Miami's Dreams Of Becoming The ‘Silicon Valley Of The South’ Have Stalled

Miami Mayor and presidential hopeful Francis Suarez has long touted his city as a growing hub for tech companies, advocating for cryptocurrency expansion and personally recruiting the tech industry to Magic City. But despite talk of creating the “Silicon Valley of the South,” Miami’s tech sector hasn’t seen the booming growth the mayor and others predicted. 

Only two tech companies signed new leases in Miami-Dade County in the first half of 2023 for a combined 21K SF, according to a Bisnow analysis of leasing data from Savills, Cushman & Wakefield and Avison Young. The figures exclude expansions and renewals, and show that despite the record levels of venture capital funding seen during the last two years, momentum for a tech migration hasn't sustained.

In the first half of 2023, there was $1.5B in venture capital funding across 240 deals in South Florida, according to Savills. The funding represents a steep decline compared to the $9.8B invested in all of 2022 and the $8.5B invested in 2021 but falls in line with pre-pandemic years. 

“When VC funding is high, we have a more robust tech leasing environment,” said Marisha Clinton, the senior director for Northeast regional research at Savills. “When there’s a pullback in VC funding, then naturally tech leasing pulls back as well.”

Despite attempts from Suarez and others to position Miami as a top destination for tech firms, the region hasn't been able to keep up with better-established  tech hubs. South Florida is ranked 31st in CBRE’s Scoring Tech Talent 2023 report of top North American tech destinations, behind not only established locations like San Francisco or New York but also nontraditional tech markets like Detroit, Pittsburgh and Orlando. 

The region had 77,000 tech jobs in 2022, a 24% increase from 2017, but companies may have trouble filling those positions with local talent. While South Florida created 15,090 tech jobs from 2018 to 2022, the region only had 14,273 college graduates in tech fields from 2017 to 2021. Many of those graduates are leaving the area as well, with South Florida’s population of people in their 20s declining by 9.8% from 2016 to 2021, according to the CBRE report. 

“The talent question continues to be the No. 1 driver of investment decisions by companies,” Rodrick Miller, the president and CEO of the Miami-Dade Beacon Council told Refresh Miami last week. “Generally, I hear that Miami is a good market for junior talent, but that it’s much harder to find senior-level talent. And that increasingly, cost-of-living questions impact the ability to be able to recruit that talent to the market.”  

The Beacon Council and Suarez's office didn't respond to Bisnow's request for comment.

While overall tech leasing accounted for 319K SF of activity in Miami-Dade, Broward and Palm Beach counties for the first half of the year, there was only 127K SF of new leases signed when excluding renewals and expansions. 

The high cost of living in South Florida — the inflation rate is more than double what it is nationally and rents in Miami were up around 30% in June compared to the year before — could be leading some tech firms to look outside of Miami or the region.

Even for those firms that do decide to open locations in the region, leasing data suggests that the relatively less expensive Fort Lauderdale market is a more attractive option than Miami. New leasing in Broward County in the first half of the year accounted for 51K SF of activity across seven deals, more than twice as much activity as Miami saw.

When the software development firm Chetu was experiencing rapid growth during the pandemic, the firm’s leadership didn’t consider Miami as a potential destination, its CEO said.

The firm relocated from Plantation to Sunrise in Broward County in 2021, purchasing its new headquarters at 1500 Concord Terrace because the region offered “clear and direct access to the IT talent from Boca to Miami,” founder and CEO Atal Bansal wrote in an email.

This year, the firm expanded its footprint at the property it owns to around 55K SF.

“While Miami is a beautiful city with a lot of opportunities, we never considered it as a viable option because, in part, its expansion has led to skyrocketing rent and housing costs, and notorious traffic,” Bansal wrote. “Additionally, we have found that Broward is more stable than Miami-Dade with regards to business and we have seen that tech talent, on average, prefers a more suburban lifestyle.”

Kaseya, which has been headquartered in Miami since 2018, inked the only lease larger than 20K SF in Miami in the first half of this year, signing on for a 101K SF expansion at the Wells Fargo Center in the city’s downtown.

The deal, part of a broader growth plan for the company, brings Kaseya’s total footprint in Miami to around 250K SF after the firm leased roughly 107K SF in 2022. In exchange for creating as many as 3,400 jobs, Miami-Dade County agreed to provide the firm with as much as $4.5M in performance-based incentives in the next five to 10 years. 

The city’s deal with Kaseya came after at least two cryptocurrency companies that had been courted by Suarez to come to Miami failed to follow through on plans to open offices after the sector's crash last year.

Blockchain.com, a New York-based cryptocurrency exchange, agreed last February to take 22K SF on the top two floors of Cube Wynwd at 222 Northwest 24th St. after announcing plans in 2021 to relocate to Miami. But the company backed out of the deal just five months later, setting off a lawsuit between the brokerage firm that negotiated the lease and the property’s owner over the payment of a commission.

The cryptocurrency exchange FTX, which had secured the naming rights in June 2021 to the arena where the Miami Heat play, announced in September that the firm would relocate from Chicago to Miami. The firm was set to move into a space at 1450 Brickell Ave., but went bankrupt in November and its founder, Sam Bankman-Fried, has been charged with fraud, bribery and conspiracy. He's pleaded not guilty.

After the collapse of FTX, the arena was briefly renamed Miami-Dade Arena before Kaseya agreed to pay $117M over 17 years to rename it the Kaseya Center.

While Suarez remains a cryptocurrency advocate — his campaign for president is accepting donations in bitcoin — the sector is no longer providing much of a boost to leasing activity in the region. Instead, advocates for Miami’s economic growth are trying to position the city as a nascent hub for a broader range of tech firms. 

“Our tech sector is still infinitesimal in comparison to some of the other top markets — and that’s OK,” the Beacon Council’s Miller told Refresh Miami. “We have to ask ourselves: What size is attainable for us, and how do we actually grow?”