Core Market Series: Florida

As one of MLG Capital’s home markets, the state of Florida has been an investment target for the duration of our firm’s 36+ years of existence. Since acquiring our first asset in the state decades ago and building out a portfolio over time, we continue to actively seek unique deals where we can capitalize on believable and achievable assumptions, as well as the numerous positive market dynamics in many areas of the state. MLG currently has a satellite office located in downtown Sarasota, FL.

With multiple attractive major metros and many desirable submarkets in the Sunshine State, MLG has owned unique assets across six metropolitan areas. These assets encompass over 4,500 multifamily units and almost 5 million total square feet (as of 11/15/2023).

MLG’s current portfolio includes nine multifamily properties across the state, with the highest concentration of units in the Orlando and Tampa metros. Five of the properties are managed by Valiant Residential, MLG’s subsidiary management company, who manages over 35,000 units, primarily across the Sunbelt (as of 11/15/2023).

Florida has many elements that make the state conducive to successful real estate investment. While each deal must be examined on a granular, submarket-by-submarket level, broadly speaking, Florida benefits from:

• Unique Demand Drivers
• Impressive Population Growth and Labor Market
• Strong and Diverse Economies

Unique Demand Drivers

The famous real estate adage of “location, location, location” certainly holds true for Florida. The state’s setting on both the Gulf of Mexico and the Atlantic Ocean, and its resulting weather, are obvious draws. With its high quality of living, Florida recently ranked as the 6th best state to live in in 2023.¹ Residents of Florida benefit from no state income tax, which sets it apart from similar-climate states as a migration destination. In addition, U.S. News & World Report has Florida ranked as the best state in the country for education.² These unique demand drives have continued to bring growth to the Sunshine State.

Impressive Population Growth and Labor Market

The attractiveness of Florida’s demand drivers has been realized through the state’s impressive population growth. Florida’s population has increased almost 40% (nearly double the U.S. rate) since 2000, and, in 2022, its 1.9% population growth made it the fastest-growing state in the country.³ With the state projected to reach 25 million people by 2030, there is reason to be excited about the state’s continued growth.⁴

Despite the immense population growth, Florida has maintained low unemployment, sitting at 2.7% vs the national average of 3.8% in August.⁵ The state is known for its business-friendly environment, with a survey of executives ranking it the second best state for business in 2023.⁶ There are 23 Fortune 500 Companies, across various industries, who have their headquarters in Florida.⁷ In July, the Sunshine State added over 44,000 jobs, beating the runner-up by over 16,000.⁸ Tampa, Orlando, and Jacksonville, along with five other Florida cities, are among the top 15 large U.S. cities for job seekers in 2023.⁹

The strength of the job market has been accompanied by wage growth. Florida’s average personal income in Q1 2023 grew 7.9% vs the U.S. average of 5.1%,¹⁰ and its year-over-year change in median annual pay was 6.4% compared to the national median of 5.9% in September.¹¹ While searching for the right real estate deal, where people want to live, raise a family, and work are important high-level considerations. As outlined above, Florida fits the bill.

Strong and Diverse Economies

The aforementioned low unemployment and robust job market help paint the picture of a thriving Florida economy that is attractive for investment. Florida’s economic strength is also shown through its ranking as the fourth largest economy in the United States with a GDP of over $1.4 trillion.¹² If its GDP is looked at on a global scale, Florida would rank as the 17th largest economy in the world in 2023.¹³

Florida also boasts a number of large metropolitan areas with diverse economies. These markets, who are less reliant on the strength of a single industry and whose job markets invite population growth, are appealing. For example, while known for tourism and entertainment, Orlando now has a notable presence in technology and research.¹⁴ Central Florida has seen substantial industrial market growth, and cities like Tampa have strong economies with multiple flourishing industries.

With an abundance of demand drivers, developers have rushed to build in markets like these. As such, it is important to be wary of new construction and its impact on the supply-demand equation in each submarket. For example, a market like Jacksonville has seen significant multifamily construction. However, we believe buying in the right pockets, at a time with less competition in the market, and managing through the surge in supply will benefit us in the long run.

Boots on the Ground

Last, having boots on the ground, with team members in our Sarasota office and Valiant’s management presence, drives opportunity for success. We can efficiently get on-site to put eyes on assets and drive the surrounding area. We have built meaningful relationships over the years, and we leverage these, and our management expertise, in the process of underwriting, acquiring, and operating real estate.

Conclusion

In an effort to make believable and achievable assumptions when evaluating real estate opportunities, we aim to buy in areas with strong fundamentals and projected success over the investment horizon.

While each individual deal is unique, the above qualities exhibited in Florida are among the reasons we like investing in the Sunshine State and continue to chase new opportunities there.

If you have a deal that you think would be a great addition to our portfolio, reach out to our deal sourcing team. If you’re interested in our diversified funds, learn more here.

James Domach is an Associate at MLG Capital, primarily focused on the underwriting and evaluation of acquisition opportunities in the Southeast. He enjoys playing and watching sports, especially University of Wisconsin teams, and spending time with friends and family.