9 Reasons to Invest in South Florida Commercial Real Estate

Apr 17
9 Reasons to Invest in South Florida Commercial Real Estate

On a national and global level, Florida has historically been one of the strongest commercial real estate markets, with continually solid returns and safety for the capital of global & domestic investors. In fact, US News & World Report currently ranks Florida #2 in terms of fiscal stability and #9 with its economy nationwide.

Within the state, South Florida commercial real estate leads the way supported by consistently strong population growth, tax-friendly laws, continual visitors to the region by tourists from around the world, 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 from South America.

Florida’s commercial real estate market receives continual, major 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. All of these aforementioned factors aggregate to continually make it a hot commercial real estate investment opportunity.

Below are the top 9 reasons why South Florida is one of the best commercial real estate markets for investors, including: fiscal stabilitypopulation & business growth, business incentives, workforceforeign investments, & high yields on investments.

As high-tax states such as New York and California continue increasing taxes, regulations, and the overall burden of doing business therein, business-friendly states such as Florida will directly benefit from the capital and population migration thereof. This has been and will continue to be a direct boon to commercial real estate within The Sunshine State.”

– Marcos Puente, Director of Acquisitions @ MMG Equity Parters

1. Florida’s Fiscal Stability & Economy

As mentioned above, US News & World Report ranked Florida #2 in Fiscal Stability and #9 with Economy compared to the rest of the country. Fiscal stability is highest when there are assets and policies in place that mitigate potential economic crisis / smooth 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 2x the national average of 2.5.

To further expand on The Sunshine State’s favorable economic conditions, the economy ranks #9 due to the following factors: job growth and venture capital. Florida is #3 nationwide as far as job growth is concerned with 1.9% job growth year-over-year compared to the national average of 1.2%. Additionally, the venture capital funds in the state contribute $17.8 per $1K GDP, which is over 2.5x the national average of $6.77 per $1K GDP.

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 growth of 2% per year since 2010. While growth has slowed slightly over the last year or two, projections are still bullish. Experts estimate that the state’s population will gain 6 million residents within the next decade to total over 26 million Floridians by 2030.

Miami-Dade County alone currently has 2,751,796 residents in Miami-Dade. 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, 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.

Miami also ranks 8th in terms of business growth since 2010 (+2% per year), and 18th for wage growth (+3.3% per year) with both measurements outpacing the national average, 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 workforce is highly competitive and is among the top on a national and global scale. 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
  • Florida has the 3rd largest workforce in the United States
  • Florida has over 9.7 million civilian workers
    • Put into perspective, that’s a greater population than Switzerland and nearly the same size as Sweden’s population
  • Florida is home to over 5 million foreign language speakers

Kendall Corners Miami Commercial Real Estate Market

4. Growth in the Florida Retail Market

Florida is home to over 270,000 retail stores, and the retail market employs well over 2 million people. This foundation is supported by people consistently spending their hard earned dollars at store fronts around the state.

This is further exemplified because retail growth in Miami and South Florida has been explosive in recent years. Among the top retail markets in the country, Miami saw 5% growth in hospitality employment in 2015, reaching an all-time high in jobs in that sector. Additionally, from July 2017 to 2018 Palm Beach saw a 4% increase year-over-year, where the national average was up 1.6%.

Retail growth in South Florida is also exemplified by the the $1.7 billion Miami Worldcenter, a 450K square foot project set to be complete in Q4 2019. The $1 billion Brickell City Centre is another example of major, innovative retail-based construction project that highlights the current state of investments in downtown Miami.

Capital continues to flow into retail and shows no signs of letting up at the moment. Here are South Florida’s Top Shopping Center Transactions for 2018 that further highlight the constant movement of assets into the region’s retail market.

5. Business Incentives in Florida

Florida is attractive to businesses for a number of reasons. With no personal income tax, inheritance tax, or estate tax, investors and entrepreneurs flock here to reduce their potential tax burden.

According to Chief Executive Magazine, Florida is the #2 rated state for business and according to Tax Foundation, it is the #1 tax climate in the southeast, and Kiplinger ranks it #4 in the nation. For these reasons, 20% of US businesses that export goods are located in Florida.

