Why South Florida - 2Q 2023_Final

SOUTH FLORIDA Why

DYNAMIC TRENDS DRIVING GROWTH Q2 2023

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MAR K E T B E AT

Office Q4 2022 Broward County

17.5% Vacancy Rate -42K YTD Net Absorption, SF $37.83 Asking Rent, PSF (Overall, All PropertyClasses) Absorption number is not reflective of U.S. MarketBeat YoY Chg

12-Mo. Forecast

ECONOMY The Broward County unemployment rate was 2.5% in November 2022, 100 basis points (bps) lower than one year ago. Nonagricultural employment totaled 905,200, an increase of 36,300 jobs year-over-year (YOY). Office-using employment including Professional & Business Services, Financial Activities, and Information had a combined increase of 8,800 jobs in the last 12 months. Broward County ranked third among all Florida markets in annual office-use job growth. SUPPLY Broward County’s overall vacancy rose 30 bps from the previous quarter and 50 bps YOY to 17.5%. This marks the third consecutive quarter of vacancy increases. Class A and B vacancies rose to 18.4% and 15.6% respectively, on par with each clas s’s peak vacancy rate during the pandemic. The increase in vacancy can be contributed to the completion of construction on the Optima Onyx Tower, which brought 277,000 square feet (sf) of available space to the market, and large tenant vacancies. Humana vacated over 120,000 sf of space in the Southwest Broward submarket during the second half of 2022 while MCNA Dental vacated 81,600 sf of space in Cypress Creek at year-end. DEMAND Year-to-date (YTD) leasing activity remained healthy for 2022 despite concerns of inflation and an economic recession, down just 1.9% from last year’s post -recession high. The Central Business District (CBD) continued to show positive market indicators with 136,298 sf of positive annual absorption, bringing the overall vacancy rate down 380 bps from one year ago. Solid activity in both the CBD and Plantation submarkets helped demand outweigh supply for much of 2022. However, negative absorption during the fourth quarter pushed the yearly number into the red by just over 42,000 square feet, a slight hiccup for the market but not at levels to raise concern. MARKET PRICING Overall asking rents began to show signs of leveling, ending the year at $37.83 per square foot (psf) full service, but a 4.1% YOY increase highlights rents continuing the trajectory upward to new record highs. Asking rates in the CBD continued to be the driving factor, finishing the year at $46.30 psf, on par with averages from the previous two quarters. The depletion of higher-tier Class A office availability impacted asking averages as lower-tier availability had more of an impact on overall rates. Uncertainty in the economy and growing sublease space could see rents continue to hold level through 2023, especially in the suburban submarkets.

ECONOMIC INDICATORS Q4 2022

905K Broward County Employment

YoY

Chg

12-Mo. Forecast

2.5% Broward County Unemployment Rate

3.7% Related Insights Cushman & Wakefield Research reports analyze economic and commercial real estate activity including supply, demand and pricing trends at the statewide, market and submarket levels. U.S. Unemployment Rate Source: BLS, FL Dept. Economic OPP -800 -600 -400 Thousands -200 0 200 400 600 800 2019 2020 2021 YTD 2022 Net Absorption, SF Construction Completions, SF $25 $27 $29 $31 $33 $35 $37 $39 2019 SPACE DEMAND / DELIVERIES

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OVERALL VACANCY & ASKING RENT

20%

16%

12%

2020

8%

2021

Asking Rent, $ PSF

4%

2022

0%

Vacancy Rate

MarketBeat Reports

Tri-County Breakdowns

Population The area is known for its tropical climate, strong international ties, most notably with Latin America, and friendly business environment due to less regulation and lower taxes. The Miami-Fort Lauderdale-Pompano Beach Metropolitan Statistical Area (South Florida MSA) is the seventh largest metro area in the United States with the population expected to reach 6.3 million by year end 2023.

The area contains a younger population with 25 34 year olds making up the largest percentage of the population by age. South Florida has recently seen an increase in new capital, companies, and people moving to the area due to its superior quality of life.

is one of the most culturally diverse areas in the country with nearly half of the population speaking multiple languages besides English.

