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Downtown luxury condo supply remains shy of demand

Although more than 600 units are planned or under development in Sarasota, the influx of buyers from across the country, many of them paying cash, still outpaces development.


A sign announcing construction of the second Ritz Carlton Residences tower in The Quay will begin soon.
A sign announcing construction of the second Ritz Carlton Residences tower in The Quay will begin soon.
Photo by Andrew Warfield
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As cranes continue to rise from the ground in downtown Sarasota bringing a continuously growing supply of skyward-reaching luxury condominium towers, it raises the question: When is that supply going to outpace the demand?

The answer from those whose job it is to sell those units, which can cost upwards of the mid-teen millions, is not anytime soon.

Developers continue to wedge 18-story towers onto downtown lots smaller than an acre, with prices for units starting in the millions. The hotspots are downtown one or two streets removed from the bayfront, on Golden Gate Point and even on the beaches of the barrier islands. In addition to resale inventory, there are hundreds of new construction condos either under development or planned.

Who are all the buyers for these homes, where are they coming from, and are there enough to sustain the current pace of development?

Anecdotally, the COVID-era Florida migration has seen a shift from in buyers' origins from the Midwest to the Northeast, and for the first time buyers in appreciable numbers are coming to Florida from California.

And when they come here, many are finding Sarasota to their liking. As baby boomers continue to consider or enter retirement, the supply of buyers appears vast.

Construction continues on The DeMarcay on South Palm Avenue in downtown Sarasota.
Photo by Andrew Warfield

“You've got 10,000 people turning 65 years of age every day in the U.S.,” said Simon Bacon, executive director of developer services of Sarasota-based real estate firm Michael Saunders and Co. “This is typically a very strong market for people who are looking to either be snowbirds spending a portion of the year here or thinking about retiring in a few years. There are a lot of reasons for people to come to Florida, and many of those people are part of the most affluent section of the market in the U.S. today.”

Craig Cerreta is managing broker of Premier Sotheby's International Realty Sarasota/Bradenton and the Keys.
Courtesy

That continued flow, said Premier Sotheby’s International Managing Broker Craig Cerreta, leaves the market undersupplied for luxury condo buyers.

“Bottom line, all price points have seen an increase, but overall we are still undersupplied,” Cerreta said. “For condos, we are actually more undersupplied than single family. The sweet spot is in the $1 million to $2.5 million segment, which is very undersupplied with only four months (of inventory). That price point would not be considered balanced until it got up to about eight months’ supply.”


A normal market

Among condo projects ranging from eight units to 149 in either application, approved or under construction, there are 742 units in the downtown area, including Golden Gate Point and Lido Key. 

Many are already under contract. All of the 149 units in Bayso at The Quay, for example, are sold, and sales have been brisk in most of the other projects that are being actively marketed. 

Buyers are plentiful, and they’re qualified, many pulling cash from the stock market and other less stable investment vehicles and putting it into real estate. 

“One of our managers does a luxury market snapshot quarterly, and for the first quarter of 2023 81% of the transactions north of $3 million were cash,” said Cerreta. “When you start to mix in market dynamics, it has been pretty turbulent for the last 12 months. You've seen historic inflation. Historically, real estate is a pretty stable place to put your money.”

According to Premier Sotheby’s data, condo new construction and resales priced between $2.5 million and $5 million is balanced, and below $2.5 million is undersupplied. The market priced above $5 million is saturated, but 50% of that inventory is new construction, which won’t be completed for two years, meaning that market segment is not as oversupplied as it might appear. All combined, the company says the market remains undersupplied.

Prices on resales have eased a bit, according to Cerreta, but not much. Lack of inventory combined with solid demand is keeping them high. 

Sales are not as brisk as they were in 2021 and 2022, according to Cerreta, but they are still well ahead of the pace at the same time in 2018 and 2019. “And those were great years,” he said. “The frantic pace is over, but high-demand units on the beach or downtown that are in great condition are still getting multiple offers,” Cerreta said. “The market is normal, not irrational.”

Simon Bacon is executive director developer services of Michael Saunders & Co.
Courtesy

Bacon joined Michael Saunders two years ago, relocating here from New York City. He said he’s not unlike other Northeasterners from major metropolitan areas who in the past traditionally gravitated to the East Coast of the state but are now finding superior values and lifestyle on the Gulf Coast.

"I knew nothing about Sarasota,” Bacon said. “When I started researching, what I found was the West Coast of Florida from Tampa down to Naples was not really the redheaded stepchild anymore. It was a first choice for people as far as lifestyle and the character of the people down here. It’s just completely different. It's very engaging, and for someone who's been in New York for so long. I tell the story that the first week or two that I kept wondering why everyone was being so nice to me. They were just genuinely interested.”


County is building out

The luxury condominium market is reflective of continuing strong market conditions in general in Florida and in the Sarasota area. Neal Homes Chairman Pat Neal said the pace of new home sales is restricted only by the speed of the supply chain, which he said is much improved over 2021 and 2022, although not yet back to normal.

Home builders in Florida built 190,000 homes in 2022 he said, compared to 90,000 in 2019. Additional supply — and labor — constraints followed Hurricane Ian, after which much of both went to ongoing recovery efforts south of here.

“People still want to be in Florida in great numbers. Our sales for 2023 are well ahead of our projections, and we anticipate that they will stay well ahead of the forecast for 2023,” Neal said. 

The post-pandemic migration pattern to Florida, Neal said, is expanding from historical points of origin.

“Over the years we have sold very few homes to people from California,” he said. “Everything changed in 2021 and 2022. In 2022 we sold 39 homes to people who had a California address at the time of purchase, and we see people who are leaving other states to move to Florida. Illinois has gone from the No. 6 sales state for Neal to a tie for No. 3. Minnesota has gone from off the list to on the list as a place people are migrating from to Florida.”

Luxury condominium tower Bayso nears completion at The Quay.
Photo by Andrew Warfield

Bacon has seen a similar pattern for luxury condos.

“We've seen buyers for some of our new buildings that have come from California,” he said. “We’ve seen them come from Seattle. There's a great migration going on. I think Florida is having a moment, and I don't think it’s stopping.”

Whether in town or in the suburbs, Neal expects a perpetual undersupplied market locally, one that will sustain prices.

“Over the course of time in Sarasota County in particular there will be no additional land,” Neal said. “Sarasota County is now building up to the urban growth boundary both in north and central county, so there will be a built-up condition not unlike Broward or Palm Beach, and now Collier County, so I expect prices in Sarasota County for the luxury home market to increase dramatically over the next few years.”

Correction: This article has been updated to correct the number of luxury condominiums in various stages of application to development in the downtown Sarasota area.

 

author

Andrew Warfield

Andrew Warfield is the Sarasota Observer city reporter. He is a four-decade veteran of print media. A Florida native, he has spent most of his career in the Carolinas as a writer and editor, nearly a decade as co-founder and editor of a community newspaper in Mecklenburg County, North Carolina.

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