HOW THE SHIFT AWAY FROM MAJOR CITIES MAY IMPACT SOUTH FLORIDA CRE

MAJOR URBAN CENTERS HAVE ALWAYS ATTRACTED CORPORATE HEADQUARTERS, BUT SMALLER CITIES ARE NOW COMPETING FOR THESE FIRMS

The COVID-19 pandemic has changed many things in society. People are going out less, travel (while bouncing back) is curtailed, and the remote workforce is flourishing. We also saw a shift to the?suburbs ?for many people early in the pandemic. Social?distancing ?is challenging in urban areas, big cities are expensive, and moving to less-populated regions made a lot of sense when people could work from anywhere.?

This shift goes beyond residences, though. Corporate headquarters are setting up in smaller cities to avoid congestion and, crucially, the costs of buying or leasing space in downtowns like New York, Chicago, or San Francisco.

Being in a major metro area simply isn’t necessary for many companies anymore. Remote workers and meetings are now the norm for organizations, and it’s simple enough to travel when face-to-face interaction is essential.

We see some of this shift in South Florida, too. It’s less critical to rent space in the office district of Miami when there are plenty of great options in places like Palm Beach and Broward Counties. Here’s a look at how this trend may be opening up new CRE opportunities in smaller cities.

THE COVID EFFECT

COVID-19 might not be responsible for changing?everything?about the business landscape—it?accelerated some trends ?that were happening anyway. There was already a significant movement toward working remotely in the United States, for example.

Nevertheless, the pandemic hit the fast-forward button, and we now have a vast remote workforce. With this paradigm comes the opportunity to live in the far-less-expensive suburbs without dealing with a long commute.??

But what about now that remote workers are called back to the office? Many corporations have perceived the prevailing winds and recognize adaptation is necessary to retain talent. One solution is permanent remote work arrangements. Another is hybrid arrangements, along with less-expensive offices in smaller population centers.?

This trend has been building for decades with the shift away from high-cost cities like New York and Chicago and into smaller markets like Denver, Austin, and Charlotte. Unless you’re a massive corporation, setting up in New York might not make sense financially. And unless you’re an executive making big money, living in NYC is often unattainable.?

In South Florida, Miami has always been the region’s central commercial hub, so it makes sense for many area headquarters to remain in the city. However, we see more companies look at offices beyond the Magic City, as well.

PALM BEACH COUNTY

Some businesses searching for corporate headquarters and other significant office space look to Palm Beach County. Its Business Development Board is actively attempting to attract?corporate headquarter ?relocations, touting a low cost of living, an ideal climate, and a pro-business environment that help it stand out from other locations.?

Of course, Palm Beach also offers the same benefits as other spots in Florida, including corporate tax breaks and zero personal state income tax. The area may see even more significant growth in commercial office space if the shift from major cities continues.

BROWARD COUNTY?

The Greater Fort Lauderdale area is also pushing to become a corporate headquarter hub, and it already boasts nearly?200 companies ?with “corporate, division or regional headquarters.” The local government is also actively promoting the benefits of the area and making its play to attract more companies. As these areas continue wooing businesses, there should be significant opportunities for CRE investors.?

Remember, no other place in the country matches Florida’s combination of climate, lifestyle, and low taxes. Florida’s smaller and mid-sized population centers also provide even lower rents and purchasing prices for corporations. But could Broward County and other attractive areas of SoFlo steal big business from Miami? It’s entirely possible, given the cost savings.

THE FUTURE OF CRE IN SOUTH FLORIDA

We don’t know how?durable this trend ?is yet, but it’s undoubtedly worth monitoring. Will the move away from urban areas be permanent, or will many people and businesses miss the big city life that wasn’t possible during the pandemic? Only time will tell.

Morris Southeast Group can assist as you watch South Florida’s?CRE trends ?and manage your portfolio. We’re here to provide advice, due diligence, and exceptional investment, leasing, and property management services.

The team at?Morris Southeast Group ?is available at 954.474.1776 to answer your Florida commercial real estate questions. You can also reach out to Ken Morris directly at 954.240.4400 or?[email protected] .

You can read the original article at https://www.morrissegroup.com/move-away-from-big-cities-palm-beach-broward-cre/