Foreign buyers bought many of the units that sat empty for years. Now condo builders are rushing to fill the remaining gaps in Miami's skyline. Cristobal Herrera for The Wall Street Journal

MIAMI—At the height of the real-estate boom in 2006, Ugo Colombo, an Italian-born developer, bought a stake in an empty plot of land along the Miami River, facing Biscayne Bay, in a deal that valued the site at roughly $25 million.

Last week, Mr. Colombo and his partners sold the same piece of land, now one of the last undeveloped waterfront parcels in downtown Miami, to an Argentine grocery-store magnate for $125 million.

Miami is experiencing a land rush as condo builders move to grab what remains of the city's dwindling supply of prime unbuilt sites, driving values of undeveloped plots to record levels.

It is the latest stage in a remarkable turnaround for the Miami condo market, where many of the 22,200 units built during the previous boom sat empty for years after the housing bubble burst. When prices plummeted, cash-paying buyers—mainly from Latin America, but also from Canada, Russia and Europe—began snapping them up, and the units now have been almost entirely absorbed.

"We're basically running out of waterfront properties for high-density development in Miami," said Robert Given, a broker with CBRE Inc. who co-represented Mr. Colombo and his partners in the deal. The price paid for the 1.25-acre plot of land—known as the "Epic II" site because it is located next to the EPIC Miami, a hotel and luxury condo building—is believed to be the highest ever paid for a a piece of undeveloped land in Miami in terms of price per developable square foot.

The price "beats anything we've ever been involved in or seen" in the city, Mr. Given said.

A soon-to-be-released study by New York consulting firm Integra Realty Resources for the Miami Downtown Development Authority, an economic-development agency, found that about 90% of the buyers of new residential units are from abroad. Despite steadily increasing prices, their appetite doesn't appear to be waning, said Anthony Graziano, senior managing director at Integra's Miami office and author of the study.

Prices for condos built during the 2003-to-2008 boom have increased about 75% over the past two years, to $400 a square foot from $230, the study found. Units currently under construction typically cost $450 to $550 a square foot. And those in projects that haven't yet broken ground are averaging $550 to $675 a square foot. Brokers estimate that condos on the Epic site could fetch as high as $1,000 a square foot.

At the height of the most-recent real-estate boom, the priciest condos sold for $650 to $800 a square foot, Mr. Graziano said.

The past year has seen a series of deals in which developers have shown a willingness to pay tens of millions of dollars an acre for unbuilt land. Last July, Swire Properties Inc., a subsidiary of a Hong Kong-based commercial developer that is building Brickell City Centre, an enormous mixed-use project in downtown Miami, paid $64 million for 1.55 acres at 700 Brickell Avenue.

Four months later, the Related Group, chaired by Jorge Perez, a billionaire developer and minority owner of the Miami Dolphins, paid $104 million for a four-acre site at 444 Brickell Ave., a downtown site near the Epic site.

And a few blocks away, at the corner of Biscayne Boulevard and NE 3rd Street, multiple bidders have offered more than $80 million for two acres of land next to a Holiday Inn facing the water, according to a person familiar with the sale process.

"These are trades that, three years ago, would have far surpassed anyone's imagination," said Ezra Katz, a Miami investor and chief executive of Aztec Group Inc., a real-estate brokerage. "It's a contest now, to see who can control the best sites in Miami."

There are now 14 towers with more than 4,000 units under construction in the downtown area, said Peter Zalewski, principal at, which closely tracks condo developments in South Florida. Another 44 towers with roughly 13,500 units have been proposed, he said.

"The Miami market has turned around 180 degrees in record time," Mr. Colombo, the developer, said. "There is a humongous shortage of land. On the waterfront, there's none left. Every hole you see on the map now is being filled."

Developers say there is less risk of a steep plunge in the current cycle. They have weeded out speculators, they say, by imposing a Latin American-style financing model that requires buyers to put down at least 50% before closing. As a result, developers are relying more on those deposits, and less on debt, to fund construction.

But the soaring land values also are having unintended effects on the downtown real-estate market, according to John Sumberg, managing partner of the law firm Bilzin Sumberg, who specializes in commercial real estate. Ultraluxury condo developers are crowding out less-lucrative types of development, including office space, apartment rentals and affordable housing, he says.

"The other product lines can't compete," Mr. Sumberg said. "Any site that could possibly be a condo cannot be utilized economically for any other purpose."

Another soon-to-be-released Miami Downtown Development Authority report will point out that the vacancy rate in the Brickell financial district is now 15%, down from 25% in late 2011, when there was a glut of office space. The office vacancy rate is expected to fall further, but little new office space is being built.

Climbing land values also could impinge on the development of rental apartments, which are in strong demand in Miami. At today's land prices, such projects are impossible, said Carlos Melo, principal at the Melo Group, a developer. His company just completed a new rental building downtown and has another in the works, but it acquired those plots before the escalation in prices.

"If you didn't get land before, you're not doing rentals," he said. "The rental market suffers a lot when there's this distortion in prices."

Write to Robbie Whelan at and Arian Campo-Flores at