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, and Kiplinger ranks it #5 (moved up from #8 in 2017) for the same category.

Various factors (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 #1 in Foreign Direct Investment (FDI) worldwide. Specifically, Florida ranks in the Top 10 of states receiving FDI and has nearly 1 million jobs supported directly by FDI.

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 has reached a 9-year high as of 2016 with $4.3 billion in investment from outside the US flowing, up 85% from 2014.

That growth has been driven by a larger number of countries as well, with new investments from Canada, the Netherlands, Luxembourg, Ireland, Spain, Germany, United Arab Emirates, and China. Latin American countries suffering from poor economic performance are investing heavily as well as they see South Florida commercial real estate as a haven for capital.

To further illustrate these international investments, Florida’s commercial real estate market is ranked #1 for international investors as previously mentioned. The Sunshine State presents a wealth of 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 7 of Florida’s real estate markets made the list.

Miami Commercial Real Estate Market MMG Equity Partners

7. Commercial Real Estate in Miami Offers High Yields

Compared to other global gateway cities and existing cultural hubs in the US, I-90 corridor, and in Europe, South Florida offers comparatively higher yields on investment.

Assets in Florida markets are performing strongly right now with a 10% gain in the first half of 2016. Other Florida cities like Orlando, Tampa and Jacksonville have also been targeted due to these higher relative gains. In South Florida specifically, 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

Combined with low-interest rates and a strong job market, REITs have had a major impact on the Miami commercial real estate market. A record 15.5 million people visited Miami in 2015 and the population of the city has grown by nearly 8% in the last five years to 2.7 million. Miami metro totals over 6 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 in Florida and South Florida have been strong, consistently performing investments for both domestic and global investors, and continue to generate capital growth as the area grows and flourishes. Whether evaluating Florida NNN properties for sale or other commercial investment opportunities, there has never been a better time for commercial real estate investments in Florida.

9. Forecast Remains Positive for South Florida CRE

Consistent population growth (mentioned at the start of the article) and home building combined with healthy tourism (Florida ranks #2 of all US States) provide a solid foundation for capital to flow into the region’s retail market. Those elements along with continual construction projects serve as a positive sign of growth across many other CRE sectors.

Some of the recent CRE highlights in the region include: Palm Beach posting a record quarter for Q1 2018 in multifamily sales, Miami-Dade retail posting positive growth in the same quarter as far as Sq Ft valuation, and Broward County showing healthy signs in various sectors, especially in regards to office sales with an increase of 15% year-over-year.

Only time will tell, but the overall sentiment in regards to South Florida commercial real estate is looking upward and onward.

South Florida Commercial Real Estate News & Resources

There are a number of factors that 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 further investigate the CRE market in the region:

  • MMG Retail News: The MMG blog features key 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 both residential and commercial real estate. Their South Florida branch opened in 1990 and focuses 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 main regions: Miami, New York, and Los Angeles.
  • CRE-SourcesTheir 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 of the 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. Their news section is updated 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.

Facts About Florida & Population Stats

Capital: Tallahassee
Area: 65,758 square miles
GDP: $976.4 Billion
Population: 20,984,400
Median Income: $29,838
College Educated: 40%

4 responses to “9 Reasons to Invest in South Florida Commercial Real Estate”

  1. I own a 13.000 + sq ft building in Broward County Florida. It is located in central Broward county and is considered a “very desirable location’” as it is less than a mile away from the major highways that go North, South, East and West. My building is currently 100% occupied with a dermatologist (who recently put in $350,000 in improvements) and a dentist, (who also recently put in $250,000 in improvements). These 2 tenants account for slightly over one half the the rentable space. The other half is rented by 2 smaller businesses, a small law firm, and a Homecare Company. All leases are long term, (5 years or longer). However, I hold options to terminate all leases with written notice, (length of notice times, vary by tenant). Has COVID-19 impacted the current value of my building and what would expectations be for long term appreciation (next 5-10 years)

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