MIAMI – Move over, Texas. The Lone Star state has made headlines as tech companies like Oracle, Hewlett-Packard Enterprise and billionaire Elon Musk plan to move larger operations out of California for their greener pastures and lower taxes.
But now Miami is becoming a magnet for businesses trying to escape high taxes and overcrowding.
The Sunshine State’s most famous city has been trying for years to convince businesses that it’s not just a playground for partying vacationers, but fertile ground for finance and technology firms to foster a start-up atmosphere.
Then the coronavirus pandemic hit.
“I’ve been buying real estate in Miami for over 20 years and it’s been a great flight. It’s been a rocket ship since Covid took off,” said developer Alex Rodriguez – as in “A-Rod,” the former Major League Baseball superstar who has invested in commercial and residential real estate.
Rodriguez recently partnered with Barry Sternlicht of Starwood Capital to develop restaurant and retail space in Starwood’s new Miami Beach headquarters, the first Class A office space in the community.
Sternlicht relocated Starwood from Greenwich, Connecticut in 2018. Taxes had a lot to do with it, but he also blames political leaders, particularly New York City under Mayor Bill de Blasio.
A settlement for high tax countries
“People don’t feel safe,” Sternlicht said of New York. “The wealthy leave in busloads and Miami is getting more than their fair share.” He compares Miami to Singapore – a “working, diverse culture” that is business-friendly. “In all honesty, some of these states, like Illinois and New York and Connecticut – my home state – are going to have to have a payroll day when they have to find out they just can’t raise taxes any further. I just don’t go to work. People can live in other places. ”
For example, California lawmakers are considering raising the state’s highest income tax rate above the current 13.3% and raising corporate taxes. A bill that would have tried to tax wealthy Californians for up to 10 years after they left the state died in the last session after severe setbacks.
“It’s not just about taxes, it’s also about quality of life,” Nitin Motwani said of Miami’s appeal. He’s a developer who left Wall Street and Goldman Sachs over a decade ago to return to Florida. “I loved New York. I just loved South Florida and I felt that South Florida really had great potential given what I’d seen in New York.”
For the past seven years, Motwani has worked with business development officials to persuade companies to follow him south. His hardest sell was his wife, Anshu, who also worked at Goldman before receiving her MBA from Harvard.
“You’d better do it worth it,” she told him in 2008. A dozen years later, Anshu Motwani said she would never retire. “People often think that Miami doesn’t have certain things that New York has. I don’t think that’s the case anymore.”
Millions have been spent on arts and cultural institutions. There are reportedly 40 artist studios in the city center.
Company on the move
The migration to Miami gained momentum as firms like Universa Investments from Los Angeles and Nucleus Research from Boston moved. Then came Starwood, and now Blackstone is opening its technical headquarters there. Growing numbers of Silicon Valley investors are mocking California on Twitter as they head east to Miami – names like Jon Oringer, who founded Shutterstock, Keith Rabois of the Founders Fund, and Shervin Pishevar, who started Hyperloop One.
“They don’t know which side their bread is buttered on,” said Scott Absher, referring to California’s political leadership. Absher is the CEO of ShiftPixy, a part-time tech start-up that has just moved its headquarters from Irvine, California to Miami’s Brickell Key. The lease for his new waterfront office is about 25 percent less than what he paid in California. The money the company needs to achieve profitability.
According to the Miami Downtown Development Authority, the average cost per square foot of office space is $ 45.45, compared to $ 64.12 in San Francisco.
“I came to California in the mid-1990s and one of the things I saw was just this bubbling of activity, excitement, and optimism. I don’t see it that much anymore,” Absher said. He admits that he feels a little “melancholy” after giving up his California driver’s license, but believes he found the innovative energy and welcoming business atmosphere in Miami that he felt in the Golden State. “I think you have to look outside. You have to look ahead.”
An analysis by LinkedIn of where technicians are moving this year shows that Miami’s tech workforce grew 3% in 2020 (Madison, Wisconsin, grew the most at 75 percent, but the total workforce is much smaller).
Home sales and prices in the Miami area are up double digits year over year, and executives considering moving here are now asking about the quality of schools, not just the tax breaks.
Talent is finally showing
“One of the really interesting things that happens here is the arrival of talent and that has always been the big hit for Miami,” said Rodriguez. “It has always been a challenge to hire people here. But now you have talent from all industries.”
It helps Nitin Motwani feel validated. He grew up in Fort Lauderdale and watched his parents struggle in the hotel business. He vowed to leave Florida and never return. Now he’s a managing partner in a $ 4 billion mixed-use development in downtown Miami called the Miami Worldcenter, which doesn’t seem intuitive for a future where office space may not be quite as necessary. Except … maybe … in Miami.
“During the pandemic, we had transactions valued at over $ 100 million at the Miami Worldcenter,” Motwani said. “There is a phrase ‘death by a thousand cuts’ and that was ‘success through a thousand cuts’. This was the longest overnight success story you can imagine.”