South Florida's real estate industry has been buzzing for the past couple of years, with hopeful speculation that the tri-county region might become the next Big Tech mecca, popularly dubbed as the "Silicon Valley of the South." Venture capital firms have opened offices in Wynwood, and politicians like Miami Mayor Francis Suarez have publicly shown support by tweeting things like "How can I help?" in reference to Bay Area firms moving to Miami according to The Real Deal.
How can I help? https://t.co/hIC1k8ka1i
— Mayor Francis Suarez (@FrancisSuarez) December 5, 2020
However, contrary to the hype, office leasing by tech companies in South Florida hasn't matched the region's reputation as a magnet for these firms. Tech leasing has been generally on the decline since 2021, and by some metrics, has failed to surpass pre-pandemic levels. Robert Orban, a Miami-based tenant broker with Cresa, commented on the situation, saying, "In my experience, we are anecdotally hearing of it [tech firm demand], but not seeing a lot of it."
Meanwhile, billionaire tech investor Peter Thiel recently expressed concerns about relocating operations from Silicon Valley to Florida due to the rising housing costs in the Sunshine State, as Hoodline reported. Thiel pointed out that buying a house in Miami today requires paying four times as much for a monthly mortgage than it did just three years ago – a significant increase that may be dampening the migration plans of tech professionals.
An analysis from Bloomberg revealed that the number of million-dollar ZIP codes in the Miami area more than doubled since the end of 2019 through 2022, due to increased demand for luxury properties. The rising cost of living in Florida is stymieing the state's prospects as an affordable alternative to Silicon Valley for tech professionals, venture capitalists, and other business owners seeking benefits such as the state's tax incentives and comparatively lower regulatory barriers.
Although some brokers dispute the data showing that tech leasing has fallen below pre-pandemic times, they do acknowledge a recent slowdown. This cooling is largely attributed to work-from-home and hybrid-work trends, as well as macroeconomic factors such as higher costs of capital and a general economic slowdown.
In 2019, tech leases in South Florida represented 7 percent of office deals and 11.7 percent of office square footage leased, according to an analysis by CompStak. However, in 2022, tech leasing represented only 5.5 percent of office deals signed and 6.9 percent of total office square footage leased as per CompStak. Software company Kaseya's recent lease of 101,000 square feet of office space at the Wells Fargo Center in downtown Miami is considered a "massive anomaly" for South Florida's office market, providing a "false narrative" about market activity, according to broker Jeremy Larkin of NAI in Miami.
Larkin attributed the Federal Reserve's interest rate hikes and the cooling economy as major factors that have tempered appetite among family offices and venture capital firms to back tech companies, which are perceived as high-risk investments. It may take a few years, or even many years, for South Florida to catch up to cities like Boston or Austin when it comes to attracting and retaining tech firms at a large scale.
