The Miami market is sizzling — largely as an unexpected result of the pandemic, which prompted individuals and businesses alike to migrate to the Magic City. Miami offers a diverse culture, sunny weather and no state income tax, and as COVID-related restrictions ease, the momentum in the market continues to grow.
For many cities across the country, the pandemic brought a plethora of challenges as people sought to leave the congestion and high prices of the major cities. With remote work and cheaper living options, Miami quickly became a haven for migrants throughout the pandemic, especially for northerners looking for an escape from cold winters. South Florida was named the number four relocation destination for Americans who moved during the pandemic, and trends indicate this momentum will likely continue. In fact, Miami in May saw a record-breaking 287 percent year-over-year increase in closed sales for townhomes and condos, while overall dollar volume for single-family transactions increased 85 percent, according to the MIAMI Association of Realtors. Median prices have increased for 37 consecutive quarters, spanning the past nine years.
ASPIRING TECH AND FINANCIAL HUB
While Miami has traditionally been viewed by some as a vacation destination, it has now turned into a primary residence option for many, or an attractive investment opportunity. Although rising home prices may not be appealing to homebuyers, they offer ample opportunities for rental property investors, since the market is hot and properties are in high demand. It comes down to simple supply and demand: Inventory is low, so home prices are climbing in response to the influx of interest from both individuals and businesses. It’s fair to assume the number of sales would have been even higher had there been more availability.
There is momentum for tech businesses as well. Over the past year, Miami attracted more businesses than either California or New York. Silicon Valley has been the epicenter of tech industry growth, but increasing rents, home prices and taxes have industry publications asking: What is the advantage for tech businesses to stay in Silicon Valley?
The attraction of Miami has no doubt been fueled by Mayor Francis Suarez’s enthusiasm to transform Miami into one of the next big technology epicenters. In social media exchanges with Tesla CEO and SpaceX founder Elon Musk, Twitter CEO Jack Dorsey and former Google CEO Eric Schmidt, among others, Suarez has expressed he is open to and excited for tech expansion into Miami. Tech businesses’ move to Miami consequently increased the need for tech employees: Miami has seen a 29 percent rise in tech job postings between the first and second quarters of this year, and the city leads the state of Florida for tech job advertisements overall, according to a CompTIA analysis of Burning Glass Technologies Labor Insights data.
Compared to other large metro cities, Miami also offers a very favorable tax structure for businesses and individuals. The friendly state and local tax environment acts as a driving force for people looking to relocate due to expanded remote work options, as well as for companies and individuals seeking relief from recent tax reform changes made in major cities such as Chicago, New York and San Francisco. With more businesses shifting to remote work, location is no longer a limitation for recruiting talent. This has led companies to reconsider the benefits of locating their headquarters and offices in expensive areas, such as New York and Silicon Valley. Companies relocating to Miami benefit from the low sales and property taxes and individuals benefit from no local taxes on personal income.
Tech companies aren’t the only ones making their way south. Established New York City investment firms are among those finding relief from tier 1 cities. Billionaire Paul Singer moved his $41 billion NYC hedge fund firm, Elliott Management, to South Florida, and other large firms are following in his footsteps. In fact, Leon Cooperman, CEO of Omega Advisors, has said he suspects Florida will soon rival New York as a finance hub.
Of course, as seen with the tech industry, as more businesses set down roots, the need for employees (and housing) increases, feeding into the limited supply and high-demand cycle that is driving up residential home values.
THE STRESS ON INFRASTRUCTURE
The easy access for international business and commerce also makes Miami appealing for international businesses. In the early 2000s, the Miami market was fueled by strong ties to Latin America, but now its reach has expanded to other international regions as well. Miami is a melting pot, and multiple factors combine to make it a perfect fit for an international company looking to expand. Miami is the second-largest city for international banking — sometimes called the “capital of Latin America”— due to its proximity and positioning as a gateway to the Latin American markets.
But the city’s success has come with some growing pains. As a result of in-migration, traffic has increased, further exacerbating Miami’s traffic congestion problem. As a result, Mayor Suarez has spoken with Elon Musk’s Boring Co. about a proposed two-mile tunnel under the city, in hopes of solving the traffic congestion problem. With the involvement of Musk, the project could be completed at a fraction of the cost of competitive offerings.
Much of Miami’s economy has historically been driven by tourism and that trend has not abated. Hotel occupancy has crept above 2019 levels, showing bookings at 101 percent of their level of 2019, which was a record year. Miami has ample options for domestic and international air travel and more tourists are trickling in as international and business travel resumes.
THE STILL-RISING SKYLINE
Florida’s population is expected to increase to almost 26 million by 2030, with South Florida leading the way, according to the Florida Chamber of Commerce. In fact, South Florida’s population is projected to reach 6.9 million in the next 10 years, increasing by more than 12 percent each year. The multilingual and multicultural population exemplifies why Miami is one of the United States’ most diverse cities and is helping to shape the talent pipeline for big businesses.
The Miami skyline, the nation’s third-tallest skyline behind New York and Chicago, is continuing to expand, with more than 20 skyscrapers over 300 feet high being built or planned for the city. This includes offices, condos and hotels with retail and restaurant space underneath. The expansion of Miami skyline projects will provide additional opportunities for homeowners and businesses looking to expand into the Miami market.
Miami is developing on a multitude of fronts and is rapidly rising as a world-class city with offerings for businesses and the technology industry, thanks to a business-friendly climate and an increasingly innovative and diverse population. As a result of in-migration, investors are confident the real estate market is more stable than ever, as demand continues to increase for office, industrial and residential spaces.
Ian Shapiro is a partner and co-leader in the national real estate and construction practice at BDO. He is based in Miami.