As seen in Bloomberg
By Jonathan Levin and Amanda L. Gordon
Construction cranes pirouette above the skyline in Miami. Porsches are selling briskly in Coral Gables. Over in Palm Beach, along Worth and Hibiscus avenues, the Gucci set is counting new neighbors. The scent of fresh money hangs over Florida these days like the sweet smell of orange blossoms. In the midst of a deadly pandemic—and in truth, largely because of it—an optimism has taken hold among the state’s boosters.
Locals are buzzing again that the Miami area might finally realize a long elusive dream of becoming Wall Street South. Several prominent financial companies, including the mighty Goldman Sachs Group Inc., are considering moving some business there, or are relocating outright. And in these days of working from home, Florida’s low taxes, year-round warm weather, and emerald golf links are already luring some Wall Street people down from New York.
To David Greenberg, a former board member of the New York Mercantile Exchange who helps run a family investment office in Boca Raton, news that Goldman may move its asset-management division here was a watershed moment for the Sunshine State. “There’s no way to put that genie back in the bottle,” says Greenberg.
Maybe. This sultry home of tourism, cruise ships, and retirees has been trying to diversify its economy for generations, with mixed success. Such traditional business hubs as Wall Street, Hollywood, and Silicon Valley didn’t sprout overnight. Gaining critical mass takes time. Even as Miami’s Brickell neighborhood transformed into Florida’s version of Manhattan a decade ago, the state has attracted only a smattering of mostly small to medium-size hedge funds, family offices, and banks looking for a convenient hub for Latin American wealth management. In research firm Z/Yen’s Global Financial Centres Index, the Miami area doesn’t even make a cameo.
But Covid-19 may just be the catalyst for a shift. For months, New York stock traders, portfolio managers, and investment bankers scattered across the U.S. Many headed south to spacious homes with private pools. Now, as the vaccine rollout begins and firms look toward a post-pandemic world, some are realizing that their employees don’t want to return to their old lives in Manhattan high-rises.
It’s easy to see why the Wall Street South idea resonates: Bankers can enjoy an outdoor lifestyle and also justify their existence, because there are so many rich clients milling around. South Florida is one of the most ostentatiously wealthy places on the planet, home to two of America’s three richest ZIP codes.
The 2017 tax overhaul, which capped the federal deduction on state and local taxes at $10,000, only increased Florida’s tax advantage over areas such as New York and New Jersey. And while Miami isn’t cheap—in fact, rents are far out of proportion with service-sector-driven median income—the price per square foot of a condo in the Brickell district is about a quarter of the cost in Manhattan, according to appraiser Miller Samuel Inc.
Doug Cifu, chief executive officer of electronic market-maker Virtu Financial Inc., says his company’s decision to open a new office in suburban Palm Beach Gardens is simply “rational.” He expects employees to save an average 10% to 11% on taxes, and much more on housing. “In terms of the quality of life, from my perspective, it is far superior in Florida now than it is in New York, and I don’t see that changing in the near to medium term,” he says.