According to the National Association of Realtors, five of the ten strongest commercial real estate markets are in Florida this year. The rankings backing up that positive news consider a metro area’s demographic growth, economic conditions, and some key commercial market signs, including these:
– Leasing volume
– Rent price growth
– Vacancy rates trend
– Sales volume
The most promising Florida markets, according to the NAR analysis, are:
– Cape Coral-Ft. Myers
– Port St. Lucie
– North Point-Sarasota-Bradenton
– West Palm Beach-Boca Raton-Delray Beach
– Punta Gorda
The NAR analysis looked at 390 metropolitan areas across the U.S., examining overall conditions in the multi-family housing, office, industrial, retail and hospitality sectors. Aside from Florida, only Washington state has more than one region in the top ten.
Population increase provides a foundation
Florida is enjoying the most significant net migration of any state, as more people have moved to the Sunshine State over the last few years than to any other—by a wide margin.Population increases contribute to the demand for multi-family housing, which in turn boosts other CRE sectors. As an example, the small metro area of Punta Gorda, mainly a tourist destination in the past but with recent increases in retiree residents, has seen a jump in demand for apartments, resulting in rents increasing. That trend has supported new retail construction and the addition of jobs in the hospitality sector.
Why are people moving to Florida? Weather is always a list leader for reasons to move to Florida, along with a thriving economy, lenient mask rules, lower covid-19 counts than some places, no state income tax, and relatively stable regional politics.
Which sectors are out in front?
Office space is leading the way, particularly in South Florida, as finance and tech companies relocate to or expand in the area. Florida is regarded as business-friendly in ways that New York and California no longer are and offers an attractive environment for companies wanting to recruit and retain talented workers. Add to that the lower cost of office space, workforce diversity, and easy access to international markets, and the appeal is clear and gaining attention.
Jeff Gordon of real estate leader JLL commented that South Florida continues to enjoy an influx of tech, fintech, and financial organizations that have never settled here before. The expanding presence includes relocations and expansions. The trend has benefitted the submarket of flexible office space as well, since relocating or expanding companies may occupy temporary quarters or executive suites while they settle in and determine their long-term needs.
Increasing population boosts housing, and rising office construction and occupancy adds to the workforce population. Both, in turn, increase the need for retail and hospitality services, which have started to show new signs of improvement as well. According to a report in the South Florida Business Journal this month, Class A retail space in the region is in high demand, with asking prices for leases in Miami-Dade increasing by 12.5% in the third quarter. Vacancy rates are also falling, with retail and restaurant rates in Miami-Dade at 3.9% this quarter compared to 4.5% in the third quarter of 2020. Similarly, in Broward County, asking rent increased from $22.18 per square foot last year to $22.96 per square foot this year (a 3.5% jump), while occupancy showed a slight increase.
Planning for the future
The outlook for Florida is bright, according to current indicators. Compared to the states from which people are migrating, housing remains available and affordable, even if not relative to nearby states. As the nation continues to recover from the pandemic, Florida is poised to benefit from its natural advantages and economic landscape.