Fort Lauderdale Reinvents Itself
And Attracts Real-Estate Investors

Fort Lauderdale's move from hard-party capital to high-end tourist destination will be on display in September, when the luxury St. Regis Resort opens on the site of the former Candy Store lounge and its trademark wet T-shirt contests.

It is just one of many changes as this South Florida seaside community once synonymous with lowbrow spring-break shenanigans reinvents itself, capturing the attention of more buttoned-down real-estate investors.

The region is gaining thousands of new condominium units and has attracted about $1 billion in new high-end hotel properties coming on line from 2004 through 2009. Museum Plaza, the onetime headquarters of video company Blockbuster Inc. in downtown Fort Lauderdale, is getting a makeover from N.R. Investments of Miami Gardens, Fla., which purchased the vacant offices in January for about $130 a square foot. Office condos in the updated property are now being marketed at prices starting at $290 a square foot.

The recent strengthening of the region's commercial and residential real-estate market can be traced in part to the nation's housing boom as well as the city's decision in the 1980s to send young revelers packing. That's when the city banned open containers of alcohol and changed traffic patterns to stop cruising cars crammed with rowdy college students. "The changes were important in order to be taken seriously in business," says Fort Lauderdale Mayor Jim Naugle.

The size of the bets on the Fort Lauderdale residential market suggests investors are serious. About 4,671 new condominiums were completed last year, with about as many scheduled to come on the market this year, says Gleb Nechayev, senior economist with Torto Wheaton Research. Investors also purchased about 15,000 apartment units to convert into condominiums last year, the fourth-highest volume among the country's major markets, according to Real Capital Analytics Inc.

Sandwiched between Miami and Palm Beach, Fort Lauderdale, with its sunny weather and wide beaches, has drawn retirees and job seekers who helped push the region's population up 2.1% in December to 1.8 million from a year earlier, according to Moody's Economy.com, a unit of Moody's Corp. Growth in smaller professional-services firms and a robust construction sector sent employment levels soaring 4.5% in January from the year earlier, about three times the national rate of 1.5%, according to the Bureau of Labor Statistics.

The market does have its risks. Last fall, Hurricane Wilma badly damaged a number of office buildings in downtown Fort Lauderdale, and at least one office-property sale broke down in the wake of the storm.

The specter of a slowdown in the region's hot residential market also looms. Until now, rising median home prices -- $369,000 in December, up 22% from a year earlier -- have helped drive up land prices and damped new commercial construction, increasing rents and driving vacancies down to below-average levels in the retail, office and warehouse sectors, according to Property & Portfolio Research Inc. But unit sales of existing single-family homes and condos fell 39% in January from a year earlier.

Some residential developers are confident they can adjust their housing mix to withstand any drop in demand. Rockefeller Group Development Corp. of New York plans to begin construction next month on a mixed-used development called Miramar Town Center that will contain about 500 residential units. "If we were trying to get top dollar, that would give us more concern," says John Petricola, the group's regional director. "We're being very careful to make sure they're positioned around the market's median price."

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