With its warm climate, sandy beaches and moderate costs of living, people from all over the world are attracted to Florida. The Sunshine State added 2.9 million residents from 2010 to 2020, according to census figures. It was the seventh fastest-growing state during the decade and its 14.6% growth rate was double that of the U.S. as a whole.
Despite the perks of being a coastal state, however, Florida is likely to deal with the fallout of climate change in the coming years and its real estate market may already be feeling some of these effects. A study released in October 2020 by the National Bureau of Economic Research found that sales and price growth of homes in low-lying coastal areas of the Sunshine State were decelerating in comparison to less-risky inland locations. These trends appear to be most severe in Miami-Dade County, where much of the developed coastline is susceptible to a 6-foot rise in sea levels.
A first-quarter 2021 report from commercial real estate services company Avison Young showed that Florida industrial real estate is in high demand. Industrial asking rents rose by 2.8% and vacancy rates declined by 0.3% on a quarterly basis. Amazon was responsible for 8.1 million square feet of industrial leases and development deals in Florida last year, Avison Young reported, while the e-commerce giant also is planning construction of its first multistory warehouse in South Florida, near Miami International Airport.
This past April, Yardi Matrix reported that apartment rent-price growth in Tampa and Miami exceeded the U.S. average of 1.6% during the previous 12-month period. Rents grew by 5.8% in Tampa and by 4.5% in Miami, while Orlando (1.5%) trailed the national growth rate.
A 2020 report from the National Low Income Housing Coalition calculated an hourly “housing wage” needed to cover rent and utilities for a two-bedroom apartment without a tenant spending more than 30% of their income on housing. The coalition estimated Florida’s housing wage at $24.43, the 12th highest across all states, the District of Columbia and Puerto Rico. In many states, including Florida, a minimum-wage earner needed to work more than 100 hours per week to achieve this affordable-housing standard.
COVID-19 infections were continuing to trouble the state earlier this year. An analysis from USA Today released in early June showed that Florida accounted for 12% of all U.S. infections during the prior week. New cases at this time declined in only 15 of the state’s 67 counties.
Several major health care companies — including Baptist Health, Mayo Clinic and Ascension St. Vincent’s — are among the largest employers in the Jacksonville metro area. The health care industry accounts for more than 98,000 jobs, or about one in six jobs in the region. St. Johns County, south of Jacksonville, is considered the state’s wealthiest county with a median household income of $82,252 in 2019. ●
Office-market fundamentals in the Tampa metro area have remained relatively stable in recent years, even during the height of the pandemic. From second-quarter 2019 through first-quarter 2021, the average asking rent fluctuated between $27.24 and $29.30 per square foot, Cushman & Wakefield reported. The marketwide vacancy rate during this period, however, rose by 280 basis points, with much of the increase occurring at the end of last year and the first three months of this year.
The Tampa metro area, encompassing Hillsborough and Pinellas counties, lost 3.1% of its jobs during the 12-month period ending this past February while the unemployment rate rose by 110 basis points to 4.2%. Office-leasing activities were still down compared to pre-pandemic days, according to Cushman & Wakefield, but the 567,000 square feet of leases signed in Q1 2021 was more than twice the level of the prior quarter. Ford Motor Credit, the FBI and call center Maximus each signed leases of more than 100,000 square feet in the first quarter.
Focus: Tourism
Florida’s tourism-marketing agency reported that the state had 86.7 million visitors in 2020, a 34% decline from 2019 and the lowest number since 2010. State legislators were cautioned that tax revenues from the leisure and hospitality industry might not return to pre-pandemic levels until 2024, the Tampa Bay Times reported.
Earlier this year, however, occupancy rates for Florida hotels were rising. In mid-May, STR reported that Miami and Tampa led the nation’s 25 largest hospitality markets with occupancy rates (including temporarily closed hotels) of more than 70%, well above the U.S. average of 57.7%. A week later, STR noted that three Florida markets (Sarasota, Daytona Beach and the Florida Keys) led the nation in revenue per available room compared to 2019 levels.
This past April, Florida sued the Centers for Disease Control and Prevention to restart cruise-ship operations in the state. In July, a federal judge allowed cruises to resume without strict vaccine protocols in place.
What the locals say
“We’re in the infancy of the return [to the office]. Unlike previous cycles, this one is very strange. Large Fortune 1000 companies have a much more conservative approach to returning to the office than local and regional companies who’ve been back for a year. … Those companies are significantly larger, so the parking lots are still relatively empty. We’re up to about 40% building occupancy today and that’s been slowly improving month by month. But it varies drastically from building to building. You can drive around the suburban markets and there’s plenty of buildings without a car in the parking lot, so it’s just all over the board.”
John Gilbert
Orlando managing director, JLL
3 Cities to Watch
Miami
Miami had several capital-improvement projects slated for this year that were derailed by the COVID-19 pandemic. The city is anticipating less tax revenue in 2021 and was set to cut 300 mostly unfilled municipal jobs. CBRE reported that the industrial real estate sector in Miami-Dade County is flourishing. In Q1 2021, average asking rents increased by 3% year over year to $10.15 per square foot and nearly 1.9 million square feet in new construction was completed.
Orlando
Central Florida is in the midst of a boom-to-bust scenario. The Orlando metro area led the nation in jobs created from 2014 to 2018, but it now leads the state in pandemic-fueled job losses as employment declined by 11% year over year this past February. Many of these jobs are in the tourism and hospitality sector. Orlando added an average of 107 residents per day from 2010 to 2020, and its 23.7% growth rate was much larger than that of Jacksonville, Miami or Tampa.
Tallahassee
The Sunshine State capital (population 195,000) grew by 7.4% from 2010 to 2019. Florida State University is a major economic and cultural hub, serving some 44,000 students and employing about 14,000 faculty and staff. According to CommercialCafe, Tallahassee’s average office asking rent of $20.48 per square foot rose by 4.1% from 2019 to 2020. Only three office properties, with a combined value of $25.6 million, were sold in Tallahassee last year.
Sources: Avison Young; CBRE; ClickOrlando.com; CommercialCafe; Cushman & Wakefield; Forbes; Florida State University; JAXUSA Partnership; Missouri Economic Research and Information Center; National Low Income Housing Coalition; Orlando Business Journal; South Florida Business Journal; STR; Tampa Bay Times; The New York Times; USA Today; U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; U.S. Census Bureau; Yardi Matrix
