Tax Reform Act of 2017. The Trump administration passed Tax Reform in 2017. The two states that benefited the most by far is Florida and Texas. The states that weren’t too favorable in terms of the outcome of 2017 were California and New York. In fact, New York right now is the most expensive state in the US to live in, which explains in part why so many of these individual families from those two areas are moving here in such big numbers.
Here’s an example of the effect of Tax Reform ’17 just in the last two years, and this slide’s kind of important because so many of you, I’ve heard you say, “Yeah, we’ve seen a population spike since 2020, but what happens next year? What happens in 2024? What happens in 2025?” I’m giving you a 10 year snapshot here, which shows that in the last 10 years, the average growth has been averaging close to 930 people a day. Last year we were over 1000. It’s projected this year, we may hit 1100 people per day. That’s an important stat for this reason, the fastest growing state in the country is Texas. Second is Florida, but at the pace Florida’s on, in two or three years, we could pass Texas, meaning the fastest growing state by population in the US.
And oh, this is a very important stat. This is from the Internal Revenue Service that tracks our incomes and tracks where we move. They are ranking Florida now as the state that has the highest income households in the country moving here. And we outpace Texas by a lot, it’s not a small number. The wealthy families, more so than Texas, more so than any other state in the country, are choosing Florida. Now these aren’t the corporations that are moving here. These are individuals that I believe have been mostly motivated by Tax Reform ’17.
And then finally corporate relocations, which we’re going to talk to Mayor Francis Suarez about in detail. In the history of Miami, we’ve never had over 122 companies decide to relocate to South Florida, and they did all this in the last couple of years. Here’s an example of some of these corporations. Some of them are moving their world headquarters like Carl Icahn, like Citadel from Chicago, they’re moving their world headquarters to Miami. A lot of other companies are opening regional offices. There almost about 100 of them and there are more coming.
Why don’t we just take a minute and enjoy Mayor Francis Suarez’s point of view on what he told these companies, how he sold Miami and convinced them to relocate major operations, major business considerations to Miami. Mayor Suarez.
Mayor Francis Suarez:
Hi.
Craig Studnicky:
Thank you so much for joining me today.
Mayor Francis Suarez:
Thanks so much for having me.
Craig Studnicky:
Now, please, for this Miami Report it’s kind of a big deal. And listen, we’ve been speaking a lot lately. You’ve told me you’re going to accompany me on all these Miami Reports going forward.
Mayor Francis Suarez:
I am.
Craig Studnicky:
You have a little better information than I have about what’s going on South Florida.
Mayor Francis Suarez:
It’s public information, but it’s almost like inside information.
Craig Studnicky:
Yeah. Listen, I spent a lot of time researching what’s going on in Miami. Whenever I speak to you, I feel like I just moved here.
Mayor Francis Suarez:
Craig, nobody does it better than you do.
Craig Studnicky:
Well, no, I appreciate that very much. Thank you, but I’ll be happy to be number two next to you. I started publishing the Miami Report 13 years ago. It was right after the crisis of ’08. And back then I used to publish it annually and all we really did was measure inventory, where prices are going, where the buyers are coming from, really basic stuff. But it was very confusing because the media always got it wrong when it came to our little town called Miami.
Mayor Francis Suarez:
Yes, that’s right.
Craig Studnicky:
Always. The last couple years I’ve had to publish this quarterly, because Miami’s changing every quarter. It doesn’t change every year.
Mayor Francis Suarez:
It’s phenomenal.
Craig Studnicky:
The growth is dynamic. For years and years and years, I have enjoyed selling real estate here to second home buyers from North America and South America since 2017. Americans that were moving here because of the tax law change that President Trump passed.
Mayor Francis Suarez:
Sure.
Craig Studnicky:
They want to move to a no income state tax. It was either Texas or Florida.
Mayor Francis Suarez:
Absolutely.
Craig Studnicky:
And since Texas doesn’t have a lot of oceans and Texas doesn’t have this ridiculous weather. Here we are in Coconut Grove today.
Mayor Francis Suarez:
Incredible.
Craig Studnicky:
In the middle of October. We’re so lucky to live here. That’s another feeder market that came here. We’ve always had Latin America and Latin America continues to come. However, we have a fourth feeder market that we’ve never seen, never seen. And I have done a lot of research on this, I don’t know if any city in the United States is seeing the kind of growth that we’re getting now from US companies as well as what’s about to come in the next five to 10 years. I almost have this idea that you had a vision to transform Miami into this model US city for the 21st century.
