It's not just Texas benefiting from companies fleeing the Northeast, Delaware
Even as certain commercial real estate (CRE) market sectors have seen success in 2025, the office sector has lagged in many markets. However, thanks to some businesses deciding to relocate, certain areas are seeing conditions improve in the office market.
With return-to-work policies in place, many cities are seeing boosts to class A and B office properties, which had been struggling during the pandemic.
The improvements in the market have been seen in the number of commercial and multifamily mortgage originations, which increased 42% year over year in the most recent survey from the Mortgage Bankers Association (MBA).
David Druey (pictured top), Florida regional president of Centennial Bank, has noticed a similar bounce back in the Florida office sector.
“I think office space is definitely bouncing back in South Florida,” Druey told Mortgage Professional America. “I think Dade County probably bounced back, and West Palm has bounced back more than Broward.”
One big reason for the rebound is that several businesses have moved their headquarters from the Northeast to Florida.
“We’ve got a lot of corporate headquarters that are transitioning from up in the New England states down to West Palm and Dade County,” Druey said. “So, I think those office spaces have kind of popped. Those decisions for those companies to move down have kept values higher.”
Still not a sure thing
While the office market has improved, Druey notes that lenders must examine deals closely to determine if they make sense.
“It's still not a slam-dunk decision to do an office space,” he said. “You definitely have to do a little bit more underwriting for the lease, and then who they're leasing to. Office space is an interesting space for banks to look at and underwrite. We typically (look at) medical office, and we classify that a little bit differently.
“Most of the time when we're looking at office space now, we're pretty leery of how long the lease terms are and what the sublease options are.”
Despite market turmoil, commercial real estate originations jumped in Q1 2025. Danny Llorente, Chief Lending Officer at KDM Financial, attributes this to investors re-entering the market and many loans soon coming due.https://t.co/4jur50WJXK
— Mortgage Professional America Magazine (@MPAMagazineUS) May 27, 2025
Druey said one thing helping the office market is the return-to-office mandates from some corporations. He said that companies, including Centennial Bank, are looking for flexible office space.
“There’s a migration back to people coming back to the office, maybe not five days a week, but maybe two or three,” he said. “I think that you're seeing more flex office space. We are looking to downsize in our office space, and we're pretty pleased with some of the offers we've been getting to move because we're a credit tenant. They want to make sure that if they have us in there, they can get a better rate or longer term.”
Businesses looking to relocate
One reason Florida became a destination location for many corporations during the pandemic was the more relaxed regulations it imposed. While other states remained restricted, Florida remained largely business as usual.
“During COVID, people I knew in Arkansas stayed inside for five months with nothing to do,” Druey said. “We're out here riding bikes. We're on a boat and we're going to the beach. We're just living our life, having a great time, and working from home.”
Another factor making Florida and Texas attractive is the lack of a state income tax, which is enticing corporations to migrate to those states.
One state feeling the pinch is Delaware. A Reuters report showed that nine public companies worth at least $1 billion were considering moving their corporate headquarters from Delaware. The potential exodus, nicknamed “Dexit,” seemed to be started by Tesla’s move to Texas and Trump Media & Technology moving to Florida.
The website Commercial Property Executive listed Florida, specifically Miami and Orlando, as the second most attractive area for corporate relocation, only behind Texas.
Druey believes Florida, and its commercial real estate market, could benefit significantly from corporate relocation.
“Between Texas and Florida, because there's no state income tax, there's no reason for you not to move your corporate headquarters,” Druey said. “And if Delaware continues to say that they're going to change their tax code, because everybody had a corporation in Delaware, Florida and Texas become much more interesting options to bring companies to those two states.
“Texas and Florida are pretty good at actively courting those businesses to their states. I think that's not going to cease anytime soon with the relocations out of the Northeast.”
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