Saturday, February 9, 2019

Miami's Industrial Leasing Surges on Record Demand, Boosted by Shipping

Miami's Industrial Leasing Surges on Record Demand, Boosted by Shipping

Investors Eager to Put Their Money in a Top US Port Market

Metropolitan Miami’s industrial market is surging with unprecedented demand for rents, vacancies and leasing, fueled by e-commerce, port upgrades and the region’s status as one of the most coveted ocean shipping centers across the United States.
The average industrial asking rental rate for Miami-Dade, Broward and Palm Beach counties in the fourth quarter of 2018 hit $8.75 per square foot, eclipsing the previous mark of $8.54 set in 2007, the Newmark Knight Frank brokerage said in a new report.
In Miami-Dade , the average industrial asking rate climbed above $8 a square foot for the first time, the report shows. Palm Beach County’s average rate reached $10 a square foot, the highest ever in Florida.
Meanwhile, the tri-county area's leasing activity remains robust, with tenants taking 17.2 million square feet for the full year, breaking the 2017 record total of 10.6 million square feet.
South Florida’s industrial market is one of the hottest in the nation as companies seek more distribution space to fulfill next-day and same-day delivery service for online shoppers. In addition, the expansion of the Panama Canal in 2016 has brought more large ships to Florida ports, sparking improvement projects and boosting the value of nearby industrial developments, brokers say.
What’s more, institutional investors are pouring money into industrial real estate in Miami because it’s considered a gateway region to other countries, explained Steve Medwin, executive managing director for Newmark Knight Frank.
South Florida also is desirable because of a severe land shortage that makes it difficult for competitors to enter the market. The region is wedged between the Atlantic Ocean and the Everglades, limiting expansion and driving up costs for investors seeking to buy into the area.
New York-New Jersey, Seattle and Los Angeles-Long Beach also are enjoying industrial booms for similar reasons, Medwin added.
“REITs, pension funds are all looking to have a position in industrial properties in these markets because the fundamentals are so strong,” Medwin said. “There are no headwinds that we see on the horizon to slow it down.”
Single-digit vacancies are frustrating brokers and tenants across South Florida. Palm Beach County’s 3.4 percent vacancy is the lowest in the state, according to Newmark Knight Frank.
Kerry Jackson of Reichel Realty & Investments in Palm Beach Gardens, Florida, said he hasn’t seen the market this tight in his almost 30-year career. He's looking for 25,000- and 10,000-square-foot spaces for clients, with no luck so far.
“There are just a handful of options,” he said. “And if you throw in an extra requirement – like extra yard space or parking – it’s impossible to find. Everything is extremely compressed, which drives values up.”
Even with 4.7 million square feet of industrial space being completed across the tri-county region last year, demand still outpaces supply, though all the new space probably will lead to higher vacancies in 2019, according to the Newmark Knight Frank report.
Landlords probably will have the leverage to keep pushing rents, which already have grown by more than 5 percent over the past year, according to CoStar Market Analytics.
That should be a call to action for tenants, who may want to lock in longer lease terms to deal with the higher costs, according to Christos Costandinides, a market economist with CoStar Group in South Florida.
"You definitely want to use your negotiating power to account for what's happening in the market," he said.
Source: CoStar  FEBRUARY 06, 2019|PAUL OWERS

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