Because you’ve somehow convinced over 122 major companies, most of which are Fortune 500 companies, to relocate their offices, their businesses here to South Florida, Miami, within the last two years. So far, only about 15 to 20% of those companies have arrived. The rest are planning. And I know just by common sense, there are more coming. Sir, you’ve transformed the city, this is no longer your mom’s and dad’s Miami. This is an international business center. This has always been the gateway to Latin America, but the Americans that are moving here have changed this again.
Sir, I have spoken to so many people at ISG and RelatedISG and realtors all over South Florida. Not to mention the millions of property owners, millions. I haven’t talked to all of them, but I talked to a lot of them by email, by text. They would like me to ask you this question. In 2020 when we were all home because we had to be home, you were on planes, you were flying all over the United States from New York, you went to Illinois, where Chicago is, you went to California, back crisscrossed the country, and you somehow convinced that over 122 major corporations starting with Ken Griffin for example, at Citadel.
You’ve got Carl Icahn that moved here. We’ve got Goldman Sachs opening an office here. Major corporations that are relocating here, and they’re going to change South Florida forever. Sir, what was your sales pitch? What Did you say to these companies, because clearly it worked.
Mayor Francis Suarez:
It’s proprietary. No, I’m just kidding.
Craig Studnicky:
God, I hope not.
Mayor Francis Suarez:
No, no, it’s not. Look, I am blessed. I am the first mayor of Miami in the 125-year history of the city that was born in the city. What does that mean? That means that there’s no separation between the person that I am and the city that I love and that I represent and that I serve. And you’re right, there was a vision and that vision was built on the shoulders of other visionaries. So when you talk about people like Maurice Ferré, who began the vision that Miami could be the gateway to the Americas. And then people like my father who brought all these sports franchises to Miami when he was mayor.
Craig Studnicky:
Sure, yeah.
Mayor Francis Suarez:
And then today there modern day visionaries like Manny Medina, who a few years ago envisioned that Miami to be successful had to have a technology ecosystem. All of that influenced my upbringing.
Craig Studnicky:
Okay.
Mayor Francis Suarez:
All that influenced my vision for the city. And as a father now of an eight year old and a four year old, I realized that for our city to succeed, for any city to succeed in the world, they needed to be at the intersection of this metamorphosis from a highly industrial economy to an ever increasing digital economy, so that was my aha moment. And I realized, as you said, I started building this ecosystem with the help of so many people in this community.
And then we had a catalytic moment. The catalytic moment was, you talk about some of these macro factors like the SALT deduction going away. So what did that mean?
Craig Studnicky:
Right.
Mayor Francis Suarez:
That means that in a city like Miami, if you’re in the highest tax bracket, you’re only paying a third of your income in taxes. If you’re in New York, you’re paying 54% of your income in taxes. That means that for every dollar that you earn, you’re only taking in 46 cents. Think about that.
Craig Studnicky:
My son lives in New York City. You’re spot on.
Mayor Francis Suarez:
So it’s like the government is your majority partner, but you don’t get say in that partnership. So I think there’s a huge opportunity there. And then the second piece that happened that was a major differentiator, macro differentiator, was you had cities like New York and San Francisco kicking out their largest company and their largest innovator. In New York kicking out Amazon after winning the HQ2 prize. And San Francisco kicking out Elon Musk by saying F Elon Musk and him saying message receive and leaving. Well, people don’t understand about those situations is it’s not just that you’re kicking out a company, which by the way, Amazon was going to provide 50,000 high paying jobs for New York.
Craig Studnicky:
Yeah, yeah.
Mayor Francis Suarez:
It’s not just that you’re kicking out a billionaire. Elon Musk is the richest person in the world.
Craig Studnicky:
Right.
Mayor Francis Suarez:
It’s the signaling effect to the rest of the market when you’re saying, “We don’t want you here.” So by contrast, I wake up on December 4th of 2020, the same year you’re talking about. And I see a tweet on my Twitter thread that says, “Hey, what if we moved Silicon Valley to Miami?” And I responded very innocently, never thinking that I was going to be like a viral moment or anything like that, “How can I help?” And that created a firestorm-
Craig Studnicky:
I remember that. It did.
Mayor Francis Suarez:
… Of investment because it was an attitude differentiator. Our city, which is a fundamentally pro-American city, a pro-police city, which means pro-safety and pro-capitalism, pro-American dream, free market is what people want because they want to be in a place where if they work hard, government’s not going to take a penny of their dollars more than necessary. It’s going to give them the ability to risk their capital, to invest in real estate.
Craig Studnicky:
Correct.
Mayor Francis Suarez:
And other high performing assets. And they’re going to be able to retire eventually in the future, so that is the American Dream. And I think no city in the world really has encapsulated that dream better and has changed its economics in a way that captures that. We’re number one in the nation tech job growth. Okay. We’re number one in wage growth. We have a 1.4% unemployment and we’ve moved-
Craig Studnicky:
It’s that low?
