Why Companies Headquartered in Major Cities are Setting Their Sites on Sunny and Tax-Friendly Florida
By Metro 1
“I have a lot of friends who have moved to Florida in the past three months. Others are trying to figure out how to get here. Everything I’m reading says there’s a huge flood of movement to the suburbs of New York City and Florida right now during the pandemic.”
This quote, as reported by the South Florida Business Journal, comes from Layla Capital CEO Justin Cooper. A recent transplant from New York City, his statement captures in an anecdote what real estate data is consistently showing: COVID-19 has created significant migration patterns away from big cities and into more spacious areas of the country.
Cooper, who moved his family — and his company — to Boca Raton from Manhattan during the pandemic, went on to say in the interview, “For us, the move to Florida is permanent.”
Other companies who have made waves for recent relocation announcements include discount footwear chain Payless, which is currently undergoing a drastic restructuring in the hopes of a comeback. Where will the retail giant attempt this rebound from, which includes a greater emphasis on e-commerce? Not Silicon Valley. The company just closed a deal at 3050 Biscayne Blvd. in Miami’s booming Edgewater neighborhood.
Another California tech company, ShiftPixy, which helps restaurant and gig workers to find employment, is opening a second headquarters in Brickell. The expansion move comes amid plans to also open a ghost-kitchen concept in the South Florida area.
Why Florida? Don’t count the sunshine state out. In addition to having year-round warm weather (exceptionally ideal if you’re stuck at home during a pandemic and traditional indoor gathering places are closed), Florida has tax advantages that other major states with Tier 1 markets like New York and California don’t have. In Florida, there is no individual state income tax, and we have one of the lowest corporate tax rates in the nation at 4.458% (vs New York at 6.5% and California at 8.84%). The combination of financial incentives and a better quality of life than northern cities has been driving individuals and companies down to Florida, especially to South Florida.
This accelerated migration to Florida is nothing new. Between 2018 and 2019 Florida was the second-fastest-growing state by numeric growth with 233,420, just behind Texas, and 9th by percentage growth.
Florida has become more appealing to big companies in recent years as home to some of the nation’s fastest-growing urban centers, specifically Jacksonville, Tampa, and Miami. These warm-weathered cities are starting to compete with larger urban areas such as San Francisco and New York in terms of human resource talent and cultural offerings, but with real estate prices still far below competitor markets — both residential and commercial.
The pandemic has only accelerated this growth since companies are working mostly remotely and creating new office plans to adapt to the changes, allowing them to finally take the leap of relocating to Florida.
At Metro 1, we’re experiencing the relocation trend firsthand, with multiple deals and inquiries coming in from out-of-state and international companies looking to move to or open locations in South Florida. While many of the users have been technology companies or companies with “pandemic-proof” concepts such as the aforementioned ghost-kitchen, we’ve also seen signs of recovery in the hospitality and retail sector as well.
Normally, a commercial real estate buildout, whether for an office space or a new retail or restaurant concept, can take months — and in some cases over a year. Companies who have the capital have taken advantage of the downtime the pandemic has created to get ahead on renovations and begin those buildout processes. Especially now in the 3rd quarter of the year, when more construction companies have returned to the job site.
So what kind of spaces are relocating companies seeking in South Florida?
The Great Outdoors
We’ve said it before and we’ll keep saying it: everyone wants a piece of outdoor living — and working. Office spaces with courtyards, balconies, patios, backyards — virtually any square footage outside — are coming at a premium. In fact, we’re seeing many current office spaces look for ways to adapt their current footprints and concepts to allow for more outdoor space to work, eat lunch, or take a break. One of the primary benefits of Florida working is being able to step outside for fresh air almost any day of the year, without bitter cold and wind. Companies want to make sure their staff can take advantage of this key benefit.
Walkability
Despite the exodus happening from dense urban areas, companies that are making a city-to-city relocation are tending to look for office space in walkable areas. Again, humans are looking to spend as little time pent-up as possible post-pandemic. That also means pent up in a car for a long commute. And, with corporate downtown spaces in urban core neighborhoods such as Miami’s Brickell, Edgewater, and Wynwood priced significantly less than similar spaces in New York or Silicon Valley, our urban centers truly offer corporations the best of both worlds. If companies can achieve an urban living experience for their employees with more space, better weather, and at a lower price, they’re going for it.
Manufacturing and Logistics
A ripple effect of relocations to Florida has meant more people. And more people living requires more ways of serving them. Especially essential goods such as groceries, pharmacy items, and any items ordered online. Companies have their eye on the South Florida market for spaces conveniently located near urban centers with the necessary space and permitting for manufacturing and logistics. Need proof? Mother-of-all-logistics company Amazon herself just bought a vacant 77-acre site in south Miami-Dade County, where, as reported by Law.com, “the e-commerce giant plans to build a distribution facility — likely its biggest in South Florida.”
Flexible Leases
One thing that COVID-19 has universally changed, especially in the restaurant and retail sector, is the risk tolerance for leasing. New concepts, even those flush with cash, are hesitant to go all-in on brick-and-mortar locations when so much still remains unclear about our road to recovery. Landlords are finding themselves in a difficult spot, where tenants have most of the leverage. If they don’t provide shorter lease terms or flexible cancellation options, they are often finding themselves needing to come down on price or offer other concessions to tenants. Percentage rents are also becoming increasingly popular demands from tenants looking to hedge their bets against pandemic losses. While a tough road to take for landlords, many are left with few options. Those flush with cash will attempt to wait out the pandemic and seek quality users who can commit to longer terms. Those who are tighter on capital will have to find ways to adjust their standard dealings in order to survive.
Metro 1 is one of Miami’s top commercial real estate firms, specializing in South Florida’s Urban Core neighborhoods. Whether your company is relocating to Miami or you’re a building owner looking to sell or lease during these challenging times, we’d love to work with you. Our talented team of pioneers has continued to close deals throughout the pandemic, and we are experts at creating opportunities no matter what the market looks like.
