While Miami’s industrial real estate market showed both a rise in vacancies and a decrease in leasing rates, the sector’s weakening was not as serious as anticipated, according to a report on the first quarter of 2009 by ComReal commercial real estate.
Lease rates fell to around $8.30 per square foot from $8.51 at the end of 2008, and vacancy rates climbed to 8.8 percent from 8.2 percent at the end of 2008.
The numbers, especially vacancy rates, clearly beat predictions, said Edward Redlich, ComReal Miami vice president. He said he had expected to see a vacancy rate closer to 10 percent. The lower-than-predicted vacancy rate is an encouraging sign that economic decline is slowing, even in hard-hit South Florida.
“It was less than expected,” said Redlich. “We were expecting the numbers to be a little bit more negative, and we were pleasantly surprised. A lot of it has to do with international business that Miami gets a lot of. Other markets — if you go to Orlando or Dallas, 10 percent is a normal vacancy market, and now they’re at 20 percent or more. Here in South Florida, being in a national recession, it’s not all that bad.”
Redlich said several of his recent deals had come with international clients from Brazil and Venezuela, seizing on the weak market.
Overall, average lease deal volume dropped to around 9,350 square feet.
“Typically in a quarter you’ll see an average deal size of 20-30,000 square feet per quarter,” said Redlich. This was just pitiful — the amount of deals recorded, as far as leases, that’s very low. We were lucky to have done three of the larger transactions. 16,000 square feet, that’s not very respectable, even in this market.”
One sector that showed particular promise according to the report was the Miami Airport West area of Doral, both for its newer, Class A and Class B buildings and its variety of transportation arteries.
“In the airport area, we have roughly 70 million square feet of warehouse in Doral. A lot of importer-exporters, they like it because it’s at the Palmetto Expressway, the Dolphin Expressway, so for transportation it’s really good as far as distribution and logistics.
“It’s the older buildings, like in Hialeah, that have been hit hard — their values have dropped as much as 40 percent. This has retained its value, with probably about a 10 to 20 percent decline.”
Redlich said that despite the slighter-than-predicted decline, the vacancy rate is going to continue to go up, and lease rates will continue to go down slightly, though there are signs of life.
“How could any businessman make a decision in the last six months? With the economy, the election, it’s understandable that nobody wanted to make a decision and commit,” Redlich said. “Fortunately, we’re starting to see people looking around, poking their heads out.”