Florida’s economy just keeps churning out jobs and growth. Because job creation is a crucial ingredient in a healthy office market, we’ve been cheering on Florida’s continued outperformance.
The Sunshine State, it seems, is changing the old boom-and-bust narrative. State labor officials announced in late September that Florida’s seasonally adjusted unemployment rate was just 2.7% in August 2023. That was well below the national average of 3.8%.
Once upon a time, it would have been unheard of for Florida’s unemployment rate to dip below 3% in the dog days of summer. The state seemed to empty out during the hottest time of year. Snowbirds closed up their winter homes, restaurants boarded up. Employment numbers usually gained momentum in September as school started up, then hit full stride in December, as retailers ramped up hiring for the holidays. From that point, unemployment stayed low throughout the tourist season, only to tick up again in May and June. Not even official seasonal adjustments could hide the predictable ebb and flow of Florida’s hiring patterns.
Now, though, Florida’s labor market has moved to a new place. Florida can have rock-bottom unemployment rates in a historically slow time of year for this reason: The Sunshine State’s job market has shifted away from its old model of tourism dependence. Tech jobs have moved here. Wealth migration has proven permanent. Florida’s beaches, theme parks and golf courses remain a draw for visitors, of course, and tourism remains a key part of Florida’s success — but leisure jobs no longer dominate the state’s economy.
The old days of Florida as a low-wage, low-skilled labor market are receding in the rear-view mirror. Now, Florida is transitioning into a year-round economy. Long-time Floridians gripe that they no longer get a break from traffic during the summer. Here’s a more specific data point: Florida wages finally are catching up with those elsewhere in the U.S. In the first quarter of 2023, the average wages in Miami-Dade and Palm Beach counties topped $1,500. That was notable because the average national wage was $1,465, according to the Bureau of Labor Statistics’ County Employment and Wages report. For decades, even the highest-paying counties in Florida trailed national wage levels.
Drawn by the combination of warm weather, a welcoming regulatory climate and a reasonable tax burden, financial firms from New York and Chicago and tech companies from California have been flocking to Florida. During the pandemic, a trickle turned into a torrent. The result is sustained momentum for the job market. The U.S. Labor Department reports that Florida’s one-year pace of job creation through August 2023 was a robust 2.8%. While Texas led large states with a 3% growth rate, other large states – including California, Illinois, Michigan, New York and Ohio – came in with numbers well below 2%.
Florida’s ongoing economic boom
The entire U.S. economy has performed well coming out of the pandemic, but Florida’s numbers are especially strong. The state’s gross domestic product is nearly $1.5 trillion, according to the U.S. Bureau of Economic Analysis.
The state’s 3.5% growth rate in GDP from the fourth quarter of 2022 to the first quarter of 2023 outpaced the national average of 2%, and other major states. Only Texas was close, at 3%. The other usual suspects – California, Illinois, Michigan, New York and Ohio – experienced GDP growth rates well below 2%, the government reported.
All of this comes as Wall Street and Silicon Valley have begun to view Florida not just as a place for a vacation or a business trip but as a year-round destination. From the perspective of the office market, this changing mindset is why Florida office markets have managed to hold strong, even as office occupancy deteriorates in many other parts of the country.
Population inflows and job growth are important drivers of office demand. No doubt you’ve read the headlines about defaults and rising vacancies in many U.S. cities, where vacancy rates of 30% aren’t uncommon. Rest assured that Tampa’s office market is still thriving. None of this is to say, however, that Florida is immune to the volatility in national capital markets.
New tenants are moving in, and office vacancy remains low, especially in Class A buildings in downtown markets. As of the second quarter of 2023, office vacancy was 11.3% in the Tampa central business district (CBD) and just 4.7% in St. Petersburg’s CBD, according to Avison Young. Suburban markets, by contrast, had a vacancy rate of 20.4%.
As employers and employees gravitate toward amenitized buildings in bustling downtowns, Feldman Equities remains laser-focused on our strategic sweet spot. We reposition struggling office space, and we build new space in downtown markets. The trend is clear: Employers and workers are gravitating toward Florida’s combination of warm weather, low taxes and common-sense regulation. And once they’re here, they want to work in vibrant downtowns, with plenty of access to restaurants and entertainment.