Florida's retail space has been booming thanks to the wealth migration coming to the state. And younger Americans might be helping to drive that trend too, according to Danny Diaz Leyva, chair of the Florida real estate practice for law firm Day Pitney.
Right now, The Sunshine State ranks first in domestic and second in international migration, with 1,000 individuals moving to the state every day, according to a recent report from Colliers. Also, Florida is attracting high-net-worth individuals, with Tom Brady becoming one of the latest to join the trend by moving his office to the Greater Miami area. The wealth migration has helped drive the retail sector in the state.
And it's not just the senior population or veterans in their respective line of work – but younger Americans are taking their money to Florida too, according to Leyva.
"Lots of finance folks moving down here, lots of venture capital folks moving down here, and then a lot of the ancillary services that support those businesses," he told GlobeSt.
"A lot of these guys coming out of college are in the six-figure range already. So they're making very good money to start. And their income, frankly, is almost limitless in some instances. So it's, a very well-heeled crowd that is moving down here."
Leyva noted that the regions of West Palm Beach and Miami are "large recipients" in the state for the wealth migration. Miami, particularly, saw the biggest explosion in year-over-year sales growth at 209 percent in the first half, with volume hitting $788 million, according to Colliers.
Recently, the real estate advisor has been seeing more demand from single-tenant assets, which is applying to quick service restaurants, gas stations, and convenience stores. Leyva also listed the concepts of CVS and Walgreens brick-and-mortar locations, as examples of single-tenant properties – even though those two aren't actively opening stores right now.
"I'm working on a couple of projects here in Miami-Dade County, in Hialeah Gardens, and in Homestead. They tend to be single-tenant assets," he said.
"The folks that I represent have acquired these properties. They're kind of infill projects because there's a lot of single-family and townhome developments around them."
Retail, of course, is pretty broad. It's not just traditional shopping for clothes but includes restaurants and food as well.
With the wealth migration, Leyva thinks that grocery stores are the "top beneficiaries." Another trend that he's been noticing is grocers like Publix have been acquiring stores out of the states they are based in.
"Imagine how well those grocers are doing that their bottom line is so healthy that they're setting aside reserves, and those reserves are not only being used to sustain and support operations, but to further enhance the value of the business by buying real estate," he said.
Now there are a couple of caveats for retail. While there's an appetite in Miami to buy strip centers that include mostly mom-and-pop retailers, space is limited right now.
"There's very little land left for development," Leyva warned.
Plus, he added that insurance costs, when acquiring property, have gotten "very expensive" for developers.
For a while, many CRE players have been waiting for the Federal Reserve to take action and start cutting rates. While all asset classes would probably benefit from relief on cheaper loans, retail, at least in Florida, may survive without it. But Leyva noted that the action, expected after the Fed's meetings this month, will only help.
"With interest rates coming down a little bit, it creates a more attractive investment environment for investors," he said.
Overall, Leyva expects to see an "uptick" across the board in CRE.
"There's a lot of liquidity, there's a lot of dry powder on the sidelines that, frankly, are actively looking for opportunities, but have not been able to find them, just because things are expensive, and obviously the cost of operating assets is high," Leyva noted.
In fact, in recent days, Leyva said he has noticed more movement for new leases and acquisitions.
"I definitely see a lot more activity in particular, on the retail side," he noted.