California, NY income taxes drive business to Miami
While South Florida has been a tourism and retirement destination, unfriendly business climates in California and New York – both with relatively high income tax rates – have created the perfect storm for businesses from these states to relocate to Miami.
“Here’s the good news: the demand is there,” said Diana Parker, senior vice president at CBRE’s Miami office.
Since the beginning of the year, CBRE has showed Coral Gables and Brickell Avenue offices to two companies, one from each of those states, Ms. Parker said.
At Brickell Bay Office Tower, one company from California and two from New York have already opened, and a New York financial firm as well as a California software company are possible prospects, said Christian Driussi, Brickell Bay Office Tower vice president.
“It’s something that’s been going on in the past 12 to 18 months,” Mr. Driussi said. “They feel, obviously, that Florida and Miami are business friendly.”
California raised its income tax rates for high-income earners following voter approval in late 2012. People earning more than $1 million pay a 13.3 % tax rate, up from 10.3 %.
“When these people come here and they do the math, they say, ‘Oh my goodness, I have all this money that I don’t have to pay in income tax, and I can apply that to either home payment or other things,” said Ron Shuffield, president and CEO of Esslinger-Wooten-Maxwell Realtors.
Italian swimwear company Sundek USA relocated its US headquarters from California to Miami-Dade and New York-based Minerva Bunker Gear Cleaners, a firefighter apparel and gear inspection, repair and cleaning company, opened a branch in the county, according to a 2012-2013 Beacon Council report. The previous year, ASA Institute of Business Technology and Lyoness Management Americas Inc., both from New York, set up shop in South Florida, the Beacon Council said.
The Beacon Council said that the three New York companies will add 374 jobs and $15.65 million in capital investment in the community.
While Stephen Beatus, Beacon Council executive vice president for economic development, said these numbers “are fairly consistent” with the number of New York and California companies moving to South Florida in previous years, he added that in the past two years “there have been a number of active projects from those areas.”
“I think it’s going to be Florida’s game,” said Ms. Parker of CBRE.
CBRE has toured companies looking for 35,000- to 40,000-square-foot office spaces, she added.
“Anyone from New York would laugh at us,” Ms. Parker said. But “for Miami, 35,000 to 40,000 square feet is big. That will have tremendous job creation.”
Butters Realty and Management is also touring a California company looking to relocate to about 25,000 square feet offices in South Florida, said Darcie Lunsford, senior vice president.
Adam Vaisman, director of acquisitions at Butters, cited three main reasons California and New York companies would set up shop in South Florida.
“Number 1, it’s easier for them to pass through to the international markets in South America and the Caribbean than it is from New York or California. Number 2, the financial structure is more beneficial. Number 3, the home affordability has gotten better even though home prices have started to rise now,” Mr. Vaisman said.
An educated workforce and lower operating cost are factors as well, Mr. Beatus said.
And then there’s the one factor that’s prompted people to come to Miami for years: year-round sunshine.
“In California, it’s beautiful weather out there, too, but it’s very pricey now,” Mr. Shuffield said. “Our sunshine here is the same as theirs.”