On a national and global level, Florida and particularly the South Florida CRE markets has been among the strongest globally, with continually solid returns and safety for the capital of international & domestic investors. US News & World Report currently ranks Florida #8 in fiscal stability and #8 with its economy nationwide.
South Florida commercial real estate leads the way in the wake of the COVID-19 pandemic within the state. It’s supported by consistently strong population growth, tax-friendly laws, continual return of visitors worldwide, and innovative development projects.
It’s not just the population growth that makes it an active and enticing market, but also the high volume of attractive real estate properties, the diverse cultural offerings, and the fact that it’s a travel destination for national and international travelers. With direct transportation access by land, air, and sea, it’s also a central hub for international business, especially in South America.
Florida’s commercial real estate market receives continual, significant investments from global players in China, Canada, Germany, Singapore, Saudi Arabia, and Qatar. This substantial influx of capital coinciding with the current economic conditions provides a solid foundation for why South Florida commercial properties remain a popular place for commercial real estate investment. These factors mentioned above aggregate to continually make it a hot commercial real estate investment opportunity.
Below are the top reasons why South Florida is one of the best commercial real estate markets for investors.
Florida is leading the nation in economic growth, with job growth three times that of the entire nation.
“As companies relocate or open new offices to create net new jobs, it has a multiplier effect on the service industry, so the demand for all types of property rises. Barring any change in the macro economy or an eventual oversupply in new products, this makes for rents and property values in all sectors to rise across the board.”
Marcos Puente, Director of Acquisitions @ MMG Equity Partners
1. Florida’s Fiscal Stability & Economy
As mentioned above, US News & World Report ranked Florida #8 in fiscal stability and #8 in the economy compared to the rest of the country. Fiscal stability is highest when assets and policies are in place to mitigate potential economic crises and smoothen the inevitable swings in the economy. The most important factor contributing to this is Florida’s liquidity score, which is 5.8 (total current assets/total current liabilities). That is more than twice the national average of 2.5.
Additionally, the Sunshine State’s economy ranks #8 due to the following factors: job growth and venture capital.
- Job Growth – As per U.S. Bureau of Labor Statistics (BLS) records, Florida clocked a job growth rate of 1.9% Year-on-Year through August 2021, ranking #3 in the nation, trailing only Utah and Idaho in job growth. At the same time, the national job growth average stood at 1.2%. Further, the BLS reported in September 2021 that Florida saw the addition of 77,000 new jobs during the month, reflecting job growth at three times the national average, and a significant improvement for Florida. Contributing factors for this growth include Florida’s ongoing economic development efforts, and recovery from the pandemic.
- As per National Venture Capital Association (NVCA) & PitchBook, Florida’s Venture Capital industry has grown lately, with over $5B invested in 2020. This increase is from more startup companies & business growth. Venture capital investment contributed $17.8 per $1,000 of Florida’s GDP, over 2.5 times the national average of $6.77 per $1,000 of GDP. Florida’s Venture Capital industry is now an essential driver of economic growth & innovation in the state.
2. Population & Business Growth in South Florida
South Florida has maintained consistent population growth since the early 1900s, according to Worldpopulationreview.com, with an average gain of 2% per year since 2010. While growth has slowed slightly over the last two years, projections are still bullish. Experts estimate that the state’s population will gain six million residents within the next decade to total over 26 million Floridians by 2030.
Miami-Dade County currently has 2,751,796 residents. According to the Miami Herald, it is the 7th largest county in the country behind Los Angeles, Chicago/Cook County, San Diego, Santa Ana/Orange County, Houston/Harris County, and Phoenix/Maricopa County, and followed by Dallas, Brooklyn / Kings County, and Riverside.
Miami now has the 6th fastest-growing population nationwide. To put things into perspective, from 2000 to 2010, Miami was not even in the Top 50 fastest-growing regions in the United States. Additionally, Miami ranks among the best nationwide in business growth since 2010 (+2% per year) and 18th for wage growth (+3.3% per year), with both measurements outpacing the national average of 0.7% and 1.9%, respectively.
A growing population and rising incomes pair well for stimulating the economy in any region. These factors combine to create a solid foundation for the continued retail market growth in South Florida.
3. Florida’s Competitive Workforce
Florida’s highly competitive workforce is among the top nationally and globally. Here are some highlights that show why Floridians stand out among the best:
- Fast Company ranked Florida #1 in the country for innovation
- TechAmerica Cyberstates ranks Florida #5 nationwide for high-tech employment. According to the report, Florida had a total of 356,800 workers in high-tech industries in 2020, representing 4.1% of the state’s workforce. This places Florida behind California, Texas, New York, and Massachusetts in terms of total high-tech employment. The report also notes that Florida experienced a 1.7% increase in high-tech employment from 2019 to 2020, outpacing the national average growth rate of 1.2%.
- Florida has the 4th largest workforce in the United States. According to data from the U.S. Bureau of Labor Statistics (BLS), as of August 2021, Florida had a total nonfarm employment of approximately 8.74 million workers, making it the 4th largest workforce in the country behind California, Texas, and New York. However, Florida’s workforce has been growing steadily in recent years, with the state adding over 500,000 jobs from August 2020 to August 2021, the second-highest job gain in the country during that period.
