Booming e-commerce and a growing population are propelling industrial rents and new construction in Miami-Dade, with rental rates skyrocketing by 35 percent since 2010, according to a newly released report.
In its report, JLL found that Miami-Dade absorbed 7 million square feet of industrial space during the past two years, with more construction and higher growth in rental rates than three other major markets in northern New Jersey, Seattle, Washington, and Oakland, California.
JLL compared Miami to the other markets because all share similar drivers of demand, local consumption and are all are port driven. Of the four markets, Miami has experienced the highest rent growth since 2010, at 35 percent, followed by Northern New Jersey at 16.6 percent, Seattle at 2.3 percent and Oakland at 0.6 percent, JLL analysts found.
“Total local consumption in general is driving the market,” said JLL Florida research manager Marc Miller. “In many cases, the Miami area is the final destination of what is coming in through the ports.”
Miller said Miami came out on top because Miami’s metropolitian population is growing at a faster rate and the increasing popularity of e-commerce has fueled demand for companies seeking industrial warehouses for regional logistical operations, like the recent expansion of Amazon fulfillment centers in Miami-Dade.
In March of last year, Amazon signed a lease with Flagler Global Logistics for an 117,235-square-foot warehouse at 3200 Northwest 67th Avenue near Miami International Airport. Recently, Amazon surpassed that deal by announcing it signed a lease for a third distribution center inside an 800,000-square-foot warehouse at Miami-Opa Locka Executive Airport.
“Delivery trends show that more e-commerce companies are taking space near the urban core,” Miller said. “Because of the density of South Florida, it makes more sense to be in the region than rather being 100 miles away.”
Miller said the Miami market is also benefitting from an influx of institutional investors and large scale tenants like Amazon and John Deere. The JLL report noted that institutional entities are the biggest net buyers in the Miami area, which recorded over $680 million in total sales volume in 2016. He also added that users of 100,000-plus-square-feet of warehouse space are becoming more common.
For instance, Dallas, Texas-based Lincoln Property Co. in June added the Miami International Logistics Center to its portfolio by paying for $27.4 million, more than twice for what it sold for in 2013. The center is a two-story, 500,194-square-foot building that sits on 20 acres at 725 Southeast Ninth Court.
In another notable deal, Prologis bought a 343,553-square-foot industrial building in Opa-Locka for $25.75 million. Seagis Property Group also fully leased its 174,024-square-foot Doral Logistics Center when it rented the remaining 88,680-square-feet to an aircraft supply company. And the 5-million-square-foot Miramar Park of Commerce added 150,000 square feet of new leases, renewals and extensions.
“From our perspective, Miami has really taken off in the eyes of investors and larger tenants in recent years,” Miller said. “Before it was smaller businesses and smaller local ownership. In the last three to four years, we have seen more sophisticated ownership coming in because of the economic drivers, as well as large scale warehouse users entering the market.”
According to the JLL report, Miami leads the pack in terms of new construction. In the last six years, the region’s industrial stock has increased by more than 8.8 million square feet, or an average of about 1.2 million square feet annually. The new development pipeline currently stands at more than 4.1 million square feet under construction with another 14.2 million square feet planned for future development, the JLL report states.
“It is premature to start worrying about overbuilding,” Miller said. “We are seeing that the industrial market will close out the second half of the year much stronger than the first half. But supply and demand is something to keep an eye on.”