ORLANDO—The severe effects of the Great Recession aren’t even a distant memory yet. Florida’s real estate market continued to lag the national recovery for years and some areas are still seeing a full recovery—but Florida is outpacing the nation on economic growth and job creation.
Last year, Florida’s job growth was 2.%, exceeding the national average of 1.6%. The tourism and construction industries have been the underpinning of the state’s economy—and both are making a comeback. Meanwhile, the job market has diversified with technology, defense, and healthcare sectors driving growth.
Praedium Group, a real estate investor that has acquired about 4.4 million square feet of commercial real estate space and 8,500 residential units in Florida, believes that there are several major factors that drive growth within the state: demographic migration trends, a diverse and strengthening economy, and the steady stream of capital that regularly targets the Interstate 4 corridor region to influence the politically important voting constituency of the area.
“A primary catalyst of Florida’s growth is the influx of 80 million Baby Boomers that are reaching retirement age and looking to trade in the harsh winters in the Northern part of the country for Florida’s temperate climate and outdoor activities,” Mark Lippman, managing director of Praedium, tells GlobeSt.com. “Although the financial and housing crises temporarily delayed retirement for some, increasing financial asset values and the recovery of housing prices have rekindled this domestic migration.”
Already the fourth most populous state, Florida has seen population growth of about 3.6 million since 2000. The state’s growth rate is one of the fastest in the country.
What’s more, a recently paper published Praedium and Maximus Advisors analyzed the impact of state fiscal pressure on migration patterns and real estate fundamentals and found Florida to be a top migration destination for households and companies. The reason: the state’s low tax rate and relatively well-funded pension plans.
“As unemployment rates have declined and job creation increased, Florida’s job market has become quite diverse,” Dana Baines, director of investor relations at Praedium, tells GlobeSt.com. “Historically, tourism has fueled Central Florida’s economy, with some of the world’s most visited destinations, including Walt Disney World, Universal Studios, Sea World and Busch Gardens, as well as beautiful beaches. However, industries such as healthcare, aerospace, and defense are also currently thriving in both Orlando and Tampa.”
According to Praedium, Florida ranks second overall in aviation, aerospace and defense firms, with more than 2,000 companies operating in the state. Lockheed Martin, the nation’s largest defense contractor, employs about 6,500 people in metro Orlando, and recently announced an expansion of its Orlando location through a capital investment of $80 million. In Tampa, the defense sector has a significant presence as well. CENTCOM—the Unified Combatant Command of the U.S. Department of Defense—is headquartered in the region.
“The Tampa/St. Petersburg office and industrial markets total over 200 million square feet of space and are a hub to many employers in the financial, insurance, and construction sectors,” says Lippman. “Forbes recently ranked Tampa the second best city for young entrepreneurs to launch their businesses, with the area’s low cost of living, loan activity and business growth potential. A major driver of the research and healthcare sector in the state is the concentration of senior citizens.”
In fact, he says, the University of Central Florida in Orlando—the nation’s second largest university and employer of approximately 25,000 people—recently acquired an office complex for the expansion of its research division. And last month, Osceola County pledged $61 million for the construction of a UCF research center that could lead to the creation of thousands of high-tech jobs.
“In the Tampa area, the University of South Florida recently announced its intention to double its student body, become a research destination, and strengthen its academic programs in finance, healthcare and information technology,” Baines says. “These universities are major employers in their markets, and they also feed the future employment base with graduates and drive research funding into their respective regions. Further reinforcing this future development, Axiometrics is projecting Orlando’s multifamily rent growth over the next five years to exceed the national average by nearly 300 basis points, and Tampa’s rent growth to surpass the national average by 320 basis points over the same period.”
Praedium reports another catalyst driving the Central Florida economy is the government’s spending focused on the Interstate 4 corridor between Orlando and Tampa. The late political journalist Tim Russert suggested that the outcomes of Presidential elections often hang on the result in Florida, and the state is delivered based on the voting population of Florida’s Interstate 4 region.
In sum, Lippman and Baines conclude, Florida’s historical economic drivers are strengthening in conjunction with the state’s burgeoning industries, and this is further driven by the inflows of federal and state capital invested into the region, making Central Florida a prime location for real estate investment.