- Florida has over 5 million civilian workers. Put into perspective, that’s a greater population than Switzerland (The population of Switzerland is estimated to be around 8.7 million) and nearly the same size as Sweden’s population (Sweden’s population is estimated to be around 10.4 million).
- Florida is home to over 6.1 million foreign-language speakers (27.5% of the total population)
4. Growth in the Florida Retail Market
Florida’s retail industry constitutes a significant part of the state’s economy as it creates jobs and generates revenue. Boasting over 270,000 retail shops, the Sunshine State’s retail market is diverse and offers a broad spectrum of products and services to consumers. This sector has experienced constant growth in its sales, owing to population growth, higher tourism rates, and robust consumer spending.
The retail industry in Florida offers over two million job opportunities, representing roughly 20% of the present workforce. These jobs include diverse roles in sales, management, marketing, logistics, and other retail operational aspects. This industry provides both full-time and part-time employment, and many roles offer flexible scheduling as well as competitive wages.
Florida’s retail market thrives due to its diverse and large population, where both residents and visitors frequently venture out to shopping destinations statewide. Increasing population rates and enhanced tourism add impetus to the strong retail market in the state. The diverse customer base, along with a flourishing economy, positions Florida’s retail industry for continued growth and success in the future.
Retail growth in Miami and South Florida has been explosive in recent years. Tech jobs, no income tax, and the sun are some reasons experts believe Florida is poised for continued growth even after the pandemic.
The sunshine state’s lack of a lockdown, attractive house process, and rise in remote working conditions are factors that attract people. The Florida Retail Federation went as far as declaring 2021 as the year of renewed growth for retailers. The expansion of COVID-19 vaccine distribution saw the increase of retail development throughout 2021.
Historically, Miami’s unemployment rate remained below the national average. However, the onset of the global pandemic saw a record spike in unemployment which directly affected the retail sector due to COVID-19 closures. Presently, Florida’s unemployment rate stands at 4.6% in October 2021.
Capital continues to flow into retail and shows no signs of letting up at the moment. These 2020 South Florida retail Shopping Center Transactions further highlight the constant movement of assets into the region’s retail market.
5. Business Incentives in Florida
Florida is attractive to businesses for several reasons. Investors and entrepreneurs flock here to reduce their potential tax burden with no personal income tax, inheritance tax, or estate tax.
According to Chief Executive Magazine’s 2021 “Best and Worst States for Business” ranking, Florida is ranked #2 overall, behind only Texas. The ranking is based on a survey of over 600 CEOs across the United States. Additionally, according to the Tax Foundation’s 2021 State Business Tax Climate Index, Florida has the #1 tax climate in the Southeast region. Kiplinger ranks it #4 in the nation. The ranking takes into account various factors such as business costs, economic health, workforce, infrastructure, and quality of life.
For these reasons, Florida was the fifth-largest exporting state in the United States in 2020, with total exports of goods and services valued at over $54 billion. This is according to data from the U.S. Census Bureau’s Foreign Trade Division.
According to the Commercial Market Conditions Index rankings, the National Association of Realtors (NAR) revealed Florida has five of the top markets in the country with the strongest commercial markets, including office, retail, apartment, industrial, and hotel sectors
NAR’s index rankings measure a metro area’s demographic and economic conditions – for example, wage growth and population growth. It also considers several commercial market indicators, including vacancy rates, leasing, inventory, rents, and sales volume.
NAR’s index, further, shows the following ten metros with the strongest commercial markets in the second quarter of 2021:
- Cape Coral-Fort Myers, FL
- West palm beach-Boca Raton-Delray Beach, FL
- North Point Sarasota-Bradenton, FL
- Punta Gorda, FL
- Las Vegas
- Raleigh, NC
- Olympia Tumwater, WA
- Spokane-Spokane Valley, WA
To further bolster the state’s standing as far as taxes and personal investments are concerned, Retirementliving.com ranks Florida as the #5 most tax-friendly state for retirement. For the same category, Kiplinger ranks it #5 (moved up from #8 in 2017).
Various factors (like the cost of living, tax rates, average income, etc.) help illustrate why Florida is a perennial favorite for business and personal finance.
6. Foreign Investment in Commercial Real Estate
The United States is #2 in Foreign Direct Investment (FDI) worldwide. Florida is one of the top ten states in the United States receiving foreign direct investment (FDI). Specifically, Florida ranks fourth among the top ten US states receiving FDI according to the SelectUSA program, which is led by the US Department of Commerce. Florida is behind only Texas, California, and New York.
Florida also has nearly one million jobs supported directly by FDI. Estimates from the Florida Chamber of Commerce show that one in five jobs depends on inward investment, resulting in over 30% higher pay above the state average wage.
In 2017, Florida was the #1 state where foreigners bought and sold commercial property. Furthermore, as of 2015, Florida ranked fourth in the US for cross-border capital flow, as an increasing number of international investors jumped into the real estate market. The investment rate reached a 9-year high in 2016 with $4.3 billion in investment from outside the US flowing, up 85% from 2014.
