Source: Carla Vienna – Daily Business Review
Ten Wells Fargo executives weighed in on the South Florida economy, noting a slowdown in Miami-Dade County but feeling bullish about its northern neighbors.
“I think the low tide is still a long way off. We’re not on a verge of a bust,” said senior economist Mark Vitner, who led the conversation Monday at the Wells Fargo Center in downtown Miami.
The Florida economy has historically outperformed the nation’s unless the real estate market falls victim to crisis, Vitner said. Fortunately, real estate recessions typically skip a cycle.
“Every other recession is a real estate recession,” the Charlotte, North Carolina-based economist said.
Overall, statewide consumer sentiment has taken a hit over the last few months. Much of Florida’s earlier gains in consumer confidence were driven by wealthy households, which tend to have more exposure to financial market hiccups, according to the bank’s latest U.S. Economic Outlook released Monday.
Geographically, Broward and Palm Beach counties are poised to outperform Miami-Dade this year, Vitner said.
“Miami has slowed not only in an absolute sense but relative to what we’ve seen in Fort Lauderdale and Palm Beach,” he said.
Nonfarm employment rose 1.6 percent over the year in Miami, while it rose 3.3 percent in Broward and 2.2 percent in Palm Beach.
Vitner predicts strong construction activity in Palm Beach, while Broward will lead in sales volume. He said the two markets have stronger ties to the domestic economy, which somewhat shields them from the pullback of Latin American buyers.
While construction activity has surged in the urban core as the region’s economy recovered, there hasn’t been as much physical product added to the market — yet.
South Florida has seen significant production in the condominium and multifamily markets, but the industrial, office and retail markets could use more space.
“The apartment boom lasted three years longer than I thought it would,” Vitner said. “Early on, we said, ‘Yes, we have a lot of runway in front of us.’ But rents can’t keep growing three times faster than income.”
The multifamily sector will dominate the lending arena this year. When asked about the state of lending, Fort Lauderdale-based senior vice president Patrick Ramge said multifamily is going to be the main driver of lending in South Florida.
“Our vacancy factor is still relatively low at 5 percent or lower in some markets,” he said. Although a whopping 12,000 units hang in the pipeline, Ramge is confident the supply won’t dramatically impact those rates.
Given the low-interest rate environment, banks have a greater interest in putting real estate on their books, Vitner said. It “makes income-earning assets more attractive.”