South Florida

*Wall Street of the South - South Florida Business Journal

Population

Foreign-Born Population

For

Population

Population

Foreign-Born Population

For

POPULATION 2,742,833 Miami-Dade County 1,983,637 Broward County 1,526,603 Palm Beach County 6,253,073 Total MSA

FOREIGN-BORN POPULATION 1,448,147 Miami-Dade County 692,198 Broward County 407,368 Palm Beach County 2,547,713 Total MSA 57% 27% 16%

44%

32%

SOUTH FLORIDA Foreign-Born % by County

SOUTH FLORIDA Population % by County

24%

Financial Services

FINANCIAL SERVICES 213,500 Miami-Dade County 177,600 Broward County 83,200 Palm Beach County 474,300 Total MSA 45% 37% 18%

MULTINATIONALS 1,000 Miami-Dade County 230 Broward County 70 Palm Beach County 1,300 Total MSA 77% 18% 5%

Financial Services

Multinationals

Mu

Financial Services

Financial Services

Multinationals

Mu

SOUTH FLORIDA Financial Services % by County

SOUTH FLORIDA Multinationals % by County

Cushman & Wakefield | Why South Florida

“Wall Street of the South”- South Florida Business Journal

Skilled & Growing Workforce

South Florida's Labor Force is Unique as Nearly Half of the College Graduates are Multilingual.

South Florida has a reliable talent pipeline with employees drawn from more than 100 countries.

3.6 Million, With a labor force of more than

35%

of adults have a bachelor's or graduate/professional degree

438k

Nearly 39% OF THE TOTAL POPULATION IS 20–54 YEARS OLD. Moody's Analytics

1.3M Employed Workers

businesses reside in South Florida

Cushman & Wakefield | Why South Florida

Regional Competitive Advantage

SOUTH FLORIDA MSA INCENTIVES FOR BUSINESSES AND CORPORAT IONS RELOCAT ING AND EXPANDING:

“Florida is a Top 5 State in Overall Tax Burden.” Florida ranks as a top State in terms of tax policy with no state personal income taxes and low corporate income tax. South Florida has seen an influx of wealth as new residents have migrated for the tax friendly benefits.

$500 PER PERSON FOR RELOCATION Follow the Sun Campaign - Miami Downtown Development Authority (DDA) Programoffers companies with at least 10 employees a one-time payment of $500 per person who relocates – up to $50,000 per business annually and $150,000 over a three-year period. Miamidda.com

COST OF LIVING COMPARISON

UP TO $200K PAID TO COMPANIES CREATING JOBS Job Growth Incentive - Broward County The incentive is a direct cash incentive paid to companies creating jobs in excess of the 115% of the County’s average annual wage, up to $2,000 per new job or $200,000 per company. Broward.org

Cost of Living Comparison

300

250

200

150

100

GRANT PROGRAM Job Growth Incentive Grant Program - Palm Beach County

50

Incentives are paid on the number of new jobs created as well as residents relocating to the county. Eligibility and size of grant based on number of jobs created over a specified time period. Discover.pbcgov.org

0

New York (Manhattan)

San Francisco

Washington D.C.

Boston Los Angeles Chicago

Fort Lauderdale

Miami

Palm Beach Atlanta

Cushman & Wakefield | Why South Florida

International Destination

Map Layer Options Toggle to Enable Views

Intl. Airports

Brightline

Rail & Intermodal

Metropolitan Areas

County Ports

Highways

Transportation Legend

Intl. Airports

Brightline Station

County Ports

Highways

Map Key Legend

AIRPORTS South Florida has three international airports with nearly 2,000 daily flights including over 190 international destinations, making it one of the top international hubs in the country. All three airports serviced over 80.0 million passengers in 2022, an increase of more than 21.0 million passengers from 2021. MIA served more than 50.6 million passengers, shattering its record of 45.9 million by nearly 10.0% set pre-pandemic in 2019.

Passenger traffic increased by 11.6 million during 2021 from the previous year.

