At its core, South Florida is a narrow strip of land between the ocean and the Everglades. Those geographic constraints keep land prices rising, a phenomenon that is especially noticeable in the industrial sector, where rental rates are setting new records.
Miami’s average industrial asking rents reached an all-time high, $9 per SF, in Q4, according to CBRE, jumping nearly 50% in five years. JLL Managing Director Brian Smith said they have since inched even higher, with rates today around $10.25 per SF.
About a year ago, rent increases “took a break, reached a peak. Tenants weren’t willing to go where we pushed them,” CBRE First Vice President Larry Genet said. “But now we’ve surpassed those previous levels on a regular basis. We’re seeing additional rent growth beyond the previous levels we thought were the top. In some cases, we’re beyond the peaks of ’05, ’07 and in some cases we’re 15% [above].”
Smith recently led the team representing NBC Universal/Telemundo Enterprises in securing 550K SF for 20 years for a headquarters, which includes production studio space, that opened this month in western Miami Dade. Smith said it is the most valuable industrial lease ever completed in Florida, although he could not disclose the exact terms, which are confidential.
Several other big deals have closed in the past six months, including Eco Windows’ leasing of 182K SF at Airport North Logistics Center in Medley and John Deere leasing 116K SF at DCT Commerce Center II, according to CBRE.
Bisnow’s South Florida Industrial Market event May 1 at the InterContinental Hotel in downtown Miami, where Smith and Genet are featured panelists, will cover the hot market, biggest deals and design trends in the industrial sector.
In Broward County, the market is almost as tight as Miami — rents are averaging $8.14 per SF and the vacancy rate is 4.95%, according to CBRE. Broward has 14 industrial projects under construction, including 11 being built speculatively, indicating that developers are highly confident in the sector.
Genet said southeast Broward County, in particular Davie, Hallandale, Hollywood and Pembroke Park, are especially hot.
“Stronger than Airport West in Doral, stronger than north Broward, right in line with the best markets in Palm Beach,” he said.
Smith said all types of companies, from Amazon to tile companies to T-shirt screen printers, need industrial space. Third-party logistics companies specializing in last-mile distribution are booming.
Market fundamentals are strong: There is a boom in e-commerce, steady population growth, and Miami still fills its traditional role as a staging ground for Latin America. CBRE research noted that recent expansions of Port Miami and Port Everglades in Fort Lauderdale were also driving growth.
Smith said not only is there new development in the industrial sector, but also demand for bigger spaces — not just the old standard of 4K or 7K SF, but sometimes 200K and even 2M SF.
“People are realizing you don’t have forever if you want a large space in South Florida,” Smith said. “There are not 200 availabilities in the 4K to 5K SF range.”
“From ’01 to today, a lot of the retail and multifamily developers have certainly gobbled up sites that could have been or should have been, in any other environment, industrial,” Genet said. “Cities want certain uses in certain locations. They have rezoned certain areas for high intensity or transit overlays or mixed-use. There wasn’t a lot of industrial to begin with at a scalable level, 10 acres or more.”
Few private owners hold large parcels in South Florida any more — ownership has shifted to the institutional market and consolidated, the experts said. To meet demand, Genet said, man-made lakes that had been created are now being filled in and put into development. Underused sites like golf courses and churches have been rezoned and entitled. Even polluted sites like landfills and garbage transfer stations are being scraped or capped and coming to market.
Genet said that Waste Management sold a 40-acre site in Pompano Beach to Bridge Development for $12M in November, and the city of Hollywood is selling a site that has contamination and needs cleanup. Genet said that private industry taking over such sites is a positive thing.
“That’s the only way it’s going to get cleaned up,” he said.
“In the brokerage world, there’s also been a lot of consolidation,” Smith said. “It’s harder to be ‘single shingle’ because a lot of big brokerages have taken over — the CRBEs, JLLs and Cushmans of the world. There’s not a lot of product to go around. If you have a buyer who wants to buy 50K SF in Airport West, the options are slim to none.”
But companies shouldn’t worry, Genet said.
“There’s definitely a lack of developable land for industrial, but we keep finding it,” he said. “Everyone says it doesn’t exist — but we keep turning it over here and there.”