“While South Florida may not have the number of large, single-tenant industrial buildings found in other industrial real estate markets, it is performing extremely well in its own right. In fact, South Florida is emerging as an industrial powerhouse with the stats to prove it, from land sale prices to lease rates.
It’s no wonder that many of the major industrial property owners — such as Prologis, GLP, Clarion, Prudential Principal and TH Real Estate — have established footprints in South Florida. Recently, Bridge Development sold three industrial buildings to Duke Realty in Hialeah Gardens for $118 per square foot in ‘cold dark shell’ condition. Fueled by proximity to Miami International Airport and land constraints throughout the region, the majority of the growth has occurred in the Medley and Doral area.” — Steve Wasserman, Executive Vice President | South Florida
The South Florida industrial market — which encompasses Miami-Dade County, Broward County and Palm Beach County — has experienced significant post-recession growth because of its strong logistics advantages and burgeoning young population.
These drivers make South Florida an excellent choice for both regional and last-mile distribution. Because of this, vacancies remain low and asking rates are nearing all-time highs, making the region a popular option for institutional owners to invest in.
South Florida boasts multiple logistics advantages across sea, air and land. One such advantage is Port Everglades, which is located on the southeast coast of the Florida peninsula. Port Everglades is one of the most active containerized cargo ports in the U.S. and serves as South Florida’s main seaport for petroleum products.
Miami International Airport (MIA) — which is ranked #1 in the U.S. for international freight — is also a major demand driver for the South Florida industrial market. MIA is a global freight hub, handling 83% of all air imports to the U.S. and 79% of all air exports from the U.S. to Latin America.
After peaking at almost 11% in 2009, the South Florida industrial market has posted significant year-over-year drops in overall vacancy to reach the 4% range.
As new developments have provided opportunities for occupiers to locate or expand within the region, vacancy now stands at 4.4% — just above the decade-low vacancy of 4% reached at year-end 2016. All three counties in South Florida finished Q1 2017 with a vacancy rate under 4.5%, further showcasing healthy fundamentals throughout the region.
Miami-Dade County led all other South Florida markets in Q1 2017 with more than 600,000 square feet in industrial net absorption — more than half of the total in South Florida in the first quarter. Activity looks on track to remain strong in Miami-Dade County in the coming quarters, with many e-commerce companies looking for space.
In Broward County, more than 400,000 square feet were absorbed in Q1 2017, with the strongest demand in the 10,000–30,000-square-foot size range. In another sign that the region is gaining in popularity with both regional and last-mile e-commerce distributors, spaces with high parking ratios are experiencing the most demand in the county.
Palm Beach County finished Q1 2017 with more than 200,000 square feet of absorption. Echoing the trend in Broward County, small building product with high parking ratios experienced the most demand in the county.
In Q1 2017, more than 2.7 million square feet of industrial product completed in South Florida — only 800,000 square feet less than in all of 2016. Low vacancy rates and high demand across size ranges are the main drivers for this level of construction.
While product under construction dropped in the first quarter below the decade-high total of nearly 5.5 million square feet at year-end 2016, a healthy 4 million square feet remain under construction. This development will provide tenants with much-needed Class A options for the remainder of the year.
New completions were strongest in Miami-Dade County in the first quarter, with more than 1.3 million square feet completing. The largest influx of new supply in the coming year is expected to enter the Miami West submarket, with more than 1 million square feet under construction.
Industrial asking rates in South Florida finished Q1 2017 at $7.50 per square foot per year — the highest mark since the pre-recession high of $8.05 per square foot per year in 2008. Rents remain highest in Miami-Dade County, which finished the first quarter at $9.90 per square foot per year — 8.6% higher than this time last year. Broward County and Palm Beach County also posted year-over year rental rate gains of 8.3% and 7.2% respectively.
Because of strong rent growth, capitalization rates for institutional-quality assets in Broward County are in the 5% to 5.25% range and 4.5% to 5% for institutional-quality assets in Miami-Dade County.
|Inventory||Overall Vacancy Rate||Overall Net Absorption||New Supply (Construction)||Under Construction||Asking Rental Rate (psf/yr)|
|Overall Vacancy Rate Q1 2016||Overall Vacancy Rate Q1 2017||Asking Rental Rate Q1 2016||Asking Rental Rate Q1 2017|
500,000 SF +
Source: Colliers International
For more insights, learn about the top 10 U.S. industrial emerging markets positioned to experience the most robust increases in demand from occupiers and owners. And stay tuned for more Industrial Market Spotlights!