Mayor Francis Suarez:
1.4%.
Craig Studnicky:
Oh my gosh.
Mayor Francis Suarez:
According to Bloomberg, okay.
Craig Studnicky:
Sure. By the way, finding good people is impossible.
Mayor Francis Suarez:
Impossible.
Craig Studnicky:
Right.
Mayor Francis Suarez:
And we’ve moved two and a half trillion dollars of assets under managed companies to Miami in the last 30 months. Two and a half trillion.
Craig Studnicky:
That’s the number I was trying to find. Thank you for giving me. That is an enormous number.
Mayor Francis Suarez:
Enormous amount of people.
Craig Studnicky:
And also, as you and I touched on a few weeks ago, when cities are starting to feel as vibrant and as vital as Miami now is, especially with all these new wonderful young people coming here. What’s happened with crime in Miami?
Mayor Francis Suarez:
Well, what we’ve done, again, is a counter-narrative to what other American cities have done. While other cities get into this crazy defund police movement, we did the exact opposite. We lowered taxes to the lowest level in recorded history. In my last budget, I lowered taxes to the lowest level. So while other cities are raising taxes in this sort of tax death spiral, we actually lowered taxes. What was interesting is, our revenue went through the roof because of our growth, because of the amount of construction, because of the amount of investment.
Craig Studnicky:
Right. Plus your taxes grow.
Mayor Francis Suarez:
Exactly. So we grew 12%, which is the second most recorded history, even though we had that lowest tax rate in recorded history. So what happened? We were able to pay our officers better and we’re able to provide more officers. We have the most police officers we ever had in our history. And shocking correlation, we’re on the precipice right now, if we have a great quarter four, of being having the lowest homicide rate per capita in our history. In our history.
Craig Studnicky:
Shocking stat.
Mayor Francis Suarez:
Shocking correlation. It’s a shocking statistic because it’s a counter-narrative to what’s happening in other urban American cities across the country.
Craig Studnicky:
Well, yes. I mean, I know you’ve gotten kind of close with Mr. Griffin of Citadel.
Mayor Francis Suarez:
Yes.
Craig Studnicky:
His decision to move his world headquarters here was no small thing.
Mayor Francis Suarez:
No, it was not.
Craig Studnicky:
But Chicago hasn’t been a very friendly city to a lot of people, unfortunately.
Mayor Francis Suarez:
Yes.
Craig Studnicky:
It’s sad for Chicago because it’s a great city.
Mayor Francis Suarez:
It is.
Craig Studnicky:
But you were able to convince them that here, your employees won’t have to go to work looking over their shoulder.
Mayor Francis Suarez:
Yes.
Craig Studnicky:
This is Miami. We also touched a little bit on real estate taxes.
Mayor Francis Suarez:
Yeah.
Craig Studnicky:
You were able to throw the residence of the citizens of Miami a little bone recently.
Mayor Francis Suarez:
That’s right.
Craig Studnicky:
You were able to reduce taxes.
Mayor Francis Suarez:
We did. And I think, again, that’s my spike the ball moment, right. We’re winning and I’m spiking the ball because I want the narrative to be, “Hey, we care about you.” And I think a lot of cities are not… They’re not projecting that message. And I think what we’re projecting is we care about you. We want to have the lowest taxes ever. And guess what? Next year, if I can reduce taxes again, I’ll reduce taxes even lower. Government is not created to subsist and to exist. Government provides a service and once it’s done, it shouldn’t require a penny more of your money. It can’t solve every problem.
We just did a phenomenal thing recently, which is we started the Venture Miami Scholarship Fund, where every single kid in Miami that’s eligible for a Pell Grant will go to college to get a STEM degree for free at FIU, University of Miami, Florida Memorial and Miami-Dade College. So we are empowering people-
Craig Studnicky:
You sure are.
Mayor Francis Suarez:
To get the kind of educations that will match the jobs that we’re bringing because we’re number one in the nation in tech job growth. Can you imagine Miami number one in the nation in tech job growth?
Craig Studnicky:
Actually I can, but sometimes when I say that, whether I’m in South America.
Mayor Francis Suarez:
It gets you excited. I can tell.
Craig Studnicky:
I do. No, I do.
Mayor Francis Suarez:
Look how excited you get.
Craig Studnicky:
No. This is the most exciting city in the United States right now.
Mayor Francis Suarez:
It is. It is. Correct.
Craig Studnicky:
And by way, you travel more than I do. But whenever I travel outside Miami, usually it’s for business. My son and daughter both live in New York, so when I go visit them, that’s social. But wherever I am, whether it’s New York or South America, when someone asks me, “Where do you live?” It’s like I give them a three to four second pause, one 1000, two.
