Posted on July 27, 2021 · Posted in Industrial / Flex, Investments, Retail

The industrial market is continuing to grow in South Florida, according to Collier’s Q2 market report for the region, which means airport and cruise port access will become ever more crucial in the coming years.

There’s huge investor demand to buy existing, vacant or income-producing land, according to Colliers’ Steve Wasserman, who said there’s also a shortage of good-quality buildings to sell to owner-occupants, though that could depend on whether you’re a tenant or buyer.

“There’s a tremendous amount of new construction going up over the next year or two with investors,” Wasserman said. “It seems to be getting absorbed on a reasonable basis. For example, First Industrial just leased 140,000 square feet in Pompano Beach to a company that’s in the building supply business, and they also did a 300,000-square-foot deal with a freight company. Other than Amazon, there’s still a good amount of activity taking place.”

In Miami-Dade, the industrial market attracts big interest and investors can take advantage of low borrowing costs, which allow their investment dollars to go further. According to the market report, leasing activity in the second quarter of this year was strong, nearing three million square feet and bringing net absorption to nearly five million square feet by mid-year.

The biggest lease in the quarter was Amazon’s 216,000 lease in Homestead. Amazon is the largest occupier of industrial space in Miami-Dade, Broward and Palm Beach counties. The active market brought the vacancy rate down to 3.9%, with warehouse and distribution asking lease rates above $10 per square foot.

According to the report, opportunities to invest are hard to find in Broward County, as investors look for well-leased and ideally-located industrial products. That said, there were a number of deals transacted for more than $20 million in the second quarter of this year, which makes for an appealing market for both investors and tenants.

“The price of land, if you did a look back over the past five years, has probably escalated to $1.5 million an acre. The land in the last five years may have been $500,000 an acre, so it’s gone up $1 million an acre if you can get it, and it’s fully entitled,” Wasserman said. “No. 2, cap rates, which is the return the investors are looking for, have slid down, again five years ago, maybe from about six to a four. If it’s a top-quality space in the right business park with the right tenant, it can even go below four. That’s the return to the particular investor.”

The vacancy rate went up to 7.6%, with an asking rate averaging nearly $10 per square foot. Some of the biggest deals included Amazon’s leases in Coral Gables and Tamarac Business Center, plus renewed leases of Vital Pharmaceuticals and Universal Technical Institute.

Although Palm Beach County’s deals have been predominantly smaller than in Miami-Dade and Broward counties, its net absorption is the strongest it has been since 2017. According to Colliers, delivery of 437,530 square feet has helped to offset the county’s heightened demand for industrial products.

There’s currently 351,000 square feet of industrial space under construction in Palm Beach County and the vacancy rate has stayed low over the past 18 months, despite the pandemic and new developments in the area.

Wasserman says the logistics demand and access to the airport and the cruise ports are going to be more important over the next five to 10 years, to keep up with the increase in production in food, linens, goods and merchandise from Asia and abroad. Wasserman also expects to see more fragile or perishable products, such as fish, coming through airports.


Source: GlobeSt.

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