Warehouses are the hottest thing in commercial real estate these days.
Sustained growth in jobs, population and consumer confidence are driving expansion for contractors, building supply companies, food distributors and other businesses in need of industrial space across South Florida. As a result, vacancy are falling, rents are rising and developers are rushing to build more warehouses — in some cases “on spec,” without having tenants lined up.
“Those gorgeous, high-rise condo towers are the projects that everybody is focusing on, but the companies doing all of that construction are users of industrial space,” said Eric Rapkin, managing partner of the Akerman law firm in Fort Lauderdale. “All those building supplies — carpet, drywall, air conditioners — are trucking through warehouses to get to the end users,” added Tom O’Loughlin, a broker for the CBRE firm in Fort Lauderdale.
While the office and retail markets are bouncing back from the recession, industrial is booming, in part because rents are cheaper than the two other commercial sectors. In fact, some small retailers are saving money by cutting back on storefront space and renting warehouses for storage, said Edward W. Easton, chairman of The Easton Group, an owner and manager of industrial space in Palm Beach and Broward counties.
Palm Beach County’s industrial vacancy rate in the first quarter was 5.2 percent, down from 6.3 percent a year earlier, according to CBRE. Over the same period, Broward County’s warehouse vacancy dropped from 7.7 percent to 6.2 percent — a five-year low. The average asking rental rate in Broward rose slightly to $7.68 a square foot in the first quarter, while Palm Beach County’s average rental rate jumped 17 percent to $8.52 a square foot, CBRE said.
Within two weeks, McCraney Property Co. is due to complete the 100,000-square-foot Vista Distribution Center in the Vista Business Park off Okeechobee Boulevard in West Palm Beach. McCraney expects to break ground within 90 days on Turnpike Business Center, a 483,000-square-foot project adjacent to Florida’s Turnpike at Belvedere Road. Duke Realty and Liberty Property Trust also have industrial developments planned nearby.
Earlier this month, Butters Construction and Development of Coconut Creek announced plans to build warehouses and offices as part of a 925,000-square-foot business park on the former Deerfield Country Club in Deerfield Beach. The first two industrial buildings — more than 258,000 square feet — will be built on spec.
South Florida has long been viewed as one of the nation’s top industrial markets because of its easy access to major thoroughfares and its proximity to Latin America, said Wayne Schuchts, a principal at the Avison Young firm. “It’s all about time and money,” he said.
Aside from the economic recovery, a push by Florida Gov. Rick Scott to attract niche manufacturing companies to the state has helped boost demand for warehouses, CBRE’s O’Loughlin said.
Less than two years ago, industrial landlords were wooing tenants, who had their pick of buildings and worry-free rental rates, brokers say. Now tenants are scrambling to find space with landlords firmly in control. “I wouldn’t say we’re in the catbird seat, but it is nice to see the market turn around,” said Steven McCraney, CEO of McCraney Property. “I would say industrial is the premier product today.”