How was the South Florida commercial real estate market in 2022, and what is coming in 2023? | Real Estate

South Florida’s commercial real estate market – in sectors such as retail, multi-family and industrial – is ending the year strongly.

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Thanks to the influx of companies moving to the area, especially Brickell, office rentals have been very strong. Tenants include hedge fund giant Citadel, Microsoft, WeWork and Blackstone, among others. Confidence in the office sector is most evident at 830 Brickell, a new building with 1 million square feet, where space has been rented for up to $130 per square foot.

Nationwide, the office sector has suffered as companies continue to use remote or hybrid work. According to WFH research, nationally, 58% of employees work full-time on-site, 13% are fully remote, and 29% are in a hybrid home-office work arrangement. Technology, financial and professional/business sectors currently have the highest percentages of employees working from home.

In contrast to the national scene, the South Florida office market had an exceptional growth period. While states like California and New York had the most people moving, Florida welcomes about 800 people a day, according to census data.

In the industrial sector, South Florida continued to rally on the back of strong demand, which absorbed new warehouse inventory. The industrial vacancy rate fell to a record 2.2%.

Vacancy rates should remain low, as approximately half of the industrial space under construction is already leased. Also, due to limited industrial land in Miami, rental rates are among the highest in the nation, with an average of $18 as opposed to the national average of $11. The industrial sector’s growth is due in large part to the exponential increase in electronics commerce in the last decade, since this trade requires distribution space with a warehouse.

Thanks to immigration, the Miami multi-family market has been one of the best in the US. Miami had a 7.7% annual rental growth rate, and, at the end of the third quarter, ranks as the fifth highest of any quarter on record. Rents stabilized in mid-2022 after the record high registered at the beginning of the year.

High rents have, however, had a big impact on affordability, resulting in people having to move to areas with lower housing costs. The high costs are the result of housing shortages, with demand outpacing available inventory. Borrowing difficulties and higher inflation worsen affordability.

Commercial real estate in Florida should continue to rank higher than other areas of the US. One reason is because the Sunshine State is a tax-free state. Also, in South Florida, the improvement of the port and its infrastructure will boost growth and commercial traffic, helping the industry sector.s

What will commercial real estate bring for 2023? Growth in most sectors is slowing. Inflation and higher borrowing costs are causing expenses to outpace income growth. Fear of recession, higher interest rates and higher insurance costs are a challenge for Florida real estate. However, robust migration, climate, taxes, and its business-friendly environment make Florida one of the best destinations for commercial real estate investment.

Fernando Echeverri, is a broker specializing in commercial investments properties, and works with Great Properties International. Contact: (305) 458-6101 or [email protected].