Shaping the Future of the Miami Commercial Real Estate Market
In the closing keynote session at CRE.Converge this week, Hessam Nadji, Marcus & Millichap President and CEO, sat down with Jon Paul Pérez, president of Related Group, a leading developer and one of the largest Hispanic-owned businesses in the U.S. with a development portfolio of over $40 billion.
Pérez shared his insights into how the COVID-19 pandemic has affected the Miami commercial real estate industry, the growth potential in the Miami market and his efforts to elevate the area into the “Silicon Valley of the Southeast.”
What many people may not know, Pérez shared, is that Related Group started by doing mainly affordable housing development, and at one point was one of the largest affordable housing developers in the country. The company then moved into moved into market-rate multifamily housing and condominium development. When the 2008 financial crisis hit, it became clear that the company was overly invested in one business line – their condominium development – and, “We realized we needed to diversify so we can continue to have a profitable business,” Pérez said.
That diversification proved to be invaluable when the COVID-19 pandemic hit.
“Eighteen months ago was a scary time,” Pérez said. “Even with my father there as CEO and mentor, it’s something he’s never been through, something the executive team had never been through. We ran every single “what-if” analysis possible.”
“We were lucky that we were diversified, construction didn’t stop, and our projects continued,” he added.
The company continued to expand all the way to Arizona, Texas and the Carolinas, where they see a lot of current and future growth potential.
“All the markets we’re in, we’re seeing increasing rent growth, and that’s helping us offset increasing construction costs, which I think has been a major issue in our industry,” he said
Nadji asked Pérez what trends he’s seeing in the South Florida office market, with all the shifts in how and where people work, and what office demand looks like.
“We’re seeing an increase in tenants who were historically not coming to Florida – venture capitalists, hedge funds, financial firms – leasing space with us. I don’t think the office market is dwindling, I see it growing in areas like South Florida, while other areas like Chicago are close to 20% vacancy.”
Pre-pandemic, there was some migration to South Florida, but it was at a snail’s pace, Pérez said. “There was no hedge fund, no series interest from companies like Blackstone for 20,000-100,000 square feet of office space to move 300 employees out here.”
“Now, everything has accelerated. I think over the next year there will be a lot of announcements of major companies moving here,” he predicted.
What has made the market so attractive to tech companies coming from the West Coast?
“They love to pay less tax; the weather is pretty similar so it’s not a huge change of lifestyle. And these guys move in groups, in herds,” Pérez said with a laugh. “So once they saw [billionaire entrepreneur and venture capitalist] Peter Thiel move here, we saw a wave.”
Nadji asked Pérez about Related Group’s strategies for attracting the next generation of developers. The company has quickly realized that they need to be flexible to attract the caliber of talent they’re looking for.
“When I started working in Related Group in New York, I was working from 9 a.m. to 9 p.m., minimum,” Pérez said. “Now, the culture has changed.”
Pérez sees tremendous value in investing locally. “The communities we develop in have given us so many opportunities for us to be successful. We donate a lot to arts and education. We want the school systems to be strong to cultivate home-grown talent.”
So what’s next for the newly minted leader of this powerhouse firm with $13 billion worth of projects in the pipeline?
“I want to continue to be at the forefront of development, continue the legacy my father built, and be a true community leader.”
By all accounts, Pérez is off to a strong start.
This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s CRE.Converge 2021. Learn more about JLL at www.us.jll.com or www.jll.ca.
