The industrial real estate market in Palm Beach County is red hot, powered by the booming residential market, experts say.
“We’re seeing tenants like air conditioning, tile, marble, plumbing and lumber companies,” Robert Smith, who deals heavily with industrial real estate as executive vice president of CBRE in Boca Raton, told The Real Deal. “A large percentage of industrial users are housing related.”
Robert Smith
Palm Beach County is one of the few areas in South Florida with space to build single-family homes, he noted. And thousands of homes are planned by the likes of Pulte, Kolter and Minto. “Nobody has built industrial space to support that growth,” Smith says.
So it’s no wonder that the vacancy rate for industrial properties in Palm Beach County fell to a 10-year low of 3.4 percent in the first quarter by CBRE’s calculation.
“There’s a scarcity of product,” Douglas Mandel, senior vice president of investments at Marcus & Millichap in Fort Lauderdale, told TRD. “Occupancy is so high that landlords are pushing rents higher across the board — for all types of property.” Rents rose 4 percent to $8.86 triple-net per square foot in the first quarter from the year-earlier period, according to CBRE.
The scarcity of industrial product hasn’t gone unnoticed by developers. They plan more than 1 million square feet of industrial buildings in the unincorporated area along Florida’s Turnpike between Southern Boulevard and Belvedere Road outside West Palm Beach, according to the Palm Beach Post.
McCraney Property Co.’s Turnpike Business Center will be located there, with 388,000 square feet of warehouse and distribution space. Construction already has begun. Development also has started on Liberty Airport, a 70-acre site that is slated to include 640,000 square feet in seven buildings. And Duke Realty intends to build 822,850 square feet at Belvedere and Jog Roads next to the turnpike.
“The next trend I see is developers building condo warehouses again like they did in 2003-06,” Smith said. Industrial tenants want to buy their space rather than lease it, because interest rates are so low. “For a lot of small service users that want to own, spaces of 3,000 to 8,000 square feet don’t exist,” he said. “That means condos will be the next wave.”
Another factor boosting industrial demand is the growth of online retail sales, Mandel and Smith agree. Warehouse and distribution space are needed to ensure that consumers get their goods of choice in a speedy manner.
“We’re a consumption economy, and nothing is really produced here,” Mandel said. “At the same time, people want same-day delivery.” FedEx moved into a 225,000-square-foot distribution center along the turnpike at Pike Road in West Palm Beach last year.