The industrial construction boom in Miami-Dade is waning and development of new warehouses will take a dip in 2019, according to the Commercial Industrial Association of South Florida’s Annual Industrial Market Report.
While rental rates increased slightly in 2018, the cost of land acquisitions and construction is becoming too expensive for developers to consider new projects. Rezoning of industrial properties into retail and office uses is also limiting development.
“A decline in new construction is expected because rental rates do not support the increased costs for land and construction,” said Andrew Dixon, a broker with Dixon Commercial Real Estate who co-authored the report. “The decrease in industrial land has resulted in increasing prices for land suitable for development.”
Industrial developers are seeing increased competition from commercial builders that are paying top dollar for sites ripe for redevelopment. For instance, the CIASF report highlighted the $40.3 million a joint venture between Terra and Terranova Corp. paid for PepsiCo’s regional headquarters and distribution center in Doral in January of last year.
While the new owners are leasing back the 232,000-square-foot facility at 7777 Northwest 41st Street, Terra and Terranova want to rezone the property in order to build 500,000 square feet of commercial space.
Still, investor appetite for industrial warehouses remained strong in 2018, according to the CIASF report. A total of 6.4 million square feet of industrial space was sold in 2018, an increase of about 2 million square feet over the previous year. The combined dollar value of all industrial sales in 2018 totaled $621 million, roughly $203 million more than the previous year. The average price per square foot was $96 compared to $80 in 2017.
