by Jack McCabe
Population growth is fueling Sarasota-Manatee’s real estate market.
FLORIDA AND THE SARASOTA AND MANATEE region are experiencing another real estate boom. Both statewide and locally, sales and pricing increases mirror the double-digit gains of 2004-05, yet the percentage of owner-occupiers of residential real estate has declined over the last three years.
Here’s my take on what’s driving our economy and real estate growth and what’s ahead.
IT’S POPULATION GROWTH, OF COURSE
The U.S. Census Bureau estimates Florida’s population increased by more than 200,000 residents in 2014 to top 19 million, overtaking New York as the third most populous state. By 2020, the state population is projected to reach over 21 million.
The zero net population growth and minor decline in new Florida residents from 2008-2010 was a temporary anomaly in what will be a 20-year, long-term cycle of continued growth. Florida’s warm weather, geography, recreation and lifestyle opportunities, and global location will continue to draw tourists and full- and part-time residents from all directions and locations in the world.
The Sarasota-Manatee MSA had an estimated population of more than 726,000 at the end of 2014, according to Census Bureau data. Sarasota-Manatee’s supply of primary and secondary home buyers and seasonal renters will increase an average of 14,500 to 20,000 per year for the foreseeable future, requiring approximately 6,900 to 9,500 additional housing units per year.
Our population growth in the 941 region has been driven by part-time residents and investors from the Midwest and Canada. Additionally, the northeastern U.S., eastern Canada, and European baby boomers have begun targeting Sarasota for residences.
The majority of new residential units will only be occupied part time, three to five months out of the year, according to my analysis of the trends and data.
Sarasota and Manatee will need an additional 6,900 to 9,500 housing units per year for the foreseeable future.
EMPLOYMENT AND INCOME
The Sunshine State has long relied on tourism, construction, real estate and agriculture as the main economic drivers of its economy. Real estate and construction account for 25 percent of Florida’s employment, or about double that of most states.
Since the recession, Southwest Florida’s jobless rate plummeted from 12.2 percent at the end of 2009 to 5.1 percent in March 2015, currently less than the Florida and U.S. unemployment rates. Peeling back the skin of the onion, however, this low rate is influenced by many Floridians who have stopped looking for full-time employment in their job fields and are working at part-time or hourly wage positions.
Despite corporate tax incentives and other stimuli, Florida has not attracted Fortune 500 firms, established companies or startup businesses that create and employ new-age, high-skilled and higher-income workers. The state is 45th in the nation for Fortune 500 national and regional offices and employment. A large percentage of Florida’s work force remains employed in tourism and service industries. Since 2011, Sarasota and Manatee’s median household income in the region has declined by nine percent.
Nonetheless, the U.S. Bureau of Labor Statistics projects that Florida’s median household income will increase an average of 2.5 percent per year, equating to 25 percent during the next decade, primarily from investment income to affluent U.S. and international baby boomers purchasing for full- or part-time residency, and also from rental income.
I believe the migration of retiring baby boomers, which began in earnest in 2012, will increase Florida’s population growth by 200,000 to 275,000 residents per year well into the next decade. Sarasota-Manatee will receive 5 percent of new state residents, or approximately 172,000 new residents by 2030.
This population growth will drive employment growth in Florida over the next 20 years. Health care requirements of aging baby boomers will drive growth in medical positions, and developing biotechnology hubs will also draw professional, higher-skilled jobs yielding higher incomes as well as increases in jobs in tourism, hospitality and recreation.
In most real estate markets, employment growth, household formation, household median incomes and affordability ratios are crucial to determining new project pricing, forecasting sales absorption and the potential for a successful and profitable outcome for new developments.
However, in Sarasota-Manatee the majority of buyers for new luxury resort properties is and will continue to be from outside of Florida. Foreign nationals will play an increasing and important segment of the overall population.
Business owners in retail and consumer services should take special note. The majority of new construction may only house residents on a part-time basis. Other properties may be rented to less affluent residents than what income studies may reveal.
But the Sarasota-Manatee area, due to population growth, could become one of the top relocation destinations in Florida and the United States. ■
Jack McCabe is chief executive of McCabe Research & Consulting LLC in Deerfield Beach and a founding member of the Carnegie Group think tank. He is an independent economist, housing analyst and consultant, author and speaker.