The industrial real estate market is booming in Palm Beach County, as the strong economy spurs demand while the supply of property grows only slowly.
“There’s a very limited supply of buildings for sale, so prices are going up,” Rebel Cook, president of Rebel Cook Real Estate in Palm Beach Gardens, told The Real Deal. “It’s purely economic: the economic recovery has created demand. Unlike in 2005-06, when a frenzy drove prices up, this is a true economic cycle.”
The industrial market absorbed a whopping 682,000 square feet of property in the first quarter, with the West Palm Beach area accounting for 95 percent of that, according to a study by CBRE. The vacancy rate fell 1.1 percentage points from a year earlier to 5.2 percent. The average asking lease rate jumped 17 percent to $8.52 per square foot.
Among notable developments, McCraney Property Co. expanded its Vista Distribution Center in West Palm Beach by developing two dock-high warehouse/distribution buildings totaling 95,634 square feet, of which 19 percent has been leased to Wellington-based book dealer Nodara.
“The market is extremely active. Our biggest challenge is we’re out of quality space completely,” Robert Smith, senior vice president of CBRE in Boca Raton, told TRD. “Existing companies are doing better, so they are requesting more space. Rental rates had to get to a level to justify new construction. Now some developers are finally starting to build speculative product.”
One planned project is Duke Realty’s Turnpike Crossings located in West Palm Beach. Site work and clearing is underway for two buildings that will bring over 225,000 square feet of inventory to the market in early 2016, according to CBRE.
The hottest markets in the county are Jupiter, Palm Beach Gardens and West Palm Beach, because the southern area already is more developed residentially, Smith said.
“The most expensive market is Jupiter-Palm Beach Gardens because of the higher demographics there,” he said. “Riviera Beach, which historically was a less desirable market is now very tight. So you’re left with nothing.”
And the market is unlikely to cool down anytime soon, Smith and others agree. “With few developments coming out of the ground soon, I predict prices will continue going up for at least another year,” Cook said. “The strong property shortage argues for higher prices for quite a while, unless something changes in the economy.”
Smith has only one concern: “if [rental] rates and [property] prices keep increasing, it won’t be affordable for a lot of companies.”