Top South Florida industrial real estate investors believe the positive momentum the market enjoyed in 2018 will continue this year, thanks to strong demand, e-commerce and other factors.
Steven Wasserman, EVP at Colliers International South Florida, shared with Globest.com some of the highlights from the recently held 12th Annual South Florida Industrial Owners Forum hosted by Colliers International in Miami.
Wasserman says the forum, attended by more than 70 industrial owners and representatives from across South Florida, featured a number of live polls that clearly indicated a positive outlook for the market, despite some market dynamics that could impact the sector.
He says institutional investors are bullish on South Florida and pointed to major deals of late including Bridge Development’s purchase of a 185-acre former landfill in Miami Gardens, as well as increased investment in South Florida industrial real estate by Wall Street firms including Gramercy Property Trust, which was acquired last year by Blackstone for $7.6 billion and MDH Partners. Both firms have industrial real estate holdings throughout South Florida.
“We expect the momentum in the South Florida industrial market to continue in 2019 due to changing consumer dynamics as a result of e-commerce and continued population growth,” Wasserman said. “All of these factors are causing increased occupancy rates, rapidly rising rents, and record-high net absorption in 2018, making industrial the best asset class for investors.”
Industrial owners at the forum said they do not foresee an oversupply of inventory in the next two years and believe cap rates will settle at 4.5% or less this year. In fact, owners contend that an additional 50 million square feet of industrial space is needed over the next five years based on forecasted population growth and historical absorption per capita in South Florida, Colliers reported.
“The majority of owners and representatives believe the issue of land scarcity in South Florida will continue to drive higher rents,” Colliers states in its recap report on the forum. “Despite an inevitable downturn, South Florida is still a good market for investments with much capital available and a large amount of new deliveries coming online that is expected to be quickly absorbed.”
Other headwinds for the industrial market include: prolonged permitting processes, rising construction costs, shortage of laborers and a looming idea of the possibility of a market correction over the next 24 months.
“To prepare for a down market, owners are approaching tenants to renew their leases early,” Wasserman says.
While industrial real estate owners were bullish on the market going forward, Wasserman says, “Although South Florida is a hot bed for industrial investment activity, we should expect a lower return environment over the next few years.”