Miami is in an enviable position. Plans for a high-speed train to connect it to New York and Cuba’s open market make it a hotbed for investment.
It is often seen as a laidback, sunshine-filled city—but Miami is undergoing a vigorous regeneration, which will see investment opportunities aplenty in property and infrastructure. There are a host of new projects in the pipeline, including an express high-speed train that will eventually connect Miami to New York, a $2 million upgrade to the port, a 50-berth superyacht marina and a 1,000ft-high observation tower.
But it was in property where Miami first built its reputation for business. The Floridian city had a GDP of $299 billion in 2014 and is said to be the original home of the condominium, building and trading in the solution for inner-city living from the 1960s.
According to the Miami Downtown Development Authority, up until 2002 there were 11,500 condos built in downtown Miami. In the next eight years, that inventory doubled to 22,000. Since 2011, another 23,000 condos are being, or have been built, in the city with a population of 430,000.
Peter Zalewski, the chief executive of the Miami property firm Condo Vultures, says opportunities are plentiful in the multicultural melting pot, which is referred to as both the “sixth borough” of New York and the northernmost city of Latin America, thanks to a large influx from each.
“Because of globalisation, because of movements toward increased dependency with trade between Latin America and the US, the expansion of the Panama Canal and the rival canal in Nicaragua, Miami becomes a logical place to manage your business in the Americas,” he says.
That is not to mention the enticing weather, with average temperature of 25C, the infrastructure—Miami has one of America’s busiest ports and an international airport that serves 40 million passengers every year—and the minimal tax (there is no state income tax in Florida).
“Demographic trends are now suggesting we have a lot more growth ahead of us than New York, which is struggling to maintain its population,” says Zalewski.
The main reason for the growing population is migration, both domestic and international, with more than 1,000 people a day moving to Florida, according to state statistics. Chris Soares, a property agent who runs the website investinmiami.com, says Miami has become the third top US city to invest in, with property much cheaper than in London or New York.
“Miami is host to 1,000-plus corporate headquarters, 73 foreign consulates and is the home of 32 per cent of the finance and insurance industry [in the US]. All these are going to experience [massive growth] by 2020,” he says.
Zalewski says Miami’s international flavour is a key draw.
The US has a population of 321 million with 13 per cent of citizens foreign-born, according to the census, while 58 per cent of Miami’s population is foreign-born.
While a fifth of households in America speak a language other than English at home, in Miami city that jumps to 77 per cent. Another high-profile draw is the US rapprochement with Cuba. After more than five decades of hostility and trade embargoes, the Obama administration has presided over a thawing in relations with the communist nation. While it is still unclear what this will mean, the economic benefits are bound to be “significant” for Miami, according to Richard Jordan, the senior vice president of global markets at US property brokers Douglas Elliman.
The Knight Frank-Douglas Elliman 2016 global wealth report placed Miami 12th in its list of the most important cities to ultra high net worth individuals, just behind top-ranked London, New York and Singapore.
“It is too early to talk about in great detail as it has just happened but there is a large Cuban base in Miami and lifting the embargo allows for travel between both countries and potential trade and business alignments between Cuba and those in South Florida. There is going to be a significant opportunity around that for both markets,” says Jordan.
GCC businesses are already riding the wave. The Dubai government-owned property developer Nakheel invested $375 million in the Fontainebleau Hotel in Miami Beach in 2008 before later selling its stake. With Dubai ranking fifth on the wealth report list, Jordan says there is a fundamental similarity between the two business hubs.
“Both have a similar climate and provide a great quality of life. Additionally, both are gateway cites. Miami is the gateway between the US and Latin America while Dubai is the gateway between Europe and Asia.”
But with so much of Miami’s economy tied up in property, are there any potential risks? As the world witnessed in 2008, the property market has the potential to cripple economies with global repercussions.
Jordan says Miami is safely diverse, citing developing medical care and technology industries, tourism and the Miami port extension of the Panama Canal. Art Basel founded its US fair in 2002 and the city’s cultural side is growing.
“Miami in years back was heavily dependent on the property market but it has continued to push itself as a global destination and diversify its business platforms. Markets will fluctuate but it has a sustainable economy behind it and an infrastructure in place.”
Zalewski has a slightly different perspective on the risks inherent in Miami on account of the city’s relative youth.
“The city of Miami was created in 1896. When you put that into perspective, this a city in its infancy. Because of that there is tremendous potential but there is also tremendous risk. The infrastructure we currently have is so new, so fresh and is basically not equipped to handle what’s coming with globalisation and then you have the issue of rising sea levels and what impact that will have on Miami.”
Zalewski also points to the possibility Cuba might actually act as a rival to Miami in terms of enticing investors and developers. Proposed US legislation to identify big-ticket investors could also drive people away from Miami while the increased focus on rising sea levels as a result of climate change might be a deterrent.
“These are three big factors that could potentially keep people on the sidelines,” he says.
However, on balance he does not believe such threats will be potent enough to stop investors from flocking to Miami and reaping the benefits—at least not in the short term.