#1 International Freight #1 International Passengers

PORTS Known as the cruise capital of the world, South Florida has three significant ports that handle the largest amount of world passengers combined. All three ports are crucial economic drivers for the region as cargo has increased significantly since the expansion of the Panama Canal. Nearly 2.6 million TEU’s in 2022, holding steady from the previous year despite global economic headwinds and still above the 2.2 million seen during 2020. The area’s most significant trade partners remained with Latin America, Caribbean and followed by Asia.

#1 Cruise Port in the World - Contributes over $43 Billion to local economy

#3 Cruise Port in the World - Contributes over $30 Billion to local economy

#4 Busiest container port among Florida’s 15 deepwater ports. -Contributes more than $14 Billion to local economy

BRIGHTLINE Brightline is a high-speed passenger rail that currently connects Miami, Aventura, Fort Lauderdale, Boca Raton and West Palm Beach. Additional stations are planned for Orlando, Tampa and PortMiami. The Orlando station is projected to begin operations during the third quarter of 2023. The Tampa station is expected to be completed over the next five to eight years.

Cushman & Wakefield | Why South Florida

South Florida Migration

South Florida’s population grew 4.8% over the last five years, or by 287,000 residents. Since 2020, the region's population grew by 2.0%, or by 115,000 residents. The increase in population led to residential home sales spiking in South Florida through 2022 as well as keeping demand for multifamily investments throughout the region. South Florida sawmore than $11.4 billion in sales volume through 2022. Although this was down by 31.5% from this time as a result from increasing interest rates, the median sale price of $570,000 was still a 13.0% year-over-year increase. The area has benefited from many wealthy residents moving particularly from the northeast. Florida’s population growth held for the 12th consecutive year, increasing over 1.9% in 2022, surpassing over 22.2 million residents.

The South Florida MSA is projected to grow by 4.8% through 2025, or by approximately 300,000 residents.

2017-2022 NET MIGRATION RANKINGS 224K FORECASTED

600k

486k

400k

276k

271k

269k

267k

229k

224k

175k

166k

200k

149k

130k

127k

123k

112k

86k

62k

San Francisco, CA

Los Angeles, CA

Chicago, IL

New York, NY

0

Dallas, TX

Phoenix, AZ

Tampa, FL

Austin, TX

Houston, TX

Atlanta, GA

Orlando, FL

Charlotte, NC

San Antonio, TX

Jacksonville, FL

North Port, FL

Raleigh, NC

Nashville, TN

Lakeland, FL

South Florida, FL

Seattle, WA

−200k

−158k

−343k

−400k

−600k

−556k

−594k

Cushman & Wakefield | Why South Florida

Net Migration (2017 – 2022)

Projected Net Migration (2023 – 2026)

Education

Top Colleges BY ENROLLMENT 2022

Millennials Are the Second Largest Labor Base in Florida

1

Florida International University 54,924

2 Miami Dade College 54,091 3 Broward College 38,397 4 Florida Atlantic University 29,637 5 Palm Beach State College 24,235 6 NOVA Southeastern University 17,914 7 Keiser University 9,031 8 University of Miami 6,532 9 St Thomas University 5,608 10 Barry University 4,767 South Florida Business Journal

#1

Best State for Higher Education

75% 47% 88%

of graduates at local post-secondary institutions end up staying in Florida

of the population in South Florida has an associate degree or higher

of the population in South Florida has a high school diploma or higher

Cushman & Wakefield | Why South Florida

Surging Multifamily Dynamics

South Florida’s multifamily market has remained strong during 2022, despite the economic context. There has been nearly $1.0 billion in multifamily sales during the first half of 2023. Investors view South Florida multifamily real estate as a safe, more stable and strong asset class. In the first quarter of 2023, all three South Florida counties (Miami-Dade, Broward and Palm Beach) experienced record average per unit sales of $366,000, $302,000 and $349,000 respectively. At 6.8% Miami-Dade had the highest rent growth in 2022 of any major market in the U.S. Broward followed closely behind with 5.1% growth and Palm Beach experienced 1.7% growth. Effective rents are at record levels in all three counties.

