In the 1990s, Miami attempted to establish itself as a tech hub. At that time, the city was home to some of South America’s top online players, including the financial web portal Patagon.com, which eventually sold a 75% stake to global financial firm Santander.
But when the dot-com bubble burst in the early 2000s, the area could not hold onto much of its tech industry presence. Numerous tech companies went out of business, and nothing replaced them.
Things are far different today. Miami is now considered “the second most entrepreneurial city in the country” and features a startup density of 247.6 per 100,000 people. And the broader South Florida area hosts some significant tech companies.
Miami is also experiencing an influx of financial firms. Blackstone Group, Goldman Sachs, and Starwood Capital Group, among others, have relocated some of their operations to the downtown area. Given these factors, it makes sense that the tech industry will return to South Florida. The region is now in the same tier as other hubs like Boulder, CO and Austin, TX, in terms of attracting firms and talent.
Here’s a look at what’s happening in the tech scene and what this expansion could mean for South Florida.
The great thing about the area’s ascension in the tech industry is that there’s a nice mix of startups and established firms setting up shop.
For example, the online pet store Chewy Inc. was a startup based in Broward County. This retailer was acquired by PetSmart in 2017 for $3.35 billion and had over $7 billion in sales in 2020, making it a true success story of South Florida’s tech scene.
Another startup with success in the area is REEF Technology Inc., an organization with offices on Brickell Key that turns underused spaces in urban centers into hubs for goods and services. The firm received over $700 million from investors in 2020 and looks primed to experience further growth.
Of course, it isn’t just startups that are transforming the tech industry, as plenty of globally established firms are also setting up in the area.
For example, Microsoft already has a Latin American sales group in Fort Lauderdale, and reports suggest the company is currently searching for more space in Miami’s Brickell neighborhood. In addition, Live Nation leased a 52,000-square-foot office in Wynwood, and Spotify has 20,000 square feet of space in the same neighborhood.
Another bullish sign for the area’s tech industry is that two of the world’s largest tech investment companies, SoftBank and Founders Fund, occupy space in Miami and appear ready to invest heavily in tech. SoftBank already has about 14,000 square feet in the city and could be searching for as much as 100,000 square feet as it expands in South Florida. The firm has also committed $100 million to fund the region’s startups.
As Miami further expands its tech presence, we could also see the city reach new heights as a global financial giant. After all, few locations in the country can compete with the mix of weather, activities, lifestyle, low taxes, and a business-friendly regulatory environment. The result would be an influx of high-paying jobs in Miami and growth for the rest of South Florida, as well.
As office space in downtown Miami rebounds and begins leasing or selling for a premium, cities and suburbs outside of the downtown core could also become more attractive to startups. Since employees work remotely at higher levels than ever before, there isn’t much reason for smaller firms to lease in a central area.
Much like Silicon Valley became an industry hub just outside of San Francisco, communities all over South Florida will benefit from this momentum.
From a commercial real estate standpoint, more tech and financial firms looking for space in Miami and the surrounding communities directly affects the demand for office space in downtown areas. An influx of startups could also mean more demand for smaller offices in outlying areas.
And the indirect growth in jobs—and the need for consumer goods and services—will impact the rest of the economy and demand for other types of CRE. As a CRE investor, it’s essential to keep an eye on these trends—especially if you own or are evaluating property classes that may benefit.
Nevertheless, our CRE advice remains consistent: trends can be valuable, but due diligence is king. Each potential investment must be judged on its fundamentals, including solid financial, contractual, and geographic analyses.
Morris Southeast Group works with CRE investors as they look for value and expand their investment portfolios. Give us a call at 954.474.1776 to discuss the current commercial real estate climate in South Florida. Ken Morris is also available directly at 954.240.4400 or firstname.lastname@example.org.