Strong fundamentals signal surge in South Florida industrial markets

South Florida’s industrial market has seen over 33 million square feet of net absorption since the end of the recession.

Following 2015’s record-setting year of 6.9 million square feet of absorption, 2016 logged another 4.7 million square feet for a combined total of 11.6 million square feet of positive net absorption within the past two years. This year’s deal activity is set up to continue this robust movement of growth.

What’s behind the surge?

“Primarily, three factors are driving demand for industrial property in Miami-Dade, Broward and Palm Beach Counties: growth of e-commerce, international trade and soaring consumption due to population growth,” said Steve Medwin, executive managing director at Newmark Grubb Knight Frank in Miami.

Among major markets, strong office-leasing trends often precede an industrial boom. Indeed, South Florida vacancy rates are sinking, with Miami/Dade at 3.5 percent, followed by Palm Beach at 4.3 percent and Broward at 4.8 percent.

Meanwhile, average asking rents are at an all-time high. Miami rates are at $7.12 per square foot (psf) on a triple net ( NNN) basis, Broward rates are at $8.84 psf and Palm Beach rates are at $9.51 psf.

According to Newmark Grubb Knight Frank (NGKF) Research’s statistics, the strongest-performing submarkets for industrial leasing in South Florida include Medley, Airport West and Hialeah/Hialeah Gardens. Medley led the region in deal activity with 1.3 million square feet of transactions, Airport West saw 1.2 million square feet of transactions and Hialeah/Hialeah Gardens had 780,000 square feet of transactions.

“The vast majority of transactions are expansions and new-to-market companies. We have seen major users absorbing spaces five, 10, even 20 times larger than the historical average deal size in our markets,” said Medwin.

Some recent deals that demonstrate the strength of the market include:

• Amazon — 850,000-square foot build-to-suit lease
• KLX Aerospace — 550,000-square foot build-to-suit lease
• Pricesmart — 350,000-square foot build-to-suit sale
• Withers Transportation — 150,000-square-foot lease
• Expeditors International — 112,000-square-foot lease

“Until the end of the recession, it was rare to see more than 10 deals per year over 100,000 square feet,” said Nick Wigoda, executive managing director at NGKF in Miami. “Now we are seeing dozens of them, along with numerous deals for more than three times that amount of space.”

Original Content SF Business Journal