Vacancies remain at historic lows in Miami-Dade: around 3%

SOUTH FLORIDA HISTORICAL TRANSACTION VOLUME VS. NUMBER OF TRANSACTIONS

WHO’S BUYING?

• Private capital continues to be extremely active. Many are first-time buyers in South Florida.

• Out of state private capital investors will continue to dominate the market.

• New foreign capital inflows slowed down over the summer. This may be due to the rise in interest rates coupled with increases in insurances costs per unit.

Cushman & Wakefield | Why South Florida

Capital Inflows in South Florida

The amount of capital into South Florida has increased substantially over the last couple of years, particularly from venture capitalists and hedge fund managers. Florida gained 15 fund managers and over $74 billion in assets over the last year, the most of any state. Elliott Management, with over $70 billion in assets, was the largest fund in the U.S. to relocate when it moved to West Palm Beach from New York. Point72 Asset Management, with $117 billion in assets, and Founders Fund, with Co founder Peter Thiel who also founded PayPal, were among other notable companies to expand into the region. Japanese multinational conglomerate, SoftBank, also announced plans to invest $100 million into Miami-based start ups. No state income tax, friendly weather, and a business friendly environment were some of the main drivers for more capital coming into South Florida.

States That Gained Fund Managers

Cities That Gained Fund Managers

No. of Incoming Managers

Incoming Gross AUM ($Mil.)

No. of Incoming Managers

Incoming Gross AUM ($Mil.)

States

States

Florida

15

$74,911.20

Stamford, CT

6

$2,414.40

Connecticut

12

$10,574.00

Greenwich, CT

5

$9,189.00

New York

4

$3,632.90

West Palm Beach, FL

3

$70,643.10

New Jersey

3

$4,756.90

Miami, FL

3

$720.80

Illinois

2

$952.30

White Plains, NY

3

$432.10

Nevada

2

$313.60

Rye, NY

3

$111.10

Arizona

2

$46.50

New York, NY

2

$3,584.10

Tennessee

1

$7,451.50

Miami Beach, FL

2

$2,695.50

400

South Florida Venture Funding

425

314

310

305

299

South Florida had 3 of the top 8 cities that gained fund managers over the last year.

222

$1.4B

$3.5B

$4.6B

$0.9B

$2.5B

$2.0B

$1.4B

2016

2017

2018

2019

2020

2021

2022

Total Invested

Number of Deals

Cushman & Wakefield | Why South Florida

Emerging Tech Hub For Investment Technological talent and tech‑business funding sources are growing in South Florida, as it quickly expanded its technology presence hosting the most startup activity in the U.S. according to the Kauffman Index in 2021.

117,452

South Florida Tech Employment Trend

117,452

107,886

99,521

99,636

35% 10-Year Jog Growth

Major tech giants are opening local offices, including Microsoft and Spotify and various technology firms such as Wix, Citrix, Blockchain, Tyco, Sykes Enterprises and Greyson Technologies are based in South Florida. Francis Suarez, the Mayor of Miami, has been very active in recruiting tech firms to the area beginning with his “How can I help?,” in response to a venture capitalist mentioning moving Silicon Valley to Miami. The area’s international access to Central and South America, young population, and business-friendly taxes make South Florida an ideal location for technology and start up firms.

94,767

91,649

88,235

85,019

82,457

2.0x More Diverse than U.S. Tech Industry Overall

80,117

77,745

77,758

2011

2012

2013

2014 2015 2016 2017

2018 2019 2020 2021

2022

Tech occupations in South Florida is expected to grow by 13.9% through 2028. Specifically, software developers are projected to see the highest growth at 18.3%.

Software/IT Workers Migration

Metros with Largest Migration Changes for Software/IT Workers: March 2020-February 2021

15.40%

“To give you an idea of what’s going on in the Miami tech scene: every day, sometimes multiple times a day, a big, massive deal is announced,” Shapiro - The Tag Experience (Owner. Represents several tech companies and venture capitalists).

