Financial Services Firms Create Snowball Effect For CRE In The Sunshine State

It is estimated that nearly 1,000 new residents move to Florida every day, enticed by low unemployment, a year-round warm-weather lifestyle and a favorable tax climate.

Businesses are noticing this trend and following suit. South Florida in particular is a magnet for financial services firms that are moving some or all of their operations from colder-weather cities.

Firms whose employees are trading their winter parkas for beachwear include Citadel — which was formerly located in Chicago and is now leasing 90K SF of office space in the Brickell neighborhood of Miami — and Goldman Sachs, which is leasing nearly 35K SF in Downtown Miami, according to data collected by JLL. 

Longtime observers of the commercial real estate scene in South Florida say this migration is not necessarily new, but it appears to have reached a critical mass in the past couple of years.

“We had prominent financial executives and their operations moving here long before Covid,” said Adam Bernstein, a JLL executive vice president based in Miami. “However, Covid certainly opened the floodgates and rapidly increased the pace at which the companies and people are moving here.”  

JLL in February reported that land sales in South Florida/Miami reached $3.2B in 2022, up nearly 50% from the previous year. That was in sharp contrast with sales across the country, which declined by 10% overall.

“We always talk to people about why they're moving their businesses here and the obvious answer is because of tax reasons and the favorable business climate that we have in Florida, compared to political situations in the Northeast, Chicago and on the West Coast,” said Steven Hurwitz, JLL managing director and South Florida agency lead.

Those transplants also mention South Florida’s diverse and educated labor pool. People are a particularly valuable resource in financial services, where skilled and educated workers are needed to keep pace with competition and technological advances, according to a new JLL report, “The Top Five CRE Trends Shaping the Financial Services Industry in 2023.”

“Real estate investors talk about South Florida being a good place to attract and retain the best talent,” Hurwitz said. “A lot of young people who want to be down here are fleeing other places.”

Hurwitz estimated that these and similar trends accelerated the region’s growth “by a decade” during the pandemic.

According to data compiled by JLL, more than 20% of Miami residents have a bachelor’s degree or higher, while the share of those holding four-year college degrees in Palm Beach — sometimes called the “Wall Street of the South” — is even higher at nearly 25%.

Further growing the Sunshine State’s brain power, Florida universities are minting nearly a quarter-million new graduates annually, and about 75% stay in the state after earning their degrees.

Hurwitz recalled asking representatives of a San Francisco company about why it was moving to Miami Beach. Their answer: a quality workforce that is less expensive than the Bay Area’s.

Bernstein added that the initial work-from-home environment mandated by companies early in Covid worked to the Miami area’s benefit. 

“People moved here on a temporary or part-time basis and quickly realized, ‘Hey, I'm performing at a same or higher level than I was in my former city and can maintain my career trajectory — and I get the benefits of tapping into an exceptional lifestyle,’” Bernstein said. “I think that's when everything changed and people decided to stay here full time, and that created a snowball effect.”

Literal snowballs might be rare in the area, but the wave of financial services companies setting up shop in South Florida has created momentum of another sort: a snowballing migration of law firms, technology consultants and other professional service providers.

“When a company such as Citadel decides to move their headquarters to Miami, there's a wave of their clientele and support resources that comes along with that,” Bernstein said. “It's not just them.”

The migration to Miami exemplifies another trend that JLL identified in the financial services industry: the diversification of firms’ locations to places outside of traditional business hubs. Only, in South Florida’s case, some firms appear to be moving out of the old hubs almost entirely.

Hurwitz noted that the Miami region used to be subject to an intense boom-and-bust real estate cycle, particularly in multifamily. Condos would be built near the peak of a cycle, demand would fall and then the units might sit empty until the pattern repeated.

“We're very much not a boom-and-bust real estate economy anymore,” Hurwitz said. “Miami and South Florida are more diversified today, with a more diverse demand base of office users, and I think that helps make us much more resilient than we were. In 10 years, even though growth may be more moderate than we've seen in the last few years, we will still be going in a really exciting direction.”

This article was produced in collaboration between JLL and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.