The global pandemic has spawned many questions regarding the impact on the world, and the future of the real estate market is a question that has almost everyone speculating. As social gatherings begin to resume once again, it seems the topic on everyone’s lips is the runaway pace of the market, despite the cloud of uncertainty hovering above.
From seeing residential sales come to a grinding halt at the start of the pandemic, to watching the professional class abandon their offices by the millions and grow accustomed to working from home; and the temporary shutdown of retail centers, restaurants, and entertainment complexes, the real estate market has been anything but predictable.
Florida, in particular, has seen impressive growth since the pandemic emerged. With some of the most relaxed restrictions in the entire United States, tourists have been flocking to Florida in droves, and a cohort of companies have been quietly resettling in the state.
While much of these plans were in motion well before the pandemic due to Florida’s favorable tax environment and year-round good weather, the sheer volume of new inhabitants is proof that Florida’s image as a retirement community is dwindling: It is estimated that up to 900 people a day are moving to Florida in 2021, as technology startups, private equity firms, and publicly held companies move to Florida this year.
Convening a group of real estate experts specializing in residential, retail, office, and industrial sectors for the ULI Florida Summit—held virtually this year after being forced to cancel its 2020 edition—the outlook for Florida real estate was nothing short of positive.
“It’s an extraordinary time to be where we are. You don’t have to wait to move to Florida, you can do it now and get involved in the community and discover how truly great Florida is,” says Nitin Motwani, the CEO of Miami Worldcenter. He was joined by Jay Jacobson, president and CEO, Eden Multifamily; Jami Passer, Chief Investment Officer, EDENS; Fritz Wyler, managing director, Prologis; and Alan Kennedy, managing director, Hines in a conversation moderated by Bilzin Sumberg’s managing partner Al Dotson.
Certainly, one of the biggest questions on everyone’s minds has been the future of the office market. As companies like Google, Amazon and Facebook have expanded their work from home policies and have made going into the office entirely up to the employee, many are speculating whether most of the world’s largest companies won’t follow suit. What’s more, many employees are reluctant to go back to the office, after more than a year of working more flexibly. However, according to Kennedy, the office is definitely coming back—and we’re seeing companies get creative with their spaces to get workers excited about their return.
“We’re starting to see more and more tenants post plans for coming back to work in [the fourth quarter of 2021] or beginning of next year,” said Kennedy, citing that corporate culture, mentorship, and staff development have suffered greatly across user groups. “Companies are focused on restoring culture, being in close proximity to universities, and thinking about creating flexible spaces.” He points to Hines’ development of the T3 office building in Fort Lauderdale, which incorporates timber, transit, and technology to create a warm, organic, and convenient environment that has attracted companies like Amazon.
Motwani also reports that nearly 30 new office tenants have signed leases for his Miami Worldcenter, with triple that many in the works. Driving the appeal is its proximity to the Brightline Rail that offers significant connectivity between Miami, Fort Lauderdale and West Palm Beach. Motwani is especially excited that the multifamily rental units are 100 percent occupied, a trend that Jacobson echoes might be here to stay.
“Multifamily right now, I’ve never seen anything like it,” said Jacobson. “Occupancies are 97 percent and rental rates are increasing throughout every kind of class we own, develop or manage. And I don’t even think we’ve seen anything compared to how busy it’s going to get when South America opens.”
Another area experiencing a major boom? Industrial real estate is in high demand as online sales have skyrocketed during lockdowns. For Wyler, that means addressing what their clients view as major pain points for their continued growth. “They’ve had to reconfigure the supply chain dramatically, they need technology and robotic capabilities, and proximity to their customers,” he says. While the boom in e-commerce may suggest that retail is on the mend, even that sector has seen its own renaissance as some consumers start looking to retail environments as a way to escape their pandemic malaise.
“We see retail being used for many purposes,” said Passer. “Consumers will still focus on convenience, experience, and diff ways to transact on their own terms. And we’re seeing a big alignment around wellness; people want an environment that feels healthy and want wellness to be a big part of their life.” Motwani and Jacobson report similar trends in the multifamily sphere, and tout contracts with vendors with BlueZone air purification systems and new projects prioritizing light and exterior space as approaches to meeting this demand.
There are some factors, however, that may not bode so well for a continuation of this unprecedented growth. Land remains a major issue for most developers, as does the instability and unpredictability of capital markets and fiscal policy. Jacobson and Wyler both have two workarounds for the land issue, which involves creating higher density projects that accommodate the dominant trends in wellness and e-commerce shopping.
“We’re looking at developing lower density multifamily units; what we’ve come up with is a design that we call a cluster design,” says Jacobson. “They’re one story and there’s no one above or below you, you have light coming in from all elevations, you’ve got this expanse of perceived volume and space, your own private backyard, and people are willing to pay 200 to 400 dollars per month more to have that exterior space.”
“We’re trying to create land in every way, from lakefill properties, to repurposing old offices and old malls, to try to generate land to supply goods for consumer demand,” says Wyler. “We are also densifying things—we’re working on something over at the [Miami] airport that will be vertical with mezzanine levels and will yield four times the coverage of its actual square footage, creating 800,000 square feet on what used to be a 200,000 square-foot developable site.”
The question remains whether the end of the pandemic could bring with it a major disruption in the market’s current pace—particularly as companies get called back to the office. But if the amount of companies relocating to Florida is any indication, then the Florida real estate market might remain extremely competitive. Said Jacobson: “The influx of people into Florida, especially southeast Florida, has been incredible—and I don’t see it letting up anytime soon.”