A surge in bulk purchases and an increased appetite for large lease spaces are driving a rapidly tightening Miami industrial market, brokers say.
The shift was highlighted by the largest industrial lease in Florida in two years, a 475,000-square-foot transaction by Bullet Line in Hialeah in January.
“We’ve seen a number of large transactions that have been indicative of the bulk, large users taking up this space,” said Devin White, a vice president at CBRE Group. “Over the last three months, we’ve seen a number of deals north of 200,000 square feet — so we’ve seen a trend in the bigger bulk spaces being absorbed.”
Those large deals include a 302,000-square-foot lease in Hialeah and a 166,000-square-foot lease in Miami Lakes, both of which transacted in January.
Much of the push for size has been coming from investors and tenants beginning to acknowledge that the market is much stronger than it was six or 12 months ago, according to White.
“It’s a combination of things,” he said. “Vacancy is declining, so tenants who were otherwise on the sidelines waiting for the bottom, they may have come to the realization that we’re past the bottom.”
As the big spaces fill up, the large real estate investment trust (REITs) and institutional investors who had been targeting large spaces are now looking for slots in the 40,000- to 50,000-square-foot range, which is having a ripple effect on the market — and making it difficult for smaller players.
“When REITs are starting to look at bids at those sizes of buildings, if the owners are selling, that makes it extremely difficult for a small company or a mid-sized company, to compete against a REIT,” White said.
The activity has been centered in Doral and the Airport West submarket, according to Greg Zeifman, an industrial/office specialist in Marcus & Millichap’s Miami office, although some value seekers are considering the Medley submarket further north.
“[Doral] has always been in demand. I think it’s still very much on the institutional radar screen,” he said.
On the leasing side, Miami-Dade County now has an overall vacancy rate of just under 8 percent, according to ComReal associate Chris Spear, who said demand was turning 2012 into the “Return of the Landlord.”
“We’re definitely seeing it shift into a seller’s market, where rates have slowly been creeping up and landlords have been getting tighter on tenant improvements and free rent,” he said. “It’s great for them, but the agent or buyer who still thinks we are where we were a year and a half ago is waking up quickly.”
It’s becoming a landlord’s market to the extent that 2012 could see a significant increase in rents.
“The Class A market, I think, is going to experience a good deal of rent appreciation this year, anywhere from 7 to 15 percent,” said Cushman and Wakefield’s Wayne Ramoski, one of the tenant brokers on the Bullet Line transaction.
“[Miami’s market] is very healthy,” he said.