How Fees And Regulations Threaten Growth
Miami is booming, but expert panelists at Bisnow's South Florida's 2016 Industrial & E-Commerce Revolution think there may be trouble ahead in the form of regulations and development fees.
Butters Construction and Development's Malcolm Butters (on right with The Easton Group's Ed Easton) started the ball rolling by criticizing how local governments “very sneakily” add more and more permit and impacting fees to developer projects. Malcolm cited the City of Coconut Creek, which he said adds things like an art fee, police and fire fees to his projects. “You start adding all these things up, and it's $4 or $5/SF for an industrial building,” he says.
Ed said there's no stopping this regulation trend unless somebody stands up to it. “Each one of these cities, whenever real estate starts doing well, they come after the developer and figure out how to pad something to increase their costs.”
One way to halt the progress of fees would be for developers to resist municipalities in court. But as Bilzen Sumberg's Howard Nelson (far left, along with Sunbeam Properties Maridee Bell and Flagler Global Logistics Chris Sutton) said, no developer wants to risk the backlash from public officials for such a move.
“There are very, very, very few developers who are willing to sue a local government over impact fees, over regulations,” Howard said. “For one, you've just become persona non grata, not only there but probably [in] all of the adjoining local governments." And the time for litigation is an issue: The average suit could ride for seven years, he said.
Ed also said federal banking regulations make it near impossible for smaller developers to jump into South Florida. Loans tend to have higher interest rates for developers with less credit behind them and bankers have to spend large chunks of time on federal paperwork for new loans.
On the plus side, foreign capital will continue to fuel South Florida deals, even with a strengthening dollar. “There's money flooding from all over the world to the United States because we're the cleanest shirt in the dirty laundry pile. That's the reason why our dollar is as strong as it is—because the other currencies are falling out of bed,” he adds.
