Posted on November 8, 2016 · Posted in Industrial / Flex, Investments, Land, Retail

While South Florida residential developers clamor for the global spotlight with jaw-dropping amenities and luxury finishes, an equally important story is unfolding in our region’s industrial real estate landscape.

Residential sales activity might be a good gauge of demand among international buyers, but trends in our industrial sector — comprising warehouse and logistics space — are a far better barometer of our local economy’s well-being.

Fueled by our strategic location as a staging area for Latin America, the trend of new companies entering our market, a growing population and fast-changing consumer trends such as online sales and the rise of subscription-based services, investment activity on the part of major industrial developers and owners is reaching fever pitch across South Florida.

Our inventory of industrial space has grown by 9 million square feet in the past three years, according to a new construction update published by JLL Research. Another 4.6 million square feet of warehouse space is expected to come online this year, surpassing last year’s record of 3.9 million square feet. For reference, this year’s inventory of new space in Miami-Dade will be equal to more than 80 NFL football fields.

This burst of development and investment is good news for our economy. Unlike the residential market, which hinges on dramatic cycles largely guided by macroeconomics, the industrial sector is a reflection of consumer activity right here in our backyard and all signs point to continued stability as our population expands.

South Florida gained nearly 500,000 new residents in the past five years, and U.S. census estimates forecast additional growth through 2020. These new residents are generating consumer demand, requiring more warehouse space to be built and occupied.

Simply put, warehouses store goods ranging from electronics and car parts, to perishables such as fresh-cut flowers and food. As people move into a community, there is greater need for more inventory and distribution channels. This activity also leads to job creation, and we’ve seen our region’s manufacturing and logistics workforce grow by approximately 5 percent since 2013, according to the Department of Labor.

Because consumers in today’s digital world are increasingly prioritizing delivery time when it comes to making purchasing decisions, online retailers and distributors are aggressively leasing warehouse space in major markets in an effort to increase speed and efficiency.

Amazon is reportedly negotiating a lease for an 850,000 square foot warehouse. This is in addition to its existing footprint of over 500,000 square feet of space in Miami-Dade. Another example is the recent announcement that KLX Aerospace Solutions will expand its distribution center and headquarters with a new facility totaling more than 500,000 square feet.

All told, South Florida tenants have leased 18.9 million square feet of warehouse space over the past three years, sparking new ground-up development and industrial property sales valued at more than $1 billion in 2015 alone.

While numbers like these might hint at over-development, JLL Research indicates the need for industrial space in our market will continue growing thanks to new residents pouring in and the ongoing trend toward e-commerce. Online sales accounted for 8.1 percent of all retail purchases in the second quarter of this year, up from 7.1 percent at the same time last year, according to the Department of Commerce. That’s a 14 percent increase in 12 months.

Reduced delivery times are also yielding demand for industrial space. It wasn’t long ago that consumers were satisfied waiting seven days for items to be shipped. Today, most people want their merchandise delivered within 48 hours — or less.

Much the same way South Florida has gained prominence from a cultural, culinary and tourism standpoint, our industrial real estate sector is now considered a top-tier U.S. market, alongside Los Angeles, New York, New Jersey, Chicago, Atlanta and Northern California.

Our region is attracting the industry’s premier developers, property owners and tenants — and we’re experiencing never-before-seen levels of investment in our logistics infrastructure. All of these factors bode well for South Florida’s real estate landscape and our broader economy.

 

Source: Miami Herald

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