In Florida, we’ve had a front-row seat for a paradigm shift in the balance of economic power. The Sunshine State has benefitted from a near-exodus of tech companies and financial firms moving out of California and New York.
For office landlords in the Tampa Bay region, the wealth migration has been a welcome one. To cite one example of the trend, in 2021 ARK Investment Management moved from New York City to St. Petersburg. More confirmation came in 2022, when Jeffrey Gundlach relocated DoubleLine, his company with more than $130 billion in assets under management, from Southern California to Tampa.
Tampa hasn’t been the only destination for out-of-state investment firms that opted for changes of scenery during the pandemic. Billionaire Ken Griffin moved his firm, Citadel, from Chicago to Miami. And Icahn Capital Management relocated its headquarters from New York City to Sunny Isles Beach a town near Miami.
Bloomberg News recently quantified the migration trends. It reported that from early 2020 through March 2023, more than 370 investment companies managing $2.7 trillion in assets switched their headquarters to different states. Most of the wealth managers that moved departed high-tax, high-cost-of-living cities in the Northeast and on the West Coast for new homes in Florida, Texas and other Sun Belt locations.
The map below illustrates how different States have fared in relative increases or decreases of assets under management (AUM) of firms leaving or entering the State:
By Bloomberg’s calculations, Miami gained 63 new firms, while Palm Beach added 37 and Tampa Bay landed 35. Florida saw an additional 800 secondary offices set up by firms, more than any other state, Bloomberg reported. See map below that illustrates where in Florida investment firms landed:
Economic developers in Florida are playing to this trend. The Business Development Board of Palm Beach County recently trademarked the term “Wall Street South,” a tagline it’s using in ad campaigns aimed squarely at Wall Street executives.
What changed? The pandemic
Students of the Sunshine State economy will note that this isn’t the first time Florida has pitched itself as a lower-tax, lower-cost alternative. For decades in the 20th century, the state grew by attracting budget-minded retirees from the Northeast and Midwest.
More recently, Florida leaders have tried to raise the state’s economic game by recruiting high-value jobs. In the early 2000s, then-Gov. Jeb Bush spearheaded a billion-dollar bet on biomedical research that featured subsidies to nonprofit labs such as the Scripps Research Institute, the Max Planck Institute and the Torrey Pines Institute for Molecular Studies.
In 2015, another Florida governor, Rick Scott, went to California to make a pitch to business owners there. Print ads supporting the recruiting effort exclaimed, “Florida Is Ready!”
Those efforts bore some fruit, and Florida continued to grow. But it wasn’t until the pandemic that the rest of the world really decided to take Florida seriously – not just as a vacation destination but as a place to do business. Miami Mayor Francis X. Suarez has said his city is transforming into “a capital of capital.” In 2021, Suarez paid for a billboard in San Francisco that read, “Thinking of moving to Miami? DM me.”
While those pitches didn’t seem so tempting before the pandemic, after the pandemic they suddenly found the strike zone.
Florida’s economic growth story
What if Wall Street is finally taking Florida seriously? From the perspective of the office market, these shifts matter a lot. The wealth migration and the movement of financial firms is driving three important economic metrics:
- Florida’s overall population is booming.
- Florida’s job market is outpacing the rest of the nation.
- Office space in the Sunshine State is outperforming the rest of the nation.
Let’s take a look at each of those trends, all of which are interrelated. First, the U.S. Census Bureau says Florida was the nation’s fastest-growing state during the one-year period ending in mid-2022. The state’s population expanded by 1.9% for the year, a result that reflects the reality that more Americans are deciding they like what Florida has to offer.
Second, Florida’s jobs machine just keeps humming. The national unemployment rate in July was just 3.5% — and Florida’s jobless rate remained even lower than that, at a microscopic 2.7%. And Florida’s one-year pace of job growth through July 2023 was 3.2%, trailing only Texas and Nevada and ranking well ahead of California and New York.
It’s worth pointing out that the job growth trends vary within the state of Florida. For instance, Tampa Bay’s job count rose 9.3% from the beginning of the pandemic through June 2023, according to U.S. Department of Labor data. But South Florida employment rose 4.3% during that period, partly a reflection of fast-rising living costs in the Miami region.
The third factor is Florida’s strong office market. 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.
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.
Articles underscoring the strength of the Florida economy relative to other States: