Miami is an international city, and some of its real estate troubles come from woes beyond its borders.
Industrial vacancy is expected to rise and rents fall in Miami-Dade County this year, according to the Midyear 2009 National Industrial Report by Marcus & Millichap. The firm predicts a drop in international trade will decrease the space needs of importers and exporters.
South Florida’s international trade numbers reflect its connection to the global recession, particularly the lagging performance of Latin America. The Miami Customs District saw international trade fall 12.8 percent — more than $3.6 billion — in the first four months of the year, according to WorldCity, a Coral Gables-based media company that analyzes trade statistics.
“Latin America lagged behind in terms of a demand for products,” said Greg Zeifman, an associate in the Miami office of Marcus & Millichap. “We’re not seeing as much on the docks as we did six months ago. That trickles down to a decreased need for warehousing.”
Marcus & Millichap forecasts industrial vacancy rates in Miami-Dade County will rise to 12 percent this year, reflecting negative net absorption of 3.9 million square feet, up from negative 3.5 million square feet in 2008.
Asking rents are expected to fall 6.8 percent to $6.41 per square foot in 2009. Effective rents are projected to drop 8.6 percent to $6.15 per square foot.
“Miami is in a position to get a double crunch as far as industrial is concerned because construction has definitely slowed and that has put a lot of local suppliers out of business,” Zeifman said. “Then the international business is slowing on the other side.”
According to CB Richard Ellis’ June report, landlords looking to attract or retain tenants are increasing concessions and incentives, and speculative development decreased by nearly a third compared to 2007 as supply outpaced demand.
Still, the vacancy rates are in line with what the market posted two years ago, according to Jose Juncadella, principal of Miami-based Fairchild Partners Commercial Real Estate Services, a boutique commercial brokerage firm. But with two new properties coming online in early 2009 — 600,000 square feet at Lincoln Logistics Park and about 250,000 square feet at Beacon Lakes – rental abatements and higher tenant improvement allowances are not uncommon.
Miami is performing better than the rest of South Florida’s industrial markets, however, and most industry watchers predict a strong rebound when it arrives.
The CB Richard Ellis report suggests Miami’s industrial real estate market will rely on its role as the gateway to Latin America to bring the market through difficult economic times.
Miami is also well positioned because market fundamentals prohibited most industrial developers from overbuilding in the boom times. Land was too expensive.
“Miami’s industrial market is going to recuperate faster than most other cities,” Juncadella said. “We still do a lot of industrial trade and we’ve expanded our prospects beyond Latin America to other nations, including China. Moving forward, the outlook is very positive.”