MMG’s Director of Acquisitions, Marcos Puente, discusses the current state of the South Florida / Miami real estate market. More specifically, he addresses the factors to consider for South Florida real estate investors, and the direct impact of the pandemic in the area. He also dives into the future of the market with a positive outlook for where things are going in the near future.
1) How long has MMG played a role as commercial real estate investors in Miami / South Florida?
MMG has been actively focused on investing in Florida commercial real estate since 2008, with a heavy focus on South Florida. We were all born and raised in Miami, so it’s easier doing business and understanding the mechanics of our backyard.
2) Is real estate in Florida a good investment?
Florida has always been a good state for investment due to the climate, lack of state income taxes, and ease of doing business. Over the past couple of years, the state has increasingly benefitted from a strong domestic migration from more populated states with higher taxes and regulations; to put this into perspective, in 2019 the state of Florida saw a net migration of 222,588 people whereas California lost about 130,000 people in the year.
3) What is the hottest real estate market in Florida?
It’s hard to answer this question at the moment; Covid has caused disruption in very specific parts of Florida’s economy – areas like South Florida and Orlando who’s local economies depend on international tourism, have been hit very hard; tourism dependent retail and hospitality are not “en vogue” at the moment, as they have been very stressed. Markets like Tampa and Fort Myers however who generally have more domestic tourism, have fared quite well.
While the net migration for the state is ever increasing, if you take a closer look at the numbers, the migration is stronger to parts of the state other than South Florida, which had a net migration of 8,204 people in 2019 as compared to the 222,588 people for the entire state. Covid has also accelerated the domestic migration trend to the state and to South Florida, the data for this year which is not out yet but will be interesting to see.
South Florida is also attracting significantly more finance and tech companies relocating from other parts of the country, and the logistics/supply chain market is red hot, which will in turn drive population growth and a stronger domestic economy.
Overall, we’re personally long on South Florida, but a rising tide lifts all boats, and the tide is rising in the entire state of Florida (pun intended).
4) Is Miami a good real estate investment?
Miami and South Florida have historically benefitted from the close connection to Latin America, serving as a safe haven for flight capital and a vacation/second home destination for those looking to diversify from their home markets.
The simple fact that Miami is a land (supply) constrained market due to the ocean on the East and the Everglades on the West, coupled with the increasing demand from companies and people looking to move here makes for good real estate investment. Furthermore, the continued economic/political instability throughout South America has historically created a strong source of liquidity for real assets here, which is an added bonus as liquidity equals value.
5) What are some of the key factors real estate investors in Miami should consider before acquiring a property?
Because Miami is in fact a red hot market with ample liquidity, strong demand, and dwindling supply, I tend to see a lot of projects with very rosy projections being capitalized and built, and these projects may never hit the mark and end up in trouble. One needs to be very careful, ensure realistic expectations, and not overpay for land or assets – the latter of which I see happen often.
6) Are any of those factors different when considering the greater South Florida real estate market?
These factors remain the same for real estate in general but are more pronounced here in the Miami real estate market because there is that much more liquidity in this market and as a result, higher velocity/competition.
7) Have you seen any significant changes in the region’s real estate investing activity due to the pandemic?
Transaction volumes are down over 60% this year, there is next to no capital available for non-essential retail and hospitality assets, and tourism is down over 60%. While velocity is starting to climb steady during the 4th quarter, we are still far off from where we were last year.
8) Do you have anything else to add regarding real estate investing in the regions we’ve covered above?
The pandemic will soon blow over, and we see the amount of pent up tourism demand ever increasing, so we believe those markets will come roaring back.