Industrial real estate has been the one of the most sought-after property types nationally, leading to record low vacancies and increased competition among investors and tenants. When it comes to selecting a market for industrial investment, port markets are emerging as the safe bet for investors to park capital due to the positive rental growth profile.
Miami’s industrial market, which includes all of Miami-Dade County, is the nation’s top performer for annual rent growth, according to a JLL report.
Year-over-year, the Miami industrial market experienced a 53 percent jump in rent, more than Los Angeles, which had the second highest rent hike at 45 percent, and New York/New Jersey, which had the fourth highest rent growth at 26 percent, the report shows. Industrial markets close to ports like Miami, New York and Los Angeles remain attractive for investors looking to secure long-term income growth, despite recent interest rate hikes, JLL found.
Renters of industrial properties are facing sticker shock in the current inflationary environment, with national effective rent growth expected to increase nearly 23% year over year in 2022.
“Although industrial has a reputation for shorter lease terms, the reality is that the weighted average lease term for industrial is around five to seven years, much like it is for office,” write Cushman & Wakefield economists Rebecca Rockey and James Bohnaker in a new analysis. “Many of the leases that are rolling today are therefore significantly underpriced on the tenant side, especially with escalations that may have been negotiated five to seven years ago.”