Miami’s strong economy broadens from ‘two-legged stool’
Written by Michael Lewis on April 15, 2015
A Leadership Miami effort to encapsulate the structure and future of Miami’s economy ended Saturday with a shape far too nuanced to package neatly.
Participants left the Gusman downtown with no roadmap to economic growth. Though they were clearly told that we’re headed for big gains, the direction and scope of diversification is far less clear.
What has long been obvious is that Miami had to diversify. Six strong presentations to the Greater Miami Chamber of Commerce’s group showed that we’ve made progress in building our economic base.
Not long ago many of us likened Miami’s economic underpinning to a two-legged stool, supported by a vibrant visitor industry and real estate development producing construction jobs. Both industries remain vital, but now the community is planting other legs on the stool to add balance and smooth out cyclical tilt.
Digital technology, the most recent addition, led to the E-Merge Americas conference about to hold its second edition. Melissa Medina, its vice president for business development, cited four elements enabling the growth of digital technology here: a geographic position linking the US and Latin America, Florida’s favorable taxes, nurturing of the tech movement by the Knight Foundation, and the global spotlight that Art Basel Miami Beach focused on the area.
She agreed with a point I made as the panel’s moderator that a fifth element has also been crucial: a global, multi-lingual population has made the tech world comfortable in Miami – last year, 6,000 persons came to E-Merge.
Another effort to broaden the economy is One Community One Goal, spearheaded by the Beacon Council to build high-paying jobs in targeted industries. That effort, which was not highlighted Saturday, or an unanticipated new sector might generate future diversification.
Diversification is vital, said Bill Talbert, CEO of the Greater Miami Convention & Visitors Bureau, which is chalking up records for hotel occupancy and rates. He often points out that 96% of overnight guests arrive here by air, and the day after he spoke he noted gains of 6.5% in domestic passenger arrivals and 5.7% in international arrivals in February.
But those 1.7 million arriving passengers in just one month, vital as they are to our economy, can’t be our only economic triumph.
They aren’t. Jay Phillip Parker, CEO of Douglas Elliman Real Estate’s Florida brokerage, highlighted a single figure that heralds both future prosperity and vast opportunity. In the next decade, he told the group, $150 billion in new wealth is expected to transfer to South Florida. In his industry, that wealth now flows primarily from Northeasterners buying real estate, he said, though flows from South America also remain strong.
That has long been our pattern: buyers of upper-end real estate flow in, often after they visit as tourists. They buy a secondary residence, then frequently make it primary, taking advantage of the tax structure as well as a lifestyle filled with culture, recreation, entertainment and sports. That, in turn, can morph into transfers of businesses here or creation of new ones.
That melding of the visitor and real estate industries is as old as Miami. The challenge is to expand our economic stage.
One way, the Leadership group heard, is via infrastructure that enables growth. We’ve spent years catching up with infrastructure we need, including roads, transit, water and sewers, said John Dohm, chairman of the Miami Association of Realtors. The trick, he said, is to not wait for needs, which because of population growth would leave us constantly behind. Instead, he suggested, plan now for 100 years of need.
Neisen Kasdin, office managing partner of law firm Akerman, said that impending redevelopment of Flagler Street downtown is likely to be as enabling as the upgrading that allowed Ocean Drive on Miami Beach to emerge in the 1980s, leading all of Miami Beach with it.
Not all government steps to grow the economy have been good, Mr. Kasdin said. The City of Miami was wise to create a community redevelopment agency to fund now-successful Midtown Miami in an old railroad yard, he said, but governments wasted money to build Marlins Park.
Now, Mr. Kasdin said, the private sector must lead in adding infrastructure because business is more nimble, more creative and has more resources than do governments. The role of government now, he said, is to keep out of the way of development and merely stop bad projects.
But no amount of infrastructure will help if we don’t use it. And that might require altered mindsets.
Gus Pego, regional head of the Florida Department of Transportation, agreed with Mr. Kasdin that until we recognize that we’re in a new era we’re unlikely to leave cars behind to use public transportation that can make economic growth easier.
As for economic impediments, one is clear. When Mr. Dohm mentioned “customer service,” he drew laughter. As long as Miami can’t be taken seriously for service in an economy that’s built largely on service, we can’t maximize our economic growth.