Mayor Francis Suarez:
To hit them.
Craig Studnicky:
And I say, “I live in Miami.” And I almost say it just like that, nice and slow. Their eyes light up, they’ve got this smile, and I can’t tell if they’re happy for me or jealous.
Mayor Francis Suarez:
Right. Well, it’s probably a combination. And I can tell you the Miami Miracle, what I call the Miami Miracle, this transformation story has resonated in the Middle East, South America, everywhere. And when you talk about what was this vision for Miami? How do we change this Miami? I realized that the world is changing rapidly, and I came up with this concept called capital of capital. And the concept means that as jobs become more decentralized, because you have remote work, there’s still going to be a central point, a central hub where capital will aggregate and where capital decision deployments will be made. And I think increasingly it’s going to be Miami.
Why? Not just because of our tax structure. Not just because we want it and we invite it in and other cities are pushing it out, but we’re also geographically right in the center of five mega markets. New York, Silicon Valley, South America, the Middle East, and Europe. And none of those markets are any closer to the other than we are to all of them. And that gives us a great geo-position, which allows us to graduate from this great brand of being sort of the capital of Latin America. But I think as I project into the future, my vision is that Miami will be one of a handful, whether it’s a dozen or half a dozen, truly global cities. And those are cities that are going to be at some level recession-proof.
Craig Studnicky:
Well, speaking of recession-proof. There’s a lot of chatter out in the world, especially here in South Florida particularly because that’s where I live and do business. That mortgage rates went up this year and real estate sales are slowing down. And in fact, I think prices may go down. Okay, we talked about these feeder markets. We have Latin America, we’ve always had Latin America. We have now this new American influx of individuals that are moving here because of what happened with Tax Reform ’17.
Mayor Francis Suarez:
Right.
Craig Studnicky:
Florida and Texas being the two big winners.
Mayor Francis Suarez:
Sure.
Craig Studnicky:
We now have these 122 companies coming here-
Mayor Francis Suarez:
Yes.
Craig Studnicky:
… And most of which have not arrived yet.
Mayor Francis Suarez:
No.
Craig Studnicky:
They’re Americans and they want bigger houses.
Mayor Francis Suarez:
Absolutely.
Craig Studnicky:
They want bigger condos. 10 years ago, I could sell one bedroom condos all day long in Miami, particularly when I was in South America. Today it’s kind of tilted more towards the twos and threes because people are moving here permanently.
Mayor Francis Suarez:
Right.
Craig Studnicky:
So despite what’s happened with mortgage rates this year, and despite all the talk about a recession-
Mayor Francis Suarez:
Sure.
Craig Studnicky:
A recession with ridiculously unemployment rate.
Mayor Francis Suarez:
Right.
Craig Studnicky:
The average price of the average condo, the average price of the average house in South Florida this year, is up about 15% more than it was last year. Last year being the most significant year we’ve ever seen in real estate appreciation in the United States, not just South Florida.
Mayor Francis Suarez:
Right.
Craig Studnicky:
Secondly, we have noticed that… Realtors, they have this thing called days on the market.
Mayor Francis Suarez:
Right.
Craig Studnicky:
So if I list your house, does it take 90 days, 120 days before I get a contract?
Mayor Francis Suarez:
Sure.
Craig Studnicky:
Last year it was 90 days. People thought it was like two weeks.
Mayor Francis Suarez:
Yeah.
Craig Studnicky:
No, it was really 90 days.
Mayor Francis Suarez:
Yeah.
Craig Studnicky:
Year before that, 90. Year before that, 90. This year it fell to 60. So what we’ve seen, despite all the chatter about high interest rates in a recession, I love your take on this because-
Mayor Francis Suarez:
Oh, I love to [inaudible 00:18:47]. Yeah, yeah.
Craig Studnicky:
We’ve seen our prices are rising not as fast as last year, thankfully. Because frankly, a 15% increase in your house, not so bad. You’ll take that all day long.
Mayor Francis Suarez:
Sure.
Craig Studnicky:
A 50% increase or 100% increase from 2020 to ’21. That sounds great, but eventually that starts to slow things down as well.
Mayor Francis Suarez:
Sure, sure, sure.
Craig Studnicky:
But despite the recession talks and mortgage rates, we’re still seeing tremendous appreciation and lots of activity in the real estate market. Again, despite all this conversation about recession. So do you really see South Florida as I do? Almost recession-proof?
Mayor Francis Suarez:
Yeah, I do. And I’ll tell you why. And I’ll give you some numbers because I know you’re a numbers guy and you like to hear sort of the numbers.
