There’s a niche market rising on Miami’s industrial real estate scene: leases under 25,000 square feet and satisfying distribution needs in the realm of smaller space.
While everyone speaks about the large deals, these smaller industrial transactions make a significant footprint in the local economy, driving business beyond e-commerce. GlobeSt.com caught up with Ernesto Cambo, principal of cpf investment group, developer of AVE Aviation & Commerce, to get his take on the trend.
GlobeSt.com: Why is the market of under 25,000-square-foot industrial spaces experiencing increased demand?
Cambo: Miami’s industrial market demand has been consistently high for years, with some of the best conditions for space to be quickly absorbed. According to the JLL Miami Market Comparison report for 2017, vacancy rates in Miami are lower than the 5.2% national average, now sitting at 3.9%.
In the last 18 months, we are especially seeing this trend follow demand for space under 25,000 square feet. This growth is fueled by the loosening of capital, which has allowed small businesses in various sectors—such as e-commerce, international trade—to grow inventory and cement their presence in South Florida.
There is, especially, a flight to quality class A assets, which represent only approximately 11% of the market. AVE Aviation & Commerce has delivered 300,000 square feet of spec warehouse and distribution space allocated for tenants under 25,000 square feet. Year-to-date, the business park has leased 170,000 square feet of such space.
If you build for this niche market, they will come. Top-grade amenities are one important draw, such as underground utilities, curb and gutter infrastructure, efficient pole-free design, disaster recovery, and extended power outages.
GlobeSt.com: What kind of industries, aside from e-commerce, are utilizing smaller-scale distribution space?
Cambo: The range of industries seeking warehouse space is expanding by the moment. Local population growth is the key driver to shifting industrial consumption, where smaller businesses can now easily function in the same sphere as major tenants that may require a much more substantial footprint.
At AVE Aviation & Commerce Center, recent tenants are expanding the diversity of its mix, including home supply companies, cruise support, and logistics. As the local economy evolves, we expect to see more transactions arise from other industries, such as those related to art, health care and food and grocery. (Some are saying experiential retail projects like Avalon in Atlanta could transform the industry.)