MISSISSIPPI GULF COAST — Earlier this month, when Clara Plummer sold and closed on the highest price per square foot ever paid for a condo in Mississippi, industry watchers took note.
Even though Plummer, broker-owner of Renaissance Beach Realty in Daphne, Ala., and Pensacola, Fla., and a sales agent with Keller Williams Mississippi Gulf Coast in Biloxi, sold the $1.2-million penthouse in the Legacy development on Beach Drive in Gulfport, and called the coastal condo market “white hot,” she was quick to point out that developers are making sure the Mississippi Gulf Coast doesn’t become a “corridor of concrete” and said the condo market was robust even before Hurricane Katrina slammed into the coastline.
“The condo market on the Mississippi Gulf Coast is exploding because it’s a drive-in market and a non-seasonal resort,” said Plummer. “In Las Vegas, you have a three-mile stretch in the desert. We’ve got a 27-mile beach strip on the Gulf of Mexico, and, sweetheart, it’s going to beat out Vegas one day.”
Don Hooper, executive vice president with Wachovia Bank, one of the largest real estate lenders in the U.S., told business leaders in June 2005 that developers were eyeing the Mississippi Gulf Coast because they had run out of available and affordable land in Florida and on the Alabama coastline. He was also quick to quell fears about concerns the three coastal counties and various cities would set different rules for condo developments. He pointed out that Mississippi restricts limitation on development directly on the beach.
Mike Boudreaux, president and CEO of Gulf Coast Investment Developers (GCID) in Biloxi and Metairie, La., was involved in about half of the 29 condo projects on the books before the storm. Of the 65 coastal condo projects now on the drawing board, GCID has 2,613 condo units in process, including The Bienville, Sea Breeze and Revelay (formerly Sterling Oaks) properties.
“Pre-Katrina, we were looking at building 1,200-square-foot, two-bedroom, two-bath units as the standard,” said Boudreaux, “Now we’ve revised those units to the 800-square-foot range, with one bedroom and two baths, for several reasons. One, several thousand hotel and motel units were destroyed and this smaller unit allows us to replace them quickly. Two, construction costs have skyrocketed post-Katrina, and with a smaller unit, we can move toward a price point as opposed to a price per square foot.”
For example, GCID redesigned the Sea Breeze project on the beach in Biloxi next to Treasure Bay from 117 units to 190 units.
“The smaller units are our focal point right now,” said Boudreaux. “Maybe three years out, we’ll go back to the larger units.”
For now, the strategy is working. According to the Mississippi Hotel & Lodging Association, some 3,000 local hotel rooms could be torn down within the next two years and replaced by condos. Also, before the storm, condos were selling for roughly $300 per square foot. That number has nearly doubled, to $500 per square foot or more, said Plummer.
Among those interested in buying upscale condos are coastal residents who lost their multi-million dollar beachfront homes in the hurricane. “They have the wherewithal to buy a condo and right now, they’re pondering because they’re still unsure about things like insurance proceeds or FEMA height considerations,” he said. “But we’re getting more calls from these local folks, especially those who are interested in the Back Bay. Obviously, condo living in a high-rise concrete structure provides more safety from what a Katrina-like storm could bring.”
Plummer, whose Ocean Springs home was destroyed in last summer’s category four storm, said Hurricane Katrina actually expedited plans for some developers. “They were on the books to tear down some of these outdated buildings and rebuild, and the storm came in and wiped out some old stuff so developers had one less step to take,” she said. “For example, we were going to tear down Ocean Springs Apartments on Front Beach Drive in Ocean Springs and put a condo there. Well, Katrina tore it down for us, and it’s really ignited development.”
Condotels, condos run like hotels, are also hot commodities, even though some developers with condotels on the books before Hurricane Katrina are now favoring residential communities. “The Mississippi Gulf Coast holds the possibility for a tremendous return on investment for condotels,” said Boudreaux. “We’ve been selling these to investors across the U.S. and Canada and in Europe. They look at the Coast as a jewel in the rough. Anyone buying in at this time will get a low cost per foot, be able to take advantage of appreciation creeping up from Florida, 12 months of high peak rental rates and can immediately take advantage of the GO Zone’s 50% depreciation in the fist year.”
Contact MBJ contributing writer Lynne W. Jeter at Lynne.Jeter@gmail.com.