Craig Studnicky:
I don’t know how I became one, but I did.
Mayor Francis Suarez:
Tell a great story. We have a tremendous amount of demand. When we looked at rental price increases, right? Miami was at or near the top in terms of what we’re seeing. Now we have historic inflation, so that’s driving prices up as well.
Craig Studnicky:
Yes.
Mayor Francis Suarez:
But you would see in Urban America, 25, maybe 35% increases. And Miami was more like 45, 50% increases. So what was happening? Everybody wanted to be here. So what’s the cure for hyper demand? Supply, right?
Craig Studnicky:
Amen.
Mayor Francis Suarez:
And so what does that mean for Miami? Well, first you got to look at what supply is available. So the delta between what’s built and what can be built in our zoning code, that’s a form-based code. Meaning that there’s like invisible boxes over buildings that tell you what you can build there, that delta is 10 to one. So we can actually get 10 times larger than what we are without changing our zoning code. We don’t have to ask for permission from the government. You don’t have to get anything special. That’s just baked into the system.
Craig Studnicky:
And that’s mostly Downtown Miami?
Mayor Francis Suarez:
That’s mostly in Downtown Miami. That’s in areas where there’s high levels of density.
Craig Studnicky:
Okay.
Mayor Francis Suarez:
So that’s a 10 to one multiple, we’ve done the analysis already. What does our pipeline look like right now? You’d like to talk about numbers.
Craig Studnicky:
Yeah, yeah.
Mayor Francis Suarez:
So our pipeline right now, the last time that I was told, we have 47,000 residential units in the construction pipeline, 47,000. What does that mean? Well, that’s about a 25% increase in our entire housing stock.
Craig Studnicky:
Yes, that’s big.
Mayor Francis Suarez:
Right. That’s a two to three year build out.
Craig Studnicky:
Yes.
Mayor Francis Suarez:
There’s no signs that that’s slowing in any way. And by the way, if prices cool a little bit, that’s not necessarily a bad thing. It’s not a bad thing for realtors because they get a percentage of the total rental amount.
Craig Studnicky:
Oh, sure. Yeah.
Mayor Francis Suarez:
It’s still going to get a big percentage. And a lot of potential people say, “Well, prices are going down.” That’s a little bit of a misnomer because a lot of it’s unrealized gain.
Craig Studnicky:
Very true. It might be off a little bit from last year’s all time high.
Mayor Francis Suarez:
Right.
Craig Studnicky:
Which is significantly higher than ’19.
Mayor Francis Suarez:
But a lot of it’s an unrealized gain. For example, I bought my house, I think in 2017. If I were to sell it today, maybe it wouldn’t be worth the same amount as the top, top, top amount, but maybe it’s a little less. But it is going to be a significant increase from when I bought it just five years ago, right?
Craig Studnicky:
Yes.
Mayor Francis Suarez:
It’s a little bit of an unrealized gain dip, which by the way is also not that bad because-
Craig Studnicky:
You explained it better than I do. But I try to explain that every day to people.
Mayor Francis Suarez:
And by the way, realtors still make a lot of money on commissions.
Craig Studnicky:
Yes, they do. Yes, they do.
Mayor Francis Suarez:
And obviously the city benefits because every time there’s a reset, here’s what people don’t understand. Every time there’s a reset, we don’t make a lot of money in our annual taxes because A, we lower taxes. And B, there’s something called Save Our Homes, which prevent you from increasing the value of the home by more than 3%. So even if the real value of the home is 15%, we’re capped at a 3% growth by our property appraiser and by constitutionally which is a good thing because it depresses the taxes for people over time. But what happens is when somebody buys, it resets at the new price.
Craig Studnicky:
Sure. Right.
Mayor Francis Suarez:
So even if prices are off from the high, right? These unrealized gains are off by 10 or 20%. It doesn’t negatively affect the city because you’re still realizing gains every time there’s a transaction of 50, 60, 70%, right?
Craig Studnicky:
Yes.
Mayor Francis Suarez:
It keeps our tax base healthy, which allows me to keep reducing taxes and keep providing premium services, which is what we want to do for all our citizens.
Craig Studnicky:
Without a doubt. And listen what you just said about the 10 to one ratio, if I can say it differently, that means 90% of what could be developed right now is air.
Mayor Francis Suarez:
And by the way… Yes, it is.
Craig Studnicky:
Without any special approval.
Mayor Francis Suarez:
That’s exactly right. And by the way, that’s not even the second part, which is that doesn’t touch commercial. So we’ve got multiple million square feet of commercial also in the development pipeline. So you’ve got some magnificent buildings that are going up on Brickell.
Craig Studnicky:
Oh, man.
