Investors from various states and countries view commercial property in Florida as an excellent investment opportunity, with Miami standing out in particular. This South Florida city is an attractive investment hub due to its rapidly growing population, favourable tax rates, and high return on investments. So, what makes Miami's commercial sector so appealing for investments? Let's delve deeper into this.
Content:
- State of Miami's commercial real estate market
- Demographic insights about Miami
- Miami's labour market
- Miami's industrial market
- Miami's office market
- Miami's retail market
- Investment opportunities in Miami
- Conclusion
State of Miami's commercial real estate market
Just over a century ago, what was once a swamp has transformed into one of the globe's most vibrant resorts and commercial centres. Nestled at Florida's southernmost point, Miami is aptly dubbed the "Magic City" for its meteoric economic rise, surging populace, and global flair. Additionally, Miami boasts a well-developed transport infrastructure, earning it another moniker: "Gateway to America."
The port of Miami welcomes the globe's grandest cruise vessels and acts as a nexus for multiple transportation pathways. Florida manages 53% of all U.S. exports to Central America, oversees 49% of cargo to the Caribbean, and facilitates 43% of shipments bound for South America.
During the pandemic, Florida experienced a sharp population increase, attributed to its sunny weather, low taxes, and legislation that supports private businesses. The demand for houses in Florida exceeds supply, and with the growing population comes a demand for goods and services, making Miami an ideal city for commercial property investments.
Demographic insights about Miami
Recent census data reveals that Miami houses more than 442,000 inhabitants, reflecting a growth of nearly 11% since 2010. It's Florida's second-largest city, trailing only Jacksonville, and holds the 41st position in the US by population count. The upward trajectory persists, with Florida emerging as the third most populated state. In a single year, the state's populace swelled by 211,196, crossing the 20 million threshold. Now, let's further explore Miami's demographics:
- Miami boasts a population of over 442,000.
- Over the last decade, the city has seen an influx of 42,800 newcomers.
- In the Miami metropolitan area, the average age stands at 40.1 years, slightly below the Florida average.
- Miami's individual income averages at $31,437, while the typical household brings in about $44,268.
- In the recent year, Miami's household incomes have surged by 5.7%, and property values have climbed by 4.2%.
Demographic growth is a positive indicator for commercial real estate investors. The more working-age residents a city has, the more appealing it becomes to corporations and businesses in need of office and warehouse spaces. Rising incomes influence residents' purchasing power. A city with a wealthier population becomes more attractive for retail business, services, and entertainment sectors.
Miami's labour market
Miami's economy is on a rapid ascent: the unemployment rate plummeted from 6.8% in March 2021 to just 3% by March 2022. The workforce expanded by 56,474 individuals, marking a 4.4% annual growth, with private sector employment also seeing an uptick.
- The Miami-Fort Lauderdale-West Palm Beach corridor boasts an impressive GDP of $365 billion, marking a robust growth of 46% in the last ten years.
- As Miami's economic landscape flourishes, sectors like professional services, trade, transportation, and hospitality are witnessing significant expansion.
- The city's workforce is primarily concentrated in areas like finance, education, tourism, and real estate.
- Global industry leaders such as Kraft Foods, Office Depot, Hilton International, and American Airlines have anchored their headquarters in Miami.
- Furthermore, tech and service giants like Canon, Hewlett-Packard, and Western Union have identified Miami as their central operational base.
- The city's academic prestige is upheld by institutions like Miami Dade College, Florida International University, and the University of Miami.
- Remarkably, a vast majority, 82% to be precise, of Miami's residents have achieved higher education.
Miami boasts a stellar transportation infrastructure, highlighted by the Port of Miami (one of the US's premier shipping hubs), solid freight rail connections, four primary interstate highways, a 38-kilometre Metrorail track bridging the central business zone to the western periphery, and Miami International Airport, a dominant global transcontinental nexus.
Considering the labour market dynamics and the state of the commercial sector, it's evident that Miami is evolving and attracting major corporations. For a commercial real estate investor, this is a positive indicator. A burgeoning city will always have a demand for commercial property rentals and purchases.
Miami's industrial market
Rental rates in Miami's industrial sector are on the rise as demand for commercial spaces increases. With limited spaces available for purchase or lease, any available property is highly sought after. Here's a snapshot of the current statistics:
- Total industrial real estate space: 2.3 million m².
- Average asking rental rate: $95.5 per m² annually.
- Vacancy rate: 2.7%.
- New developments: 250,000 m² of commercial real estate currently under construction.
- Key industrial centres: West Airport (encompassing the city of Doral), Sweetwater, and Miami's unincorporated regions.
Miami's office market
In popular Miami neighbourhoods such as Brickell, Miami Beach, West Palm Beach, Wynwood, and Coconut Grove, there's a marked increase in lease agreements being clinched by private companies, family-run offices, and investment entities. Here's a breakdown:
- Total office space: 5.8 million m².
- Average asking rental rate: $511 per m² annually for Class A office spaces and $310 per m² annually for Class B office spaces.
- Vacancy rate: 16.6%.
- New constructions: Over 325,100 m² of office spaces are currently under development.
- Major office hubs: Brickell, Downtown Miami, Miami Airport, Coral Gables.
Miami's retail market
Thanks to its expanding populace, Miami's retail sector is thriving. In Q2 2021, there was a 20 basis point drop in vacancy rates from the prior quarter. Additionally, 2021 witnessed a 2.8% rise in rental rates from the preceding year, hitting $395 per m². This upward trend in rental costs continues. Here's a quick overview:
- Total retail space: 3.27 million m².
- Average asking rental rate: $395 per m² annually.
- Vacancy rate: 4.3%.
- New constructions: Currently, 39 retail projects are under construction in Miami, totalling 360,871 m².
- Major retail hubs: Miami-Dade, Palm Beach, and Broward.
Investment opportunities in Miami
Given the above facts, consider investing in the commercial sector in the following areas:
- Auto services: With the population increase comes a rise in the number of vehicles. This business always thrives in major cities.
- Retail spaces: Investments in retail, like auto services, are popular due to the growing population.
- Co-working spaces: Miami's resort-like atmosphere attracts freelancers and many business owners prefer a hybrid workday. Hence, the demand for co-working spaces over traditional offices is on the rise.
- RV parking: Florida, and Miami in particular, is popular for RV parks. People opt for RV living and holidays for various reasons: it's affordable, exciting, and unique. Several well-equipped RV parks have already been established in Florida.
Conclusion
The Sunshine State has been drawing investors' attention for years. But it's not just apartments in Florida that are appealing; the commercial sector also offers numerous advantages and excellent investment opportunities. If you're deciding where to invest, we recommend considering commercial properties that can provide you with steady capital growth.