Related Group, arguably the biggest and most prestigious developers in the United States, are in truly deep water. The concerns created by the tariffs and immigration issues have compounded the construction industry’s labor crisis. With a diverse portfolio that spans affordable housing to luxury condominiums primarily in South Florida, the company is currently managing over 90 projects at various stages of development. These are the new rentals, units of affordable housing, completed mixed-use developments that include transit-oriented developments and luxury condos.
Adjacent to the glittering sands of Bal Harbour beach, in the very center of Miami, Related Group is building Europe-inspired opulent oceanfront condo tower Rivage Residences Bal Harbour. The joint City-state project is intended as a “mega-mansion in the sky.” This extraordinary space will be able to connect the two penthouses together, covering over 20,000 square feet and likely selling for more than $150 million. This follows the company's recent success in selling two condo penthouses at a new Fisher Island development near South Beach, Miami, for a total of $150 million.
Even with those considerable headwinds, the upper end of the real estate market is still going strong, particularly in Florida. These high-end buyers are notoriously difficult to please, looking for only the most exclusive and luxurious of offerings. Jorge Pérez, the chairman of Related Group, recently pointed out a major change in the so-called “middle market.” Buyers in the middle-market range for condos ($1–3 million) are starting to wait and see on purchases while the consequences of tariff enactment and immigration concerns play out.
The dramatic increase in tariffs is having a very obvious effect. As a result, contractors bidding on Related Group’s projects have started increasing their prices to account for more expense. More than out of current material costs, this trend is fueled by expectations of future price increases.
"We're seeing [subcontractors] throw an additional cushion into their numbers anticipating tariffs," said Jon Paul Pérez.
"It could be as much as 20%, depending on what material they're getting from another country," he added.
The National Association of Home Builders recently surveyed their members. For starters, it showed that climbing prices for construction materials would add an estimated $9,200 to the price of an average single-family home. This poses an additional challenge to the development environment for developers such as Related Group.
"When you go through their numbers in detail and you start negotiating, you quickly find out they're just sort of padding to protect themselves," Jon Paul Pérez explained.
Jorge Pérez voiced concern that immigration issues were scaring off potential buyers.
"Am I going to lose my visa?" he questioned, reflecting the uncertainty faced by international investors.
The larger political implications of these challenges reach beyond the real estate market.
"There will absolutely be a cost effect in our industry, in particular the construction industry," stated Jorge Pérez.