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Regional Spotlight: Florida and the U.S. Southeast
April 30, 2019
With a relatively low cost of living, above-average population growth, a mild climate, and abundant land for development, the Southeast continues to be one of the most popular areas for real estate development in the United States.
The region, including Florida, Georgia, North and South Carolina, Alabama, Mississippi, Virginia, West Virginia, and Kentucky, boasts 21 percent of the total U.S. population and accounts for 28 percent of total housing starts.
“Broadly speaking, the states in the Southeast are in relatively good shape in terms of state finances, with few exceptions,” says Ed Friedman, a director at economic forecaster Moody’s Analytics in West Chester, Pennsylvania. “Some states have made big efforts to boost manufacturing, especially in the auto industry, including Kentucky, Alabama, and South Carolina—and, in South Carolina’s case, aircraft.”
Photo By Miami Worldcenter
The 444-unit Caoba multifamily development in Miami Worldcenter is adjacent to the Brightline rail system’s Miami Central station. The project is to open for residents in early 2019.
“Tourism is a major economic engine all over Florida and in South Carolina,” he says. “Defense spending is an above-average source of support, with the Southeast having five of the top six states with the largest populations of active-duty military personnel—Virginia, Georgia, North Carolina, South Carolina, and Florida.”
Hurricane Florence, though leaving extensive damage and disruption in the Carolinas, especially North Carolina, is not expected to have a lasting economic impact on the state.
“Although flooded areas along the coast and inland will need time to rebuild, the Carolinas’ largest economies were spared, and the most significant tourist destinations—Myrtle Beach [South Carolina] and the Outer Banks [North Carolina]—came away mostly unscathed,” says Adam Kamins, also a director at Moody’s Analytics. “Rebuilding will be a tall task in places like Wilmington [North Carolina], but those efforts will provide a short-term economic lift, and the region’s positive long-term trajectory is unchanged as the Carolinas’ structural advantages remain intact.”
Florida
Florida continues to be a standout in the region. Southeast Florida’s economy is strong and will continue its impressive growth in the coming months, says Greg West, president and chief executive officer of Orlando-based multifamily developer ZOM Living.
“While the strengthening dollar will continue to curb foreign demand for Miami housing, local demand is growing as the economy becomes stronger,” West says. “Office markets across South Florida are improving, and new construction of space has begun selectively. The supply of apartments has curbed rent growth, but absorption and demand remain healthy.”
On the northern side of downtown Miami, $5 billion in development is taking place, including Miami Worldcenter, one of the largest private mixed-use real estate developments in the country, led by master developers Miami Worldcenter Associates and partner CIM Group, a real estate investment firm based in Los Angeles.
The $4 billion, 27-acre (11 ha) development will have a mix of retail, hospitality, commercial, office, and residential uses with access to transportation in the center of Miami’s urban core. The project’s first phase, which includes the 60-story Paramount luxury condominium, the 444-unit Caoba class A apartment tower, and over 300,000 square feet (28,000 sq m) of high-street retail space, is slated to begin opening in stages in 2019.
Adjacent to the project is MiamiCentral, a mixed-use rail station development that provides access to Brightline high-speed rail and connects to the adjacent Government Center station providing links to Metrorail, Metromover, and TriRail transit. “[MiamiCenter] is transforming public transportation by revolutionizing rail service into downtown Miami and providing the area the best public transportation system in the Southeast U.S.,” West boasts.
“The adjacent Miami Worldcenter will bring retail, a convention hotel, condos, offices, and apartments. All of this, combined with the world-class cultural venues such as the Frost Museum of Science and Pérez Art Museum Miami, means the north side of downtown will be one of the most complete and vibrant neighborhoods in all of Miami.”
Photo By ZOM Living
With a groundbreaking in May 2018, ZOM’s Las Olas Walk is expected to be completed in the second quarter of 2020. The 456-unit multifamily project in the center of downtown Fort Lauderdale was designed by Callison RTKL.
Photo By ZOM Living
ZOM Maizon at Brickell, a 262-unit luxury multifamily project in Miami’s prestigious Brickell neighborhood, is scheduled to open in summer 2019. MSA Architects designed the 19-story tower.
Another of the state’s largest cities, Orlando, is experiencing strong expansion and development as well.
“Orlando continues to experience one of the fastest job growth rates in the nation,” says Lisa Dilts, principal at independent real estate advisory firm Compspring of Orlando. “While tourism was one of the leading economic drivers in the past, our economy has diversified tremendously.
“Over the past year, manufacturing, construction, and financial services employment saw the fastest rate of growth. The story of Orlando’s growth has spread, and we are seeing Orlando at the top of the list for institutional investors who are taking note of the growth and economic diversification,” she says. “Tech, health care/life sciences, and advanced manufacturing are seeing tremendous growth in central Florida and the Space Coast” (the Atlantic Coast area near the Kennedy Space Center).
The expansion of Orlando International Airport and the Orange County Convention Center, as well as enhancement and addition of tourist attractions will continue to draw people to the Orlando metro area, she predicts.
Development is under way for Creative Village, a 68-acre (28 ha) innovation district in downtown Orlando, Dilts adds. It will be anchored by the University of Central Florida/Valencia downtown campus, which is expected to open in August 2019 with 8,000 students, faculty, and staff. The first phase is under construction with $550 million in development, including a mix of residential, education, and retail uses.
In addition, Florida’s labor market is breaking loose of its shackles. After holding steady for three straight quarters, the state’s unemployment rate slipped in the third quarter of 2018 to its lowest point in more than a decade, reports Kwame Donaldson, senior economist at Moody’s Analytics. The rate for the 2018 third quarter was 3.63 percent, down from 3.83 percent in the second quarter and 3.9 percent in the first quarter of 2018.
“More crucially, wages are beginning to blossom,” he says. “At the end of 2017, wage growth was about one percentage point slower than the nationwide rate. The nationwide rate of growth in average hourly earnings has hovered between 2.5 and 3 percent for most of that period, but today’s pace is nearly one percentage point faster. The galloping job market has yet to unleash Florida’s housing market, as house prices and permits have risen at a constant pace for nearly two years.”
The costs of construction—both labor and materials—as well impact fees and land costs are making it increasingly difficult to find development opportunities that carry the returns investors are seeking, says Dilts. “As a result of increasing land costs, we are seeing more and more residential activity at the edges in C locations, which hit a price point that cannot otherwise be accommodated,” she says.