Remarks by Richard Swerdlow

Founder and CEO
Condo.com
            

          
Tracking the Market

From a data standpoint, there are a couple of things that we track. We created a marketplace for condos. We have 600,000 listings globally on the site. So just from a county standpoint, we have 29,000 condo listings on our site. That doesn’t account for what’s an anticipated 15,000 to 20,000 new listings coming up in the next two years. Then on the rental side, we have about 8,300 rentals just in Dade County. Now, that being said, we are very bullish on what can happen in South Florida and we believe that all things can get absorbed based on the things that we are seeing on the site. We see month over month, increased traffic, people looking, people generating leads, and people thinking that there is a bargain here somewhere, because they keep hearing the media say how bad things are, that it’s a buyer’s market.

Financing Challenge

The biggest problem we see is if people are coming to the site and finding things that they want to buy, they can’t get financed, even if they are willing to put up 50 percent. A lot of financial institutions, a couple of them, issue these black lists of condos. We are now seeing condo reversions, where that inventory is being reverted to rentals and we are seeing increased rental inventory. There is this shadow rental market which is condos. Instead of going to sale, because they can’t get financing for their initial buyers, developers are putting them in as rental pools. So we’re going to see significantly more rentals available and that is going to help the affordability issue. Employees who are making $35,000 to $65,000 are going to be able rent unbelievable, 1,800 square foot condos for $2000 a month, condos they couldn’t possibly have been able to purchase. So in the next couple of years, all of the supply is going to help affordability in this market.

The Office-Condo Sector

Vacancy rates are very low in offices because of the product type that we deal with on Condo.com, which is this office-condo which isn’t in your charts. No one has talked about it, but it has taken a lot of office inventory off of the market. Where does it fit? Is it an office product? Is it in your stats? And what is going to happen with all this office-condo stuff that is too expensive? The market in Miami-Dade is about 40 million square feet and there has been a flight to this office-condo sector. Right now there is 5.2 million square feet of office-condo in our market and the summary on the office-condo market comes at the peak of the office market. It is in other words a movement from the residential condo sector by Latin American investors. They were seeing that the retail sector was starting to soften so there were some big movements to move that money into the office sector. I guess in summary, 5.2 million square feet is a lot of space. Office-condos work in specific instances, usually less than 100,000-square-foot buildings.

We describe buyers of office-condos as people who want to bring their dog to work and smoke cigars; it’s not the traditional user. The reason why, is that you have restricted expansion rights, if you are sitting next to someone in the building, and you own the condo and you want expand, it presents all types of challenges. Law firms with multiple partners, many times will have difficulty to have the core from the partnership to take an acquisition position in an office-condo. It works and has worked in specific instances. The velocity of sales in the last three months has slowed considerably. A lot of that 5.2 million square feet is going to come back in rental, and you will see vacancies increase in the office market. So generally we’re very bullish, we see a lot of activity on the site.