Corporate Relocations and an Evolving Office Market in Miami
- Nov 1, 2022
- Stephanie Demic
At the BisNow Miami State of the Market event Tuesday, October 25th, developers, architects, investors, law firms, and general contractors came together to discuss the current outlook of South Florida’s commercial real estate market and the real estate/construction industry outlook as a whole.
Challenges from the Pandemic
The first topic of the morning was 2020 and the pandemic. Overnight, these industry professionals were faced with the obstacles of price surges, lack of materials, remote barriers, and a decline in revenue. This forced them to focus on efficiency and adaptability. It was pointed out that only the strong businesses survived. Following the pandemic, many people are anticipating a recession, and South Floridians are wondering how it will affect them. These experienced leaders reassured us that South Florida will continue to flourish.
Throughout the BisNow event on Tuesday, there seemed to be a common theme - South Florida is a beacon of opportunity. People and companies from all over the US are packing up and moving down. We're going to see some extensive projects developing in Miami and surrounding areas including plans to build more schools, continued focus on vertical projects, making the city greener and we will see some large corporations moving their headquarters down. One of the more sizeable projects, 830 Brickell, is expected to be fully leased upon completion with tenants including Microsoft, Sidley Austin, Citadel, and Winston & Strawn. Brian Gale, Vice Chairman of Cushman & Wakefield, explained how most of these tenants are not local and are moving from cities like NYC, San Francisco, LA, and Chicago. He mentioned that out of 640,000 SF of tenants at 830 Brickell, only 2 tenants are local - Marsh McClennan and Baker McKenzie.
Craig Studnicky, CEO of ISG World & Related ISG claims that what's attracting these large corporations to relocate their headquarters and/or open regional offices in Miami can be attributed to climate and the Tax Reform Act of 2017. Studnicky sat down in an interview last week with Miami Mayor, Francis Suarez. Here are some of the statistics that Mayor Suarez noted about South Florida:
- #1 in the nation in tech job growth
- #1 in wage growth
- 4% unemployment rate (info he quoted from Bloomberg)
- $2.5 trillion dollars in assets under managed companies moved to Miami in the last thirty months
Studnicky pointed out this example of the effects of the 2017 Tax Reform during these past two years. The fastest-growing state in the country is Texas, and the second fastest is Florida. According to the IRS, in 2022 households in the US making over $200,000 annually rank Florida as the number one moving destination.
Evolution of the Office Market
Brian Gale, Vice Chairman of Cushman & Wakefield, provided insight on the office market and where he believes it stands today. He stated, "Pre-COVID, every quarter, absorption was happening, and rental rates were peaking." Then, COVID hit and the assumption that nobody would return to offices did too. Gale explained that about three months later, everything changed, and he started to see an influx of people and companies relocating to South Florida. He believes that people wanted to get out of their apartments and they want a balance of beautiful weather, a supportive tax system, and city life.
Another part of the office market that Gale discussed is how the desire for remote vs in-office attendance will align with the current market. Almost every panelist at this event seemed confident in pointing out that a more flexible, hybrid work environment will be the future. They learned that you don't need to come into the office every day, but also recognize it will still be necessary for collaboration. Microsoft, one of the new tenants who signed a lease for about 50,000 SF at 830 Brickell, has around 300 employees. According to Gale, Microsoft expressed that they'll never have more than 120 employees in the office at one time. Because of this, Microsoft has instituted a parking system that will ensure that if an employee doesn't need a parking space that day, it can be available to someone that will.
A Region Poised for Growth
The key takeaway is that we can expect to see continued growth and development in South Florida, and there is no question that these leaders are excited and optimistic about the region’s commercial real estate outlook.
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