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The construction market in Florida will probably continue to be influenced by the pandemic for quite some time. Despite the discovery of vaccines against covid, it is not yet possible to determine when the vast majority of the population will be immunized. Probably this will only occur after the second quarter of 2021. Until then, there will be many uncertainties about the behavior of the real estate market in Florida, more specifically the construction market.
Although the construction industry in Florida has been declared an essential service, some segments still suffer from uncertainties. This is the case with commercial offices. On the other hand, the single-family homes segment is extremely promising.
In this article we comment on the main segments of the construction market in Florida and what’s next for the industry.
A construction segment that was strongly impacted by the pandemic is the commercial office construction. With people working more and more remotely, it is not yet possible to set the trends for this sector.
Like most American states, Florida decreed a lockdown early in the pandemic, forcing remote work to be implemented. Offices remained practically empty and the new decentralized-home-office work dynamic seems to have worked well, with many companies already signaling that they will maintain the new format even after the pandemic.
As a result, the Commercial construction Market in Miami fell sharply, decreasing by 20% in 2020. It is not yet possible to determine whether people will return to their workspaces anytime soon. This whole scenario of uncertainties during and post-pandemic puts into question the viability of new commercial projects for 2021, mainly urban high-rise offices.
Another factor that directly affects the construction of new hotels is the fear of traveling and traveling restrictions for some countries. reducing the flow of tourists.
With more people joining online shopping and avoiding going physically to stores, the incentive for new construction for this specific type of establishment is also less.
All of this calls into question how the commercial construction market will behave for 2021.
In an attempt to boost the commercial sector, the mayor of Miami has encouraged technology companies and other sectors to move their operations to Miami. There is already a huge movement of tech companies moving from Silicon Valley to Texas and Florida. Big names in the financial sector from New York have already moved their headquarters to Florida as well. The last move in this direction was that of Goldman Sachs. As a result, many developers are excited to build new office buildings by imagining a growing demand for executives from other states who will need new bases in Florida. Miami Beach took the lead by announcing that it is searching for developers to build new commercial buildings. The Miami Beach authorities’ strategy is to try to diversify their economic activities a little, also investing in this market, since the traditional tourism market in the region was deeply impacted by the pandemic.
The fact that more people are buying online ends up encouraging the construction of warehouses for storing products, food and other goods. However, the city of Miami is not prepared for this new trend. There is very little land available for industrial construction. There is great demand for building warehouses, but there is not enough industrial-zoned land for new projects. A bubble is even expected in this market. With a lack of land for industrial construction and growing demand, the expectation is that land prices for the industrial sector will rise.
Single Family Homes construction
The single-family homes market in Florida is perhaps the most benefited from the pandemic and remains hot. In March, still with an uncertain future of how new buyers would behave, construction companies paused the construction of new single-family homes. However, nobody could imagine that the demand for this type of property would explode in the following months. With the risk of greater contagion in large and congested urban centers, people started looking for isolated houses in suburban neighborhoods, specially in Central Florida. This type of property also appealed for a better quality of life in times of confinement. After all, who doesn’t prefer to isolate themselves in a large house with a backyard instead of being stuck in an apartment?
What nobody expected was that this movement, which started with residents of Florida, would also happen with people from other states. Florida was truly invaded by people from northern and northeastern states, especially New York. Single-family homes in Orlando and nearby areas were the most sought after properties during the last months, especially by new yorkers relocating to Florida. Other cities nearby Miami, such as Weston, nearby Miami, are also one of the favorites for new residents from out-of-state
At the same time, those who already lived in a single-family house, did not want to sell. And whoever put the house on the market, took it off. The result: inventory has plummeted.
High demand and low inventory only caused strong pressure on the prices of this type of property, which increased builders’ confidence.
The market for single-family homes remains heated and construction in this segment for 2021 remains promising.
Transportation and Roadway Construction
New transportation and roadway construction projects will decline or fall behind in 2021. Florida has lost billions in revenues during the pandemic and the shortage of new tax revenues seems to continue in 2021. Add to this scenario the fact that Florida has no state income tax to face the new difficulties, besides focusing heavily on the tourism and hospitality sectors, tow of the most affected industries during the pandemic. This means that funding for new infrastructure projects will be limited.