VERO BEACH — The price of Vero oceanfront land, relatively stable since the end of the last real estate boom in 2007, has jumped more than 20 percent so far this year as inventory continues to be depleted by an unprecedented volume of sales.
The main way of valuing beachfront property is cost per running foot on the water.
In 2013, the average price per running foot paid by buyers on the barrier island was $19,446, meaning a typical 100-foot-wide lot would cost $1.95 million.
So far this year, the average is nearly $24,000 per precious foot of Atlantic Ocean frontage, and some sales have topped $30,000 a foot.
“Prices are undeniably increasing,” says Michael Thorpe, co-owner of Treasure Coast Sotheby’s International Realty. “Oceanfront property is viewed by many as the premier asset on the island and it is a diminishing resource, which is making it more valuable.”
“Oceanfront land on the barrier island had basically achieved commodity status,” says Clark French, broker associate at Premier Estate Properties who with his partner Cindy O’Dare sells more oceanfront property than anyone else in Indian River County.
“For quite a while we were right at $20,000 per foot in the Estate Section and here in town. You would have an $18,000 per foot once in while or a $21,000 per foot, but it was trading in a very tight range during the past three or four years; $20,000 was the market price that buyers expected to pay and sellers expected to get.
“It worked both ways. If we had a seller who thought his lot was worth $30,000 a foot, we would say we don’t really have numbers to back that up; if somebody came in and said I will give you $10,000 a foot, it was easy to tell them they were way off base.
“That has changed this year. In the past several months, there have been sales at $28,000 per foot and $29,000. We have a property under contract right now that is going to close in the next couple of months in excess of $35,000 per foot. And that is not a contingent sale. It is pending, which means it is a hard deal the buyers cannot back out of without losing a substantial deposit.”
That pending 1.7-acre property at 2300 Ocean Drive is exceptional. It has both ocean and golf course frontage, a rare combination, with 200 running feet on the Atlantic and more than 400 feet on the north side of Riomar Country Club course. It is also within walking distance of shops, restaurants and entertainment in the Vero’s village by the sea, making its location ideal.
“That property is an outlier, because it is so unique,” French says. “This one sale does not mean every oceanfront lot is now worth $35,000 a foot. But it does mean that where previously we did not have buyers willing to pay that much higher than the average, even if it was an exceptional lot, we are now seeing sophisticated buyers saying, ‘That truly is an exceptional lot and I am willing to pay more for it.’ That is a bit of a sea change in the mind of buyers.”
Higher prices are not confined to exceptional lots, however. Since June, there have been five sales, three closed and two pending, in the Estate Section south of The Moorings for prices that range between $24,700 and $30,200 per running foot of beachfront, and it is those sales that are really setting the market’s new level.
“We have seen three sales in excess of $27,000 a front foot this year in the Estate Section,” French says. “One you can call an outlier, two is like, okay, maybe there is a pattern here. Three is a trend.
“The most recent sale down there, a property at 1860 S. A1A, which is listed in the MLS as pending at $6.95 million, will close in couple of weeks. The prior sales helped inform the buyer to make the decision about that property, that it makes sense to pay that amount. There is a clear trend of increasing prices a buyer can look at and say, okay, that is real.”
The trend is being driven by the pace of sales, which is exhausting an already scarce inventory of oceanfront lots and obsolete homes on the beach that are viewed as teardowns.
“There is not much left,” says Matilde Sorensen, broker at Dale Sorensen Real Estate. “Prices are absolutely going up due to scarcity.”
“The velocity of sales is unprecedented since the boom,” Thorpe says, “and inventory is being absorbed at a much faster rate than in recent years.”
“We are at the phase now where people have to look seriously at teardowns, because we just don’t have the vacant lots to look at,” French says.
Indeed, the number of oceanfront lot and teardown sales so far this year nearly equals the number of sales in the previous three years, with 13 sales since April compared to 15 sales between the start of 2011 and the end of 2013.
Reef Road, which runs along the ocean in The Moorings and Floralton Beach, illustrates the trend.
“There were six oceanfront lots for sale there last year and today there are none,” says Erika Ross, an agent with The Moorings Realty Sales Co. who sold some of the Reef Road property.
“Confidence has come back as the economy and real estate market have recovered and sales are more property- driven now. When the market was soft, sales were mainly price-driven. People wanted to get in and be on the ocean based on cost. Now people are willing to pay more to get the exact property or type of oceanfront property they want.”
Island Realtors say the continuing rise in prices will pull into the market more oceanfront lots with older homes that will be torn down because the value of the land dwarfs the value of the buildings.
“When you are working with a buyer on a teardown, you are typically dealing with a structure that is very dated and not up to today’s standards and building codes,” French says. “You get to certain tipping point where it just isn’t worth renovating because you are not going to end up with product that is sufficient for the lot. When those properties come along, they quickly become identified by brokers and buyers as teardowns.”
“You have to be respectful of the fact there is a family that is using, or has used, that home that doesn’t necessarily see it as obsolete. We are never disrespectful or disregarding of the value it has to them, but if it is a 40-year-old wood frame house that needs new bathrooms, a new kitchen, new plumbing and electrical and windows and roof, it can be more trouble than it is worth to the buyer to renovate. In order to keep our buyers buying, we have to classify some properties as obsolete.”
“Rising prices are affecting the definition of teardowns,” Thorpe says. “It is changing the value analysis on a lot for prospective buyers. As more teardowns come on the market, we are going to see a building boom for speculative and custom homes unprecedented since the boom back in 2004 through 2007.”
