This article originally appeared on CoStar Insight. It has been republished here with permission.
South Florida continues to see healthy employment figures, with Miami-Dade outperforming in terms of job gains through the end of 2023.
As of November 2023, the latest jobs data for the area, the unemployment rate in Miami-Dade reached a historic low of 1.4%, with a record number for total employment reached as well, totaling over 1.39 million workers. The area’s labor force also continued to climb, reaching a new high of over 1.41 million workers, an indication of a healthy employment market that continues to attract employees.
Broward and Palm Beach also continue to enjoy a healthy employment situation, although the unemployment rate of these counties has increased from lows of just over 2% to 2.9% and 3.1%, respectively.
The office-using sectors of financial activities and professional and business services have been a bright spot in the recovery of South Florida’s labor market, with both Miami-Dade and Broward continuing to see record employment in these sectors through November of last year, while Palm Beach employment gains have stalled at elevated levels.
Despite a recent slowdown in gains, these two sectors have driven a strong recovery in office-using jobs in the South Florida region which have grown at a faster rate than the U.S. average since 2020. Oxford economics expects that these gains will slow, though, with a continued outperformance relative to the broader nation through 2026. From 2024 through 2026, South Florida office-using job gains are expected to grow by over 0.7% annually, relative to a 0.5% average annual gain for the U.S. This strong labor market is expected to continue to drive healthy office occupancies and rent gains going forward.
As of the end of 2023, office vacancies across all South Florida markets remained within one percentage point or less of their five-year average, with Miami and Palm Beach remaining below this long-term average. This is in contrast to the U.S. average vacancy rate, which remains over 2.5 percentage points above its five-year average, a widening gap in vacancy that is expected to continue through the near-term forecast period.
Due to supply additions over the next few years and a slowdown in demand, office vacancies are expected to rise slightly across South Florida markets through 2026, averaging around 10%. These will remain well below the U.S. average, which is expected to rise to around 16% over the same time period.
A labor market strength, resulting in healthy demand for a limited inventory of office space, will continue to result in above-average rent gains. This is likely to happen specifically in Miami-Dade and Fort Lauderdale, which have seen non-stop gains in financial activities and business services employment through the end of 2023.
Although rent gains are set to slow from recent elevated levels of over 4% annually across the region, these are expected to fare better than the expected contraction in U.S. office rents, which will average around 2% annually through 2026. Miami-Dade, which continues to see the healthiest labor market out of the three counties, is expected to enjoy the healthiest annual rent gains in the region, averaging over 1.6% annually over the same time period.
Still, these rent gains likely won’t outpace inflation, which is expected to average over 2.2% from 2024 through 2026, resulting in a drag to general office values. That said, South Florida office properties are expected to continue to see better value retention than the broader U.S. market over the next few years, and high-quality trophy towers are likely to see value appreciation as these properties have seen significant rent gains over the last few years.
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