Mayor Francis Suarez:
Just approved a couple of buildings on Brickell. One across from The Icon that’s from Related Miami.
Craig Studnicky:
Right. Right.
Mayor Francis Suarez:
One across the street from Related New York.
Craig Studnicky:
Related New York.
Mayor Francis Suarez:
So you’ve got these just iconic buildings that are going all over Wynwood, all over the Design District, all over Edgewater and Midtown. So there’s going to be lots of inventory to sell and we need that so that’s great.
Craig Studnicky:
We are going to need it. I had a meeting yesterday with a bunch of real estate agents from Mexico City and I asked them… I was talking about the population growth of Florida because we’re the second fastest growing state in the US right behind Texas.
Mayor Francis Suarez:
Sure.
Craig Studnicky:
Although, I’ll tell you something, I’ve been following the trend lines that Athena Rusano has been providing me. And it’s quite possible, not next year, but two or three years, we might take Texas.
Mayor Francis Suarez:
I believe it.
Craig Studnicky:
We might become, because of you, the number one fastest growing state in the US.
Mayor Francis Suarez:
I believe it.
Craig Studnicky:
If 90% of the FAR is still available to me.
Mayor Francis Suarez:
It is.
Craig Studnicky:
[inaudible 00:23:48] how important it is. So these folks from Mexico City are in yesterday and I say, “Does anybody know the population of Mexico City?” And someone said, “22 million.” That’s pretty close.
Mayor Francis Suarez:
Yeah.
Craig Studnicky:
Anybody know the population of Sao Paulo? It’s about 20 to 21. Very good. How about New York City? 10. Very good.
Mayor Francis Suarez:
How about Miami?
Craig Studnicky:
You got it. Oh God, I wish you were with me.
Mayor Francis Suarez:
Half a million. 600,000.
Craig Studnicky:
I heard. Well, that’s the city of Miami.
Mayor Francis Suarez:
Correct.
Craig Studnicky:
I said I’m not going to ask about the city. I’m going to ask for all of Miami.
Mayor Francis Suarez:
2.8.
Craig Studnicky:
Who wants… Exactly. Who wants to take a guess? Somebody said 10 million.
Mayor Francis Suarez:
Right.
Craig Studnicky:
Someone said seven.
Mayor Francis Suarez:
So that capacity differential.
Craig Studnicky:
I set you up for that.
Mayor Francis Suarez:
Yeah. Total setup. I love it.
Craig Studnicky:
It’s under three million. It’s 2.7 million people. What?
Mayor Francis Suarez:
They can’t believe it.
Craig Studnicky:
I said, so imagine… I don’t know how to say this-
Mayor Francis Suarez:
It’s not a mega city like these other mega cities that you see around the country.
Craig Studnicky:
Yeah. Are we’re the biggest small city, or the smallest big city.
Mayor Francis Suarez:
I don’t know. We’re the best small, big city. I don’t know.
Craig Studnicky:
We are.
Mayor Francis Suarez:
We’re the best city, period.
Craig Studnicky:
And the available FAR in Downtown, we need it.
Mayor Francis Suarez:
So we can go from 185,000 dwelling units. We’re going to go up 47,000 more. So we’ll be at approximately 225,000. Approximately, give or take. And then from that, we can go up to 1,500,000 dwelling units. So we have 10 X. I mean, it’s huge.
Craig Studnicky:
We’ve got room to receive all of these people now, from literally all over the world.
Mayor Francis Suarez:
And by the way, that’s why we’re bullish on Miami versus other cities like New York and San Francisco. They have structural problems with their tax rate, crime, homelessness, et cetera.
Craig Studnicky:
Huge.
Mayor Francis Suarez:
And we are also putting out a plan to be the first major urban city to have zero homeless. And we’re working on that. We’re dedicating a significant amount of funds for that. That’s important because it’s a quality of life issue.
Craig Studnicky:
Without a doubt.
Mayor Francis Suarez:
Right. But in addition to that, New York is built out. San Francisco is artificially constrained. So when you look at competition, which is also how you gauge where’s demand going to be? How are prices going to be stable over time? Well, you got to look at the competitors. What are the competitors doing? Are they evolving? Are they adapting? Are they doing something new? And the answer is no.
Craig Studnicky:
No. Right, right. Listen, I know you’re busy. I so appreciate you being here today.
Mayor Francis Suarez:
This is this fun for me. You make it fun.
Craig Studnicky:
Well, you sell Miami passionately. And I have tremendous respect for people that-
Mayor Francis Suarez:
You do it well, too.
Craig Studnicky:
That get to test their passion and you do it every single day.
Mayor Francis Suarez:
I love it.
