What is Commercial Real Estate?
Commercial Real Estate (CRE) can be defined as any property used for purpose of business or to provide workspace. In comparison with residential real estate, CRE provides income for investors. Income sources including, but not limited to, rent, fees, proceeds from sale, tax benefits etc.
The different classifications of CRE are Leisure (hotels, public houses, restaurants, cafe, sport facilities etc. ), Retail (stores, shopping malls, shops, office), Healthcare (medical centers, hospitals, nursing homes), Multifamily (apartments). Commercial real estate also includes lands which have the potential to bring income in the path of the future.
Why Commercial Real Estate in Florida?
The reasons why South Florida is one of the best commercial real estate market for investors are Florida’s fiscal stability & economy, population & business growth, competitive workforce, growth in the retail market, business incentives, foreign investment in CRE, investment trusts and developed infrastructure. In addition, South Florida provides cultural diversity due to the closeness to South America and Caribbean Islands, and incoming tourists all around the world. Florida is #1 for foreign homebuying for 12th straight year accounting for 22% of all the international purchases following by California by 15%. The Sunshine State is dominating the market in terms of foreign investors.
According to US News & World Report ranks Florida:
#2 in terms of fiscal stability,
#3 in education and
#9 with its economy nationwide.
These rankings make Florida an attractive hub for both domestic and global investors. Especially South Florida leads the commercial real estate market supported by continually solid returns, consistent population growth, tourists from all around the world, tax-friendly laws, and innovative development projects.
Besides the advantages mentioned above, Florida’s transportation opportunities support the active international trade and foreign direct investment to the state. Florida is ready to accommodate requirements in terms of transportation as it has airports, seaports, highways, and railways.
Florida is #2 in terms of infrastructure with its 15 deep-water seaports, 19 commercial service airports, 2 spaceports, 12,000+ miles of highways and nearly 3,000 miles of freight rail track routes and Miami leads Florida in infrastructure.
Effects of Covid-19 on CRE Market in Florida
2019 was a fruitful year for Florida’s growing CRE market. Forbes listed several Florida cities including Fort Lauderdale, Orlando, and Jacksonville as the best bets for real estate investors in 2019. In 2020, despite the Covid-19, a pandemic no one saw coming, an epidemic that became a global showstopper and continues to expand as we speak, substantial developments took place. South Florida real estate market remained strong during the pandemic, and growth in the region has continued because the market is benefiting from low-interest rates.
During Covid-19, people acknowledged the importance of living in roomy apartments or houses which surrounded by open-space where they do not have to worry about social distancing. Florida, “the Sunshine State”, satisfies all in one – big living spaces for every budget, beautiful warm weather throughout the year, open spaces everywhere and priceless beach. Research show that, people fled away metropolitan cities such as New York during Covid-19. One interesting study indicates that, in April 2020, mail-forwarding requests from Manhattan and Brooklyn residents were substantially high. Before Covid-19, New Yorkers used to come Florida for vacation or to buy a second house, now they are coming to live and become a Floridian! The reason is so simple: you can save more money in Florida – there is no state or local income tax and houses are cheaper!
There is a correlation between commercial and residential real estate investment. Overall, both developments will complement each other, people will follow jobs or vice versa. In other words where there is a residential real estate development CRE development will follow.
According to the Miami-Dade Beacon Council, they are working closely with a variety of companies looking to relocate or expand in Miami-Dade County, especially technology companies. The largest TAMI (Technology, Advertising, Media, and Information) companies have their eyes on Wynwood, Spotify inked a lease to house its South Florida headquarters in Miami’s Wynwood neighborhood. Tech firms including Facebook, Apple, Google, Uber and Chewy, take up nearly 3 million square feet in South Florida. Attraction to Florida is not just limited to tech companies, investment firms, insurance companies, hedge funds and family offices have also been making the move.
There are countless reasons why people choose to live, work, and invest in Florida. The Sunshine State offers an almost ideal work-life balance with excellent job opportunities. Forecasts show that the CRE market will continue its growth even though the near future might be a little rocky.
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