The United States is home to a diverse and thriving commercial real estate (CRE) market, with each state offering unique opportunities and challenges. Among those states, Florida has distinct characteristics that set its CRE market apart from the rest of the country.
The Sunshine State’s economy (including our Tampa and Sarasota markets) has experienced significant growth in recent years. This has attracted businesses and investors from around the globe. The strategic geographic location, favorable tax policies and business-friendly environment contribute to this economic prosperity. As a result, commercial real estate in Florida benefits from high demand, making it an attractive investment option.
Climate and Tourism
Florida’s status as a tourist destination creates a robust market for CRE. The state’s world-class theme parks, beaches and cities attract millions of visitors annually. Consequently, the hospitality sector demands are high. There’s always a need for hotels, resorts, restaurants and retail spaces, presenting a host of lucrative opportunities.
While Florida boasts abundant sunshine, it also faces the challenges associated with natural disasters, particularly hurricanes. Commercial real estate investors always need to factor this in. Adequate insurance coverage is critical, as are building resilience and disaster preparedness.
High Population Growth
Florida’s population has been growing rapidly, driven by such factors as favorable tax policies, a lower cost of living compared to other states and an influx of retirees. This growth fuels increased demand for commercial real estate, particularly in the retail, healthcare and residential sectors. Investors leverage this trend by strategically targeting areas with strong population growth and unmet market needs.
Competitive Market and Pricing
Florida’s CRE market is highly competitive, particularly in major cities like Miami, Orlando and Tampa. The demand for prime locations drives up property prices, making it challenging for investors to find affordable opportunities in highly coveted areas. Careful market analysis, due diligence and a proactive approach are essential to navigate this competitive landscape successfully.
Regulation, Tax Policy, and Legislation
The state boasts a favorable tax environment for businesses and individuals, with no state income tax. This tax advantage, combined with business-friendly policies and incentives, stimulate economic growth by attracting entrepreneurs and corporations.
Recent legislation also helps make Florida a good choice for CRE investment and development. Signed in March 2023, the Live Local Act is designed to promote affordable housing by expanding development opportunities and funding low-interest loan programs.
The law goes into effect July 1, 2023, and expires Oct. 1, 2033. It allows developers to bypass public hearings and build the maximum number of units on properties zoned for commercial, industrial or mixed-use. The developers, in return, must set aside 40 percent of the units for households with moderate incomes for the next 30 years.
The Live Local Act also provides sales tax rebates on building materials and removes rent restriction policies that can discourage development.
Investing in commercial real estate in Florida offers a range of advantages, including a thriving economy, a booming tourism industry and a favorable tax environment. However, it’s important to navigate such challenges as natural disasters, competitive pricing and regulatory considerations. That’s why it’s so important to have a team of advisors knowledgeable about the CRE landscape here. SVN Commercial Advisory Group can help you capitalize on Florida’s commercial real estate opportunities while effectively managing the associated risks.