Craig Studnicky:
We’re a part of each other now.
Mayor Francis Suarez:
Yes.
Craig Studnicky:
And I’ve told everybody at ISG and RelatedISG that we can count on Mayor Suarez to be with me at the end of every quarter.
Mayor Francis Suarez:
That’s right.
Craig Studnicky:
To talk about what happened because, mayor, I promise you, once again, because of you, this city is changing every three months in a rather meaningful way.
Mayor Francis Suarez:
Well, I’ll just finish with these three things this quarter that have happened, right?
Craig Studnicky:
Please.
Mayor Francis Suarez:
The first is, obviously we know Citadel, right?
Craig Studnicky:
Yeah.
Mayor Francis Suarez:
Everybody knows that.
Craig Studnicky:
Yeah.
Mayor Francis Suarez:
But FTX also moved their headquarters from Chicago, their domestic headquarters to Miami. And then Millennium took 100,000 feet in the Sabadell Bank building in Brickell. So they’re bringing another 1000, 1,500 employees. So those are three things. And then of course, Financial Times named us number one in the nation for foreign direct investment. So those are three major, major things that happened just in the last few weeks.
Craig Studnicky:
Again, this is not your mom’s and dad’s Miami, sir.
Mayor Francis Suarez:
No, sir. You got it.
Craig Studnicky:
No. You’ve changed it and-
Mayor Francis Suarez:
We’ve done it together.
Craig Studnicky:
There’s over 60,000 realtors in South Florida.
Mayor Francis Suarez:
We’ve done it together.
Craig Studnicky:
And millions of property owners that I’m speaking for every one of them right now, we’re thanking you very much.
Mayor Francis Suarez:
You’re welcome.
Craig Studnicky:
You sell what we sell. You sell it at a higher level than we do. And we’ve benefited from all of your hard work. I
Mayor Francis Suarez:
I do it with all my heart.
Craig Studnicky:
I believe me, I know. Guys, believe me. He’s an unusual mayor. I know we only have you for what, three more years.
Mayor Francis Suarez:
We’ll see.
Craig Studnicky:
And then we’ll see what happens with Mayor Suarez, but your future is extremely bright and I know you’ll always have a lot of love for Miami.
Mayor Francis Suarez:
Always.
Craig Studnicky:
Regardless of where-
Mayor Francis Suarez:
I can’t separate myself from it.
Craig Studnicky:
… The Republican Party takes you.
Mayor Francis Suarez:
We’ll see.
Craig Studnicky:
Yep.
Mayor Francis Suarez:
Thank you, Craig.
Craig Studnicky:
Mayor Suarez, thank you so, so much.
Mayor Francis Suarez:
Thank you guys.
Craig Studnicky:
Mayor Suarez. He clearly has a passion and a ability to present Miami to anyone on the planet Earth. I love Miami too. I’ve been selling it for 30 years. A lot of you have as well. You have to admit, not like him. 122 companies so far, there are more coming. Now, how has this affected real estate in Q3 versus Q2? This is very brief. I’m going to give you an overview. We touched on some of these points in my discussion with the mayor, but I’m going to give it to you graphically. This is what happened with the average price of the average house this year in the Tri-County Area. We always talk about Dade, Broward and Palm Beach County. And you can see in 2018, they were trading for just under $450,000. But look at the real key point.
Last year, the average house sold for $915,000. This year it’s up to 1,000,020. Yes, we’ve seen an increase in the average price of the average single family home this year. I know about mortgage rates, but the fear markets is the engine that’s causing this. Condos behaving exactly the same. In 2018, the average price of an average condo in the general resale market was $500,000, a little over. This year, it’s 655. But more than that, it’s an increase of almost $100,000 from the average price of a year ago. Yes, condos continue to appreciate at a rather substantial rate. We’re talking about standing inventory. We’re not talking about new construction, pre-construction. But despite all the chatter of how high interest rates, higher mortgage rates could affect real estate valuations. That’s not happening here. And it’s not happening mostly because of the feeder markets and because of the tight inventory that we’re still trying to sell.
This stat, I think should be the real eye opener. Last year, the average days on the market, we all know what that is, was 86 days. The year before that was 105. Year before that was 104. These are normal days on the market points. Talking points, KPIs, if you will. Look what happened this year. This year went from 86 to 53. So for less than two months, the typical house and condo resales this year, that means they’re selling faster and for more money in 2022, high mortgage rates than it did in 2021, low mortgage rates. So for those that are telling you, we think prices might start to decline a little bit because who knows why they’re saying that, the facts say absolutely not happening. Not here in South Florida. Is there a city that’s truly recession-proof? Mayor Suarez tried to touch on that. Maybe not, but if there is such a thing, it’s Miami.
