Although commercial real estate and property isn’t typically what we deal with, we have worked on a number of projects in the commercial real estate market. With that in mind we worked with a partner to craft the following on the state of Florida’s commercial real estate market in the second quarter of 2024.
PROS AND CONS. FLORIDA IS A MIXED BAG- READ ON
Pro. 6 of the top 10 US cities with the fastest growing home prices are in Florida. Median price in Florida is now $420,000. Great weather, no income tax and a strong state economy is why Florida is still one of the top in-migration states in the US. Nearly 500,000 people left Florida in 2022 but 700,000 moved in! These days, two homebuyers are moving into Florida for every one that moves out. Home prices are up 60% since 2000.
Con. Why are some people leaving? Soaring costs, culture/political wars, hurricanes, high cost of homeowners insurance- the average premium in Florida is $6000 and is up 42% from last year. According to the United Way, 46% of Florida households struggle to survive financially (to pay for food, rent, transportation, etc.) and Florida is among the 20 most financially distressed states. Wages have grown, but so have costs. Nonprofits in the Tampa Bay area are reporting more seniors are needing financial assistance.
Pro. 2023 was a record year for Florida real estate- 1 in 5 international home sales are in Florida- $12.6 billion in sales to international buyers! Investment in commercial real estate is strong and poised for growth. We have a pro-business environment, strategic location (think seaports), favorable taxes and a diversity of commercial property types.
Con. Pay growth in Florida slows- Was up nearly 14% over the last four years, but wage growth has dropped each month in 2024. Florida ranks 42 out of 50 states for median pay. Job growth in Southwest Florida (Sarasota to Naples) has also slowed with only 8300 jobs added last year and the unemployment rate is climbing, up 1/2% since April of last year- attributed to the rise in the local labor force which is up nearly 7700 (1.1%) from a year ago.
Pro. The June unemployment rate in Florida is only 3.3% vs 4.1% nationally (highest US rate since November, 2021).
Con. Florida has one of the highest rates of job quitters in the US.
Pro. But with over 550,000 job openings in the state, it may be easier for those to find a new job.
Pro. General revenue from tax collections was 4.2% higher than expected in May. This revenue plays a major role in funding education, health care, prison programs, etc. (all quality-of-life issues). If Amendment 3 passes this fall, to legalize the recreational use of cannabis, that could add $200-$400 million in additional tax revenue annually.
Pro. Florida real estate developerAlliance Companies acquired a HUD-backed loan to enable it to build 280 moderate income ($88k/year per HUD) apartments on 18 acres in Fort Myers to be completed in 2026. The land was purchased 6 years ago but construction was delayed due to Covid-19.
Pro. Aviation Precision Technology, an aerospace and aviation component manufacturer, just signed a 5-year lease for 45,570 square feet of industrial space in Fort Myers (that’s a big lease!).
Con. Multifamily vacancy rate in Fort Myers is over 13% due to overbuilding (supply/demand imbalance) and there are another 8000 units under construction now. This has taken a toll on rental rates, with asking rates down 6% since this same time last year, with an average rent of $1830/month.
Pro. Naples’ industrial vacancy rate is only 1.5%, one of the lowest vacancy rates in Florida. Fort Myers has one of the lowest retail vacancy rates in Florida at 2.9% (April, 2024).
Con. Fort Myers’ industrial vacancy rate in May was over 6% (the highest in 9 years, 1.7 million square feet is vacant) due to a robust pipeline thanks in part to Hurricane Ian recovery (Ian did $117 billion in damage). 6.3 million square feet of industrial space has been completed since the end of 2019 (think supply chain shortages). 2.7 million square feet was added last year and another 1.4 million square feet is under construction. This additional space is expected to keep industrial vacancy rates elevated for a few years. FedX is closing four facilities in Southwest Florida-a total of 110,000 square feet and the loss of 220 jobs.
Pro and Con? The median price for a Naples area home was up 8% year-over-year in May, to $650,000. That’s great if you already own, but not if you are trying to buy. Inventory was up 67%, new listings up 18% and closed sales were down 12%. That large increase in inventory may signal lower appreciation in the near term and may make it a bit easier for those looking to buy.
Pro. I am always willing to assist you with any of your commercial real estate needs. Just reach out!
