Thursday, February 29, 2024

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    Citadel’s Exodus to Miami Sparks Luxury Housing Shortage in Upmarket Suburbs

    Ken Griffin's Hedge Fund Drives Demand for High-End Homes as Employees Relocate to Florida

    The migration of financiers from New York to Miami has caused a shortage of luxury housing in the city’s upscale suburbs, where buyers are vying for multimillion-dollar homes offering easy commutes, spacious living, and access to prestigious schools. One prominent firm stands out as a driving force behind this demand: Citadel.

    Citadel, the renowned $59 billion hedge fund and market maker led by Ken Griffin, made headlines in June 2022 when it announced its headquarters move from Chicago to Florida, citing lower crime rates and favorable tax conditions.

    Citadel’s Aggressive Real Estate Purchases

    Real estate agents in Miami have observed Citadel’s aggressive approach to real estate acquisition. Michael Martinez, a Sotheby’s real estate agent in Miami, recently facilitated the sale of a $5 million home in Coconut Grove, a prestigious suburb, to a Citadel employee. According to Martinez, a significant portion of luxury homes he has sold recently were purchased by hedge fund buyers, with approximately half of them affiliated with Citadel. The migration of Citadel employees to Miami is unmistakably underway.

    Citadel’s Impact on the Miami Housing Market

    Citadel employees were particularly active in the early spring, racing to secure properties in time for school enrollment deadlines. According to Erin Sykes, a real estate agent in Miami and economist for Nest Seekers, the hottest price point in upscale suburbs like Coral Gables is between $4 million and $7 million for five to six thousand square foot houses, precisely what these families are seeking.

    Supply Shortage Challenges the Market

    Unfortunately, a shortage of supply has resulted in a scarcity of high-end homes in these sought-after suburbs. Construction backlogs and labor shortages are hindering development, exacerbating the housing shortage.

    Legislative Factors

    In July, Florida Governor Ron DeSantis signed a law targeting illegal immigration, which has led to a shortage of construction workers and is expected to delay new home development. This legislative development is contributing to the inventory shortage in desirable suburbs.

    Citadel’s Effect on the Market

    The Citadel effect in Miami is reminiscent of the impact Google had on Venice Beach in Los Angeles when it established a significant office there. Sellers in Miami are targeting Citadel employees, much like Venice Beach sellers targeted Google employees during the tech giant’s expansion.

    Citadel Buyers’ Preferences

    Citadel employees relocating to Miami suburbs are willing to pay more for “turnkey” homes, ready for immediate occupancy and requiring no renovations. Many want to settle in before the start of the school year in mid-August. The allure of waterfront living, particularly after enduring Chicago winters, is also a strong motivator for these buyers.

    Persistent Demand for Luxury Homes

    While bidding wars have somewhat subsided as prices plateaued post-pandemic, demand for luxury homes remains robust. Even properties priced over $10 million often receive multiple offers.

    Citadel’s Broader Impact

    Citadel’s move to Miami is not limited to top earners; it includes back-office staff as well. This broader relocation is contributing to increased demand for homes at various price points, not just ultra-luxury properties.

    As Citadel continues to reshape its operations in the sunshine state, the Miami luxury real estate market experiences unprecedented demand, creating both challenges and opportunities in the local housing landscape.

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