This shows how we are with inventory at this point. Right now, we are pretty much between condos and houses. We have the same amount of inventory to sell now, than we did one year ago. Enjoy it while we have it. We talked about these 122 companies. We talked about that feeder market of Americans that are moving here from all corners of the United States because of Tax Reform ’17. These are folks that are moving here now. They need a roof over their heads now. They’re not so inclined to look at pre-construction, even though pre-construction more than has its place here. They need a roof over their heads now and that’s in part what’s driving the prices up. Thankfully, we have inventory to sell in Q4.
Now, let’s go to new construction. I’ll give you a brief overview of that. Right now, traditional condos, not short term rentals, not condo hotels. These are condos that people live in year round. There’s about 32 now that have been launched. I think back in Q2 we said there were 24 or 25, we’ve added more. There’s now a total of 5,400 condos being pre-sold here in South Florida. As you can see on this map, it’s from here in Coconut Grove North to Fort Lauderdale, 5,400. Now, none of them have really broken ground this year. Not because the developers didn’t want to, and it’s not because the pre-sales aren’t there. Most of these projects have extraordinary sales. The problem is construction. We’re still dealing with the inflationary effect on construction cost. Not to mention some supply chain issues. However, I think a lot of these projects are going to break ground next year. Next year, 2023 is when we’re going to see some verticality with many of these projects.
However, we don’t have enough. We did a 20 year delivery analysis of condos here in South Florida between the year 2000 and call it 2008. 58, almost 59,000 condos got built and sold between Miami and Fort Lauderdale. Honestly, that’s a little bit too much. 59,000 in a 10 year period. The next cycle, which was the last decade, we built 20,000. They all got built, they all got sold. I think that’s the number we kind of need of new supply in the pipeline just to meet demand. Right now we have 5400, 5400. We are way short. We don’t need 5,400. We need somewhere between 20 to 30,000 condos. Remember in South Florida, we’re boarded by the Atlantic Ocean to the east, the Everglades to the west. So in order to accommodate all of this growth from this enormous population boom is to go vertical. In order to go vertical, we’re building more condos, but we need a lot more of them. We need a lot more of them just to accommodate, again, just demand.
Aston Martin. I’ve used this in Q2 and I’m going to use it again now, if I may. It broke around literally five years ago, October of 2017. They are now in their sixth year of construction. Now, it’s a beautiful building, a little complicated because of its wonderful architectural design. Maybe they have some mobilization issues because they’re building it in Downtown Miami and maybe all that kind of contributed to a little bit longer period of time to build in, typically. But it’s going to be finished after six years. The 5,400 condos that I think will break ground next year, folks, they’re going to take 4, 5, 6 years to complete from next year. So what happens between now and then? I’m not talking about 2023, I’m talking about the end of this decade. If the population continues to grow at the pace that it’s on, we have reasons to believe that the next two or three years we may surpass Texas.
Meaning Florida becomes the fastest growing state in the US, in terms of population growth. If all of that happens and you only have MLS that you can sell houses and condos in the multiple listing service, resale inventory to sell to all of these Americans and even South Americans and Canadians that are moving here. Then I will tell you as the CEO of ISG, the CEO of RelatedISG, there is no way prices can come down, no matter what happens with mortgage rates because we’re still back to that same issue of supply shock which gets me to the takeaways of today’s presentation. The continued population growth is only getting more dynamic because of these 122 companies. There is no city in the US that can talk about these kinds of companies coming to Miami within the last two years.
In the Miami Report, which we’re going to share with all of you, you’ll see the list of all the companies that are coming here. It’s impressive. Common sense says there are more coming because of the construction issues attached to some of the gorgeous new high rises that the developers, whether it’s Related, PMG, it doesn’t matter which developer it is, they’re trying to get started. They have construction issues and because of that, these projects have gotten a little delayed and they’re going to take 4, 5, 6 years to build. So between the time they finish from now, the only inventory people can buy that they can move into is existing inventory. Expect prices to continue to go this way.
These 122 companies. That is a variable, a game changer. That’s even kind of hard for me to wrap my head around because I’m still trying to understand the long term impact of all of these companies coming here with these families. This is no longer a vacation playground city solo. It is also now a gateway city. Probably the model city that Mayor Francis Suarez is trying to create with more American companies coming here that we could have possibly imagined two years ago. To say the best is yet to come is probably true. As more and more of these companies settle here in South Florida, expect more changes, expect a more viable, interesting city in every way. I look forward to seeing all of you at the end of Q4. My guests will be in the middle of January and yes, Mayor Francis Suarez has agreed to join me and talk about what’s new and what’s coming in South Florida. Be well. I’ll see you then.