March 28, 2024

Florida Continues To Shine

Mark P. Vitner | 5/1/1996
The sun still shines a little brighter on Florida's economic landscape than elsewhere. The slowdown in the national economy barely cast a shadow through much of Florida, which saw gross state product (GSP) expand at a robust 5.0% pace during 1995. Employment and income continued to rise and commercial vacancy rates dropped to their lowest levels in nearly a decade. Job seekers and retirees continued to flock to the state, pushing Florida's population to more than 14 million. Florida's important tourist trade also bounced back solidly this past year, and the state's citrus growers brought in their second-largest crop ever.

While Florida has held up better than much of the country, the state still has some problems. Federal government cutbacks have eliminated more than 1,800 jobs across the state, reflecting military base closures and miscellaneous government cutbacks. In addition, home building has slowed. Permits for new single-family homes dropped 20% during 1995. Private sector job growth has also decelerated, from a 4% pace in 1994 to just a 3% pace during the fourth quarter of 1995.

So far, however, Florida appears to have sidestepped the brunt of the slowdown in the national economy and will likely continue to do so.

We expect Florida's GSP to grow 4% during 1996 and for businesses to hire 140,000 workers. Most of those new jobs will be in services, with especially strong gains at firms that provide services to other businesses. This broad category includes advertising agencies, accounting firms, data processing companies and temporary help agencies. In addition, services tied closely to population gains, such as banking and brokerage, real estate, retailing and health care, should also post solid gains.

Florida's population has grown 1.7% per year through the first half of the decade. That growth translates into an additional 1,150,000 Floridians, which is nearly the equivalent of adding another Orlando to the state. Many of these newcomers, in fact, head to Orlando. The four-county metro area has seen its population swell by 12.2% over the past five years, adding over 150,000 new residents. The greater Fort Lauderdale area has also added 150,000 residents over the past five years, while Tampa Bay and the West Palm Beach/Boca Raton area each added just over 100,000 new residents. Population growth is expected to gradually decelerate through the end of the decade. But even at a slightly slower pace, Florida will add another one million new residents by the end of the decade, including another 195,000 residents this year.

Florida's tourist trade should also enjoy another strong year. Last year brought 41.5 million visitors to the Sunshine State and the unusually cold weather in the Northeast and return of a legitimate spring training baseball season got 1996 off to a strong start. Tourism accounts for 10.8% of Florida's economy and directly employs more than 900,000 workers. Florida is particularly well-positioned this year, as overseas visitors extend their trip to the summer Olympic Games with a visit to Orlando and Florida's beach communities. We expect the number of visitors vacationing in Florida to top 42 million this year.

The other sector to keep an eye on in 1996 is construction. This sector has proved to be Florida's Achilles heel in the past, but currently it seems to be in good shape. Construction spending grew more slowly this past year, as hurricane rebuilding efforts continued to wind down in South Florida and single-family home construction slowed across the state. Permits for new single-family homes dropped 20% during 1995. The drop was in response to earlier overbuilding in Fort Lauderdale and along the Panhandle, where permits plunged 21% and 26.5%, respectively. Builders also pulled about 15% fewer single-family permits in Southwest Florida, Tampa and Lakeland last year.

While single-family home building was winding down, construction of apartments and condominiums was picking up. The number of multi-family permits issued in Florida rose 18.4% in 1995 to 38,800 units.

We at First Union Capital Markets Group expect apartment and condominium construction to maintain that pace through 1996. Much of the increase is occurring at the very high end, especially in Dade and Broward counties.

Commercial construction has also increased. Office vacancy rates have fallen sharply from their late-1980s levels in most of Florida's large metropolitan areas, setting off a wave of new projects. Office construction increased by 32% during 1995. That gain is not as large as it seems, however, because building activity had been so depressed during recent years. The value of new office permits last year still trailed the late-1980s levels by more than one-third.

Office development has changed a great deal from the 1980s. Most new development has been confined to the suburbs and has primarily been comprised of build-to-suit projects. That might change this year, as plans are beginning to come together for a new downtown office tower in Orlando, where the vacancy rate has recently dropped to just 8.5%.

Vacancy rates also have fallen sharply in many of Florida's other downtown areas. Fort Lauderdale currently has a downtown vacancy rate of just 9% and Miami's downtown vacancy rate has recently dipped to 18%, which is nearly half its peak level of the 1980s. Retail development is up across much of the state, with particularly strong gains in the Naples/Fort Myers area and in Central Florida.

Industrial development posted another strong gain this past year, with permits increasing nearly 12%. More than 800 manufacturers have either relocated to Florida during the 1990s or expanded existing facilities in the state. Some of the strongest gains have been in high technology fields, which has helped chip away at some of the space vacated by defense firms.

Florida has also received a disproportionately large share of new customer service centers, especially in the Jacksonville, Orlando and Tampa Bay areas. These facilities are attracted to Florida's low cost of living and rapidly growing work force, two factors that should remain in the state's favor for years to come.

One reason for our unwavering optimism about Florida's near-term prospects is that none of the excesses that have tripped up Florida in the past are now present. Residential and commercial real estate are not overbuilt and are unlikely to become so over the next few years. Population growth remains solid, and credit is readily available at attractive interest rates.

A few clouds are beginning to appear. Reduced job and income growth in other parts of the country is restraining gains in tourism and leading to cutbacks at some Florida-based firms. Overall, however, Florida's economic outlook remains one of the brightest in the nation and should remain so through the rest of the decade.

Mark P. Vitner is vice president and economist of First Union Capital Markets Group, Charlotte, N.C.

Tags: Florida Small Business, Politics & Law, Business Florida

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