Many countries have driven that growth, with new investments from Canada, the Netherlands, Luxembourg, Ireland, Spain, Germany, United Arab Emirates, and China. Latin American countries suffering from poor economic performances heavily invest in the South Florida commercial real estate capital haven.
To further illustrate these international investments, Florida’s commercial real estate market presents many opportunities for these investors, with Orlando, Tampa, West Palm Beach, Ft Lauderdale, and Miami as anchoring cities.
Lastly, Buildium.com ranked the top 50 real estate markets for residents and investors in 2019 and included seven of Florida’s real estate markets.
7. Commercial Real Estate in Miami Offers High Yields
Compared to other global gateway cities and existing cultural hubs in the US, the I-90 corridor, and in Europe, South Florida offers comparatively higher yields on investment.
Assets in Florida markets performed strongly in 2016, with a 10% gain in the first half. Other Florida cities like Orlando, Tampa, and Jacksonville have also been targets due to these higher relative gains. In South Florida, Orlando, Tampa, West Palm Beach, and Miami present a wide range of commercial real estate properties and opportunities for positive returns.
8. Commercial Real Estate Investment Trusts
REITs have significantly impacted the Miami commercial real estate market with low-interest rates and a strong job market. A record 24.2 million people visited Miami in 2019 (16.3 million overnight and 7.9 million day-trippers), , according to the Greater Miami Convention & Visitors Bureau. The city’s population has grown by nearly 19.73% since the 2010 census to reach 442,241 thousand people in 2020.
Additionally, the greater Miami-Dade County, FL, has over 2.7 million people. Miami metro totals over 6.1 million residents. The combination of this growth and institutional investment from outside developers has meant more rapid growth than would otherwise be possible and consistent interest in the region.
Commercial real estate is lucrative in Florida and has well-performing investments for domestic and global investors. It continues to generate capital growth as the area grows and flourishes. Whether evaluating Florida NNN (triple net lease) properties for sale or other commercial investment opportunities, there has never been a better time for commercial real estate investments in the region.
9. Forecast Remains Positive for South Florida CRE
Consistent population growth and home building combined with steadily increasing tourism (Florida ranks #2 of all US States with over 131 million visitors in 2019 according to Visit Florida) provide a solid foundation for capital to flow into the region’s retail market. Those elements and continual construction projects are positive signs of growth across other commercial real estate sectors.
Unfortunately, the 2020 COVID-19 pandemic negatively affected the CRE sector. However, despite it’s negative effects on economies around the world, significant developments were put into play and are currently shaping up in the region characterized by sealing property refinances in several locations.
Meanwhile, international and domestic investors continue to contribute to the market, making the overall financial data in the region’s CRE remain optimistic for now. Still, analysts take a cautious long-term approach, a sharp contrast from their previously exhibited bullish behavior towards the CRE.
Some of the recent CRE highlights in the region include South Florida CRE booming, a Broward County record industrial transaction, a new Miami WorldCenter tenant, and more.
Only time will tell, but the overall sentiment regarding South Florida commercial real estate is looking upward and onward.
What’s more, Florida should continue positioning itself as a business-friendly destination even as high-tax states like California and New York continue increasing taxes and regulations. Consequently, Florida will directly benefit from the resultant capital and population migration, a direct boon to the South Florida commercial real estate.
South Florida Commercial Real Estate News & Resources
Several factors contribute to the health of the commercial real estate market in the region. Below are some important sources of information for South Florida commercial real estate news if you are looking to investigate the CRE market in the area further:
MMG Retail News: The MMG blog features essential industry news and market updates about South Florida commercial real estate, with a specific focus on retail trends.
MMG Florida CRE Quarterly News Roundup: Every quarter MMG highlights the top stories for Florida commercial real estate, including acquisitions, dispositions, new construction projects, and more.
Colliers’ Market Research: Colliers International is a global industry leader in residential and commercial real estate. Their South Florida branch opened in 1990 and focused on the tri-county region of Miami, Ft Lauderdale, and West Palm Beach.
CoStar: Founded in 1987, CoStar pledges to create efficiency and transparency in commercial real estate. It’s the first company to offer real estate firms comprehensive, objective, and reliable information.
The Real Deal: The Real Deal provides the latest real estate news and press releases. Their company focuses on three central regions: Miami, New York, and Los Angeles.
CRE-Sources: Their website aggregates commercial real estate news & reports for office, industrial, retail, and multifamily sectors of the commercial real estate markets in Central & South Florida.
World Property Journal: Their Miami-focused page illustrates the latest news in the CRE market across all major sectors.
Business Journal: The Business Journal is nationwide and has the latest breaking business news for major regions across the United States, including South Florida. They update their news section around the clock for all major markets.
BisNow: In their own words, BisNow is “intensely curious about commercial real estate,” and they are “here to help you be curious (and nerd out) about real estate.” They not only publish news but also produce hundreds of CRE conferences.