10.40%

8.60%

8.10%

6.50%

Year-Over-Year % Change

2.90%

Miami-Fort Lauderdale

Houston

Dallas-Fort Worth

Philadelphia

Los Angeles

Atlanta

https://aventuramagazine.com/inside-miamis-trillion-dollar-tech-industry/

Cushman & Wakefield | Why South Florida

Accelerated New-To-Market Tenant Demand

NTM interest has reached an all-time high with companies primarily from the Northeast and California expanding and relocating to the region. Over 40 companies accounting for over 600,000 square feet (SF) already signed since the beginning of 2020. There were at least another 20 companies currently in the market. Notable companies such as Blackstone, ThomaBravo, Subway, Elliott Management, and Point72 Asset Management have all expanded into the region. Blackstone also purchased two office buildings in Downtown Miami, 2 and 3 MiamiCentral, for $230 million, it’s first major office investment in the region. The recovery in South Florida was elevated at a faster pace due, in part, to the increase in interest from new companies.

INDUSTRIOUS

GOLDMAN SACHS

Jupiter

NATIONS BENEFITS

MILLENNIUM MANAGEMENT

West Palm Beach

Boca Raton

WEST MARINE

AMERICAN QUEEN VOYAGES

Fort Lauderdale

40+ Companies relocated or expanded over the past 15 months.

Hollywood

THOMABRAVO

BLOCKCHAIN

Miami

Miami Beach

Downtown

Brickell

AERCAP

Coconut Grove

HOUSE OF WISE

KNOTEL

SANTANDER

KASEYA

CITADEL

Cushman & Wakefield | Why South Florida

Current & Future Developments

Miami Worldcenter Miami Worldcenter, featuring 600,000 square feet of office space, is a world-class urban destination with a compelling and unique blend of exceptional entertainment, retail, residential and commercial offerings.

830 Brickell 830 Brickell brings a premium commercial offering to the heart of Miami’s financial center — as the area’s first Class A+ freestanding office building to be built in over a decade.

830brickell.com

miamiworldcenter.com

One Brickell City Centre Supertower The ±1,000,000 square foot Class A office building would be over 1,000 ft tall and become the largest building in Florida. The tower would add to the over 500,000 square feet of shopping, culinary, and entertainment offerings at Brickell City Centre.

Radius at Sawgrass Radius at Sawgrass is a unique 32 acre campus-style development, combining over 750,000 square feet of office space, 50,000 square feet of commercial, and 750 residential units.

radiusatsawgrass.com

onebrickellcitycentre.com

One West Palm ​One West Palm is a luxury mixed-use development containing a ±200,000 square foot Class A+ office space located in West Palm Beach, Florida.

Banyan and Olive Banyan and Olive is comprised of two buildings, 300 Banyan and 111 Olive, creating over 130,000 square feet of Class A space in the heart of downtown West Palm Beach.

onewestpalm.com

banyanandolive.com

Cushman & Wakefield | Why South Florida

Market Lead

Authors

SOURCES aaroads.com Broward.org Discover.PBC.org Enterprise Florida ESRI flgov.com

TownCharts univstats.com U.S. Census Bureau U.S. Bureau of Labor Statistics Visit Florida

Kauffman Index Lightcast.io MiamiDade.com Moody's Analytics

National Association of Realtors South Florida Business Journal

Contributors

Josh Faircloth Research Manager | Tampa +1 813 424 3220 joshua.faircloth@cushwake.com

Connor Salzman Research Analyst | Ft. Lauderdale +1 954 377 0493 connor.salzman@cushwake.com

Connor Steele Research Analyst | Tampa +1 305 533 2877 connor.steele@cushwake.com

Cam Sousa Research Analyst | Orlando +1 407 241 3088 cameron.sousa@cushwake.com

Jose Sime Design Lead | Miami / Ft. Lauderdale +1 305 533 2887 jose.sime@cushwake.com

©2023 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representation as to its accuracy. Cushman & Wakefield does not claim any ownership rights to the corporate logos featured in Why South Florida and their usage in this research report is strictly for illustrative and informative purposes. Why South Florida is intended for limited distribution.