‘The Citadel migration’ shaking up Miami’s luxury property market

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The migration of New York financiers to Miami has created a shortage of luxury housing in upmarket suburbs, where buyers have purchased multimillion-dollar homes in search of easy commutes, more space and proximity to prestigious schools.

Real estate agents say one firm stands out for driving demand: Citadel.

Citadel, the $59bn hedge fund and market maker run by Ken Griffin, in June 2022 announced it would move its headquarters from Chicago, citing lower crime in Florida and the sunshine state’s lower taxes.

“They’ve been buying here aggressively,” said Michael Martinez, a real estate agent with Sotheby’s in Miami, who recently brokered the sale of a $5mn home in Coconut Grove, a quiet salubrious suburb, to a Citadel employee. Most of the luxury homes he has sold in recent months have been to hedge fund buyers, half of them from Griffin’s firm, he estimates. “The Citadel migration is definitely occurring.”

Buyers from Citadel were particularly active in the early spring, agents said, as employees raced to secure properties in time for school enrolment deadlines.

“Employees have been enthusiastic about the headquarters’ move to Miami and appreciate the vibrant energy and quality of life the city has to offer,” said Citadel.

Citadel has moved almost 300 employees to Miami during what the hedge fund describes as a multiyear effort to shift its operations out of Chicago. One employee said the relocation benefits on offer were “generous”, helping to cover the higher cost of living in a city that has boomed since the pandemic.

“The hottest price point in the Gables is between $4mn and $7mn for a five or six thousand square foot house,” said Erin Sykes, a real estate agent in Miami and economist for Nest Seekers, referring to upscale suburb Coral Gables. “That’s what all of these families are looking for.”

“These neighbourhoods are tropical, they’re lush, kind of like the way Florida is imagined to be,” she said. “In the Grove there’s literally peacocks that walk across the street. You have to be really careful driving.”

But a shortage of supply has created a paucity in the high-end home market, as construction backlogs and labour shortages slow development.

In July, Florida governor Ron DeSantis, who is running to be the Republican party’s presidential nominee, signed a law targeting illegal immigration that imposes steep fines on employers who do not check workers’ documentation.

The move has resulted in a shortage of construction workers and is expected to slow development of new homes. “A project that would take six months will now take 12,” said Brett Harris, executive director of luxury sales at real estate firm Douglas Elliman.

“There is much more of an inventory shortage in those desirable suburbs. Supply is down by half compared to a year ago,” said Sykes.

The number of luxury homes between $3mn-$7mn in Coral Gables and Coconut Grove has fallen by more than 50 per cent since the start of the pandemic, according to Zillow data. Homes in this price range now account for 40 per cent of total listings.

Sykes said the Citadel effect in Miami was akin to the impact that Google had on Venice Beach in Los Angeles when it opened a large office there. “Every seller was targeting these new Google employees. That’s the only time I’ve seen a single employer-driven market like this.”

Citadel bosses moving to the Miami suburbs have been willing to spend more for “turn key” homes that are ready to move into and require no renovations because they want to settle in before the school year started in mid-August, agents said.

“It’s definitely created a shortage of good properties,” said Jennifer Goldstein, a luxury real estate agent with Official. Buyers like the idea of waterfront living after years of surviving Chicago winters, she added. “We’ve had a lot of Citadel and hedge fund clients that are looking for a resort type house that’s the opposite of what they’ve had . . . They want to play tennis, go fishing and entertain.”

Of the 20 properties Goldstein sold in the past 12 months, she said 70 per cent of buyers worked at hedge funds, many of them Citadel. “And they’re all cash buyers.”

While agents said the pandemic-era bidding wars have largely abated as prices have plateaued, demand for luxury homes persists. “Even in the higher luxury homes it’s not unusual to receive multiple offers on a $10mn plus home,” Martinez at Sotheby’s said.

Shortages were feeding through to homes that were not seen as ultra-luxurious, agents said as Citadel moves not just top earners but also back-office staff to Miami. “When you have an organisation like Citadel, not everyone is making $5mn, $10mn, or $50mn a year,” Sykes said. “They’re not searching for $5mn properties, they’re looking more at the $2mn properties.

“They want to go to the same schools, and eat at the same restaurants . . . they want the fairy tale as well.”