Neither ongoing international trade disputes, nor the warning signs of a potential recession, nor the uncertainty that’s emanating from a particularly fraught U.S. presidential election year are enough to dim the enthusiasm for the industrial real estate sector, according to the findings in NREI’s sixth annual study.
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.
Much the same way Miami has gained prominence from a cultural, culinary, and tourism standpoint, the city has become a hotbed for industrial investment activity.
The industrial real estate sector is now considered a top-tier US market, alongside markets such as Los Angeles, New York-New Jersey, Chicago, Atlanta and Northern California.
Occupancy rate reached 96% in Miami-Dade in 2016, marking the highest rate in its history. Over the past 24 months alone, over 7 million square feet of industrial space has been absorbed in Miami-Dade. For reference, not long ago anywhere from 500,000 square feet to just over 1 million square feet of absorption would have been considered a very good year for Miami.
In an exclusive interview with GlobeSt.com, JLL managing director and South Florida Industrial Lead, Brian Smith breaks down what’s driving Miami’s industrial boom. In part two, he will discuss how much new industrial construction we can expect in the near future and the biggest leasing trend taking shape in Miami’s industrial market.
GlobeSt.com: What is driving this surge in industrial absorption across Miami-Dade County?
Smith: E-commerce and population growth are contributing to most of the region’s record high absorption rates. By 2020, Miami’s metro population is expected to surpass 6.2 million people. This coupled with the increasing popularity of e-commerce, as retail sales in the region are up 4% year-over-year, have been the main drivers of this strong performance and the most prominent force shaping future demand.
With rental rates growing by 35%, Miami has experienced the highest industrial rent growth since 2010 compared to other similar industrial markets across the country, such as Northern New Jersey, which has grown by 16.6% since 2010, Seattle has seen a 2.3% increase and Oakland’s rates grew by 0.6%.
GlobeSt.com: How is this spike in activity affecting institutional investment in Miami’s industrial market?
Smith: Miami is seeing an influx of institutional capital as capitalization rates—the rate of return on a real estate investment property—grow increasingly favorable. New players are continuing to enter Miami’s industrial market with institutional entities serving as the biggest net buyers of industrial space in the region.
Miami recorded over $680 million in total sales volume in 2016. Miami’s industrial market currently sits at a 5.2% cap rate for class A space. This rate is being spurred by historically low vacancy rates, demand outpacing supply and resilient pricing.