At Scarlett Harper, we specialize in South Florida Commercial Properties, providing unique insights into emerging market trends. One of the most consequential shifts we are tracking is the recent signing of House Bill 7031 into law, which eliminates Florida’s long-standing commercial rent tax effective October 1, 2025.
Florida’s decision to eliminate the commercial rent tax, officially known as the Business Rent Tax, marks the end of a unique and often criticized tax regime. For decades, Florida was the only state to charge sales tax on the rent paid by businesses for commercial property, including office space, retail storefronts, industrial buildings, and even docking or parking rights. This tax was long seen as a drag on competitiveness and a friction point in tenant negotiations. Its removal is not only a win for business operators but also a meaningful structural improvement to the state’s overall investment climate. Investors and landlords should expect to see increased leasing velocity, stronger tenant retention, and potentially higher effective rents as the burden of tax costs shifts away from lessees.
Beyond its symbolic importance, the elimination of the commercial rent tax unlocks real value for occupiers and owners. Tenants leasing space in Florida can now calculate their occupancy costs with greater accuracy and transparency, while landlords can present more competitive net lease terms to prospective tenants. The removal of tax on common area maintenance fees and passthroughs, often categorized as taxable rent, also simplifies lease administration. For real estate investors underwriting deals across the Sun Belt, Florida assets may now warrant more favorable assumptions regarding tenant demand and absorption, especially in markets with tight supply and rising construction costs.
This change complements broader tax relief efforts designed to keep Florida affordable and business friendly. House Bill 7031 includes permanent tax exemptions for hurricane preparedness supplies, back-to-school items, and health and safety equipment. For commercial real estate professionals, the more meaningful policy move is the structural realignment of commercial leasing economics. In a climate of rising interest rates and tighter margins, any permanent cost reduction to tenants can translate to higher property-level performance. At scale, this could compress vacancy in key urban submarkets, reduce turnover risk, and support higher valuations over the long term.
Investors should not overlook the downstream effects this reform may have on asset classes heavily reliant on leased space. Office, retail, and flex-industrial landlords stand to benefit most directly, particularly in secondary and tertiary markets where leasing incentives often make or break a deal. Markets like West Palm Beach, Tampa, and Orlando may gain a further competitive edge over other Southeastern metros still contending with higher occupancy costs or slower permitting pipelines. For developers and property owners preparing to launch or stabilize new projects, this policy change creates a timely tailwind.
The commercial rent tax’s elimination also reinforces the perception of Florida as a policy-forward, low-friction environment for business. For institutional capital, especially those comparing cross-state allocations, this move signals consistency and long-range value preservation. Foreign investors and REITs, many of whom carefully evaluate local tax burdens, may now recalibrate models to favor Florida-based acquisitions over similar assets in neighboring states with higher effective occupancy costs.
While the removal of the tax is a single policy adjustment, its implications are deeply operational. Real estate professionals should revisit lease templates, pro formas, and incentive structures to ensure alignment with the updated tax landscape. Advisors and asset managers should also communicate this change clearly to tenants and prospective occupants, as it directly impacts decision-making at both the portfolio and transaction level.
Florida’s elimination of the commercial rent tax is more than a headline. It represents a long-overdue recalibration of how commercial real estate functions in the state, leveling the playing field for landlords and providing clarity for tenants. As the new policy takes effect in late 2025, the opportunity lies in acting early, positioning assets, marketing strategies, and lease structures to capitalize on a simplified and more competitive leasing environment.