As more homes sell quickly in South Florida, the demand for multi-family properties and other CRE may increase along with them.

South Florida has always been a desirable place to live. After all, who wouldn’t want to reside in one of the country’s most culturally diverse and year-round-sunniest areas?

But the COVID-19 pandemic and lockdowns significantly accelerated area growth. As indoor activities were restricted in many states, South Florida’s climate offered an escape from a dreary, socially isolated winter. Remote workers who could now work anywhere were attracted to Florida’s weather, a lack of state income tax, and a lower cost of living.

Wall Street noticed the tax benefits in South Florida, too, leading many organizations to relocate their offices to the area. South Florida is also becoming a hub for tech start-ups, which could be an economic driver in the years to come.

All of this contributes to the residential real estate boom in South Florida and statewide, where properties are moving quickly and at high prices. This trend is worth the attention of commercial real estate investors because as single-family homes increase in value, so will most forms of residential commercial real estate. The demand for less-expensive multi-family units could grow. And an expanding population will inevitably generate a greater need for other forms of commercial property.

Here’s a look at how a sustained residential real estate boom in South Florida could impact CRE overall.

What the numbers say

A quick look at the stats shows that residential real estate in South Florida is experiencing a period of massive growth—including from more domestic buyers.

In Miami-Dade County, home sales increased by 23.3% year over year, while Broward County saw a 26.5% increase. Over in Palm Beach, the year-over-year increase in home sales was 16.5%. These numbers show that homes are moving quickly throughout the region, possibly leading to a future supply shortage. Prices are also increasing, and Miami alone has seen nine straight years of appreciation. 

It’s worth noting that in 2019, up to 80% of buyers of high-end properties were from places like Russia, Asia, and Latin America. Since the start of the pandemic, however, 70% of sales have been to domestic buyers. This trend tracks with Florida’s significant current and projected population growth, which will also spur long-term demand for various types of commercial real estate. 

The need for housing

In Miami, we already see greater demand for multi-family housing because homes in the city are too expensive for the average buyer. And this situation isn’t making the area’s affordable housing crisis any better. As individuals purchase more high-end properties throughout South Florida and an increasing number of moderate homes go for above asking prices, the need for reasonably priced apartments, duplexes, and condos could grow even further.

From a CRE perspective, converting existing non-residential buildings (including offices) into apartments in prime or developing areas could have potential. These conversions have been done in places like Chicago, Los Angeles, Philadelphia, Baltimore, and Dallas, and there is speculation it could become more common nationwide as remote workforces become the norm.

There are some challenges associated with turning an office building or retail space into housing, not the least of which are zoning restrictions. Still, if these structures aren’t being used and there’s a big enough demand for affordable housing, it makes sense to explore the idea.

Demand for commercial space

The fact that more Americans are buying residential properties in South Florida than in years past reflects a growing population. And the mid to long-term effect of more people will be a higher demand for restaurants, retail shops, and other service-oriented commercial spaces. 

We should also see the job market continue to grow with an expanding population. Statewide, Florida has already added back 566,800 jobs from May 2020 to May 2021, with the unemployment rate dropping to 4.9%. As the economy heats up and businesses expand to meet increased demand, this trend should continue. 

Will more large companies relocate to South Florida? Could other corporate entities see the booming population, great weather, and favorable tax and business environment as a sign that they should relocate, too?

Although we don’t yet know the durability of these trends, it’s entirely plausible that a continuing spike in home sales driven by an influx of domestic buyers, year-round residents, and business relocations will accompany greater demand for buildings of various types.

Keeping an eye on residential real estate

The residential real estate market bears watching because it’s one key indicator of a region’s overall economy—though it’s certainly not the whole story. Nevertheless, if residential demand continues—along with other trends, like the well-documented loss of residents in California and New York—the benefits for our state and regional economies and commercial real estate investing will accrue.

Morris Southeast Group can assist as you watch South Florida’s residential real estate trends and apply the lessons to your CRE portfolio. Give us a call at 954.474.1776 to learn more. You can also speak with Ken Morris directly at 954.240.4400 or