South Florida’s industrial sector continues to outperform the rest of the market still battling through the pandemic. Industrial rents rose significantly and leasing activity more than doubled throughout the region, according to second quarter reports by Avision Young.
In turn, industrial investment activity in Miami-Dade, Broward and Palm Beach counties has exceeded $2.5 billion since 2020. Institutional investors are eager to lay claim to recession-proof warehouses large enough and equipped to handle large e-commerce tenants. Such tenants are expanding as a result of online retail consumer demand, the reports show.
According to Avision Young, leasing activity in the second quarter represented half of the total recorded in 2020, and is expected to remain strong through the next two quarters. The overall vacancy rate fell slightly by 60 basis points to 4.4 percent. Miami-Dade has 5.1 million square feet of available industrial space. The 166 warehouses average between 20,000 square feet to 50,000 square feet, enough to satisfy pent-up demand from mid-size industrial tenants, the report states.
Base rents in Miami-Dade increased by 9.5 percent since the start of the pandemic and have continued a steady upward trajectory since 2016. Net absorption in the second quarter was 2.1 percent, compared to 0.9 percent during the same period last year. “Barring anything unforeseen, net absorption for 2021 is on pace to significantly outpace the performance of the last several years,” Avison Young said.
The average asking rent in Miami-Dade is $9.51 a square foot, and is highest in the Airport West submarket, where landlords are asking $10.65 a square foot.
Since the onset of the pandemic, industrial investment activity in Miami-Dade has hit $1.5 billion, and pricing for Miami industrial assets has surged by 18.5 percent, the report states. The second quarter’s largest sale was Brookfield Asset Management’s acquisition of Bristol Logistics Center, in the Airport West submarket, for $26.3 million, or $181 a square foot.
Leasing activity in the second quarter in Broward was close to 50 percent of the total recorded in 2020, with the expectation that it will accelerate through the end of the year, according to Avision Young. Half of the 11 industrial buildings currently under construction in Broward are between 100,000 square feet and 500,000 square feet, which are in heavy demand, the report states.
The vacancy rate in the second quarter hit 4.4 percent, the lowest since 2018. Absorption rose 1.6 percent compared to zero growth during the second quarter of last year. “Net absorption for 2021 is on pace to significantly outpace the performance of the last several years,” Avison Young said.
Base rents in Broward have increased by 5.4 percent since the start of the pandemic and have generally trended upward over the last decade, rising steadily since 2012, according to the report. Avision Young noted some landlords are starting to push for rent hikes of 4 percent in new tenant leases, “but there is little traction so far.”
Since 2020, industrial investment activity in Broward has totaled $546 million, with pricing for industrial assets rising by 2.5 percent. The largest sale in the second quarter was Seagis Property Group’s acquisition of a warehouse building in Port 95 Industrial Park in the Southeast Broward submarket. Seagis, which also purchased a Medley warehouse in May, paid $24.6 million, or $173 per square foot for the Broward warehouse. That represented a 341 percent increase since the last time the property changed hands in 2011.
In Palm Beach, leasing activity in the second quarter approached 60 percent of the total recorded in 2020, and is expected to continue to accelerate, Avision Young said. The dwindling availability of Class A distribution space is creating heightened demand, which may be partially mitigated when new speculative projects break ground, the report states.
Currently, only two industrial properties are under construction. Both are in the Palm Beach Park of Commerce and have a total 1.2 million square feet. Amazon is filling up 1 million square feet with a distribution center, and the remaining 200,000 square feet is a speculative warehouse.
During the second quarter, the overall vacancy rate was 5.4 percent, the lowest since 2019, and net absorption was 0.9 percent, according to the report. “Barring any major economic shocks, net absorption for 2021 is on pace to eclipse the performance of the previous two years,” Avison Young said.
Base rents increased 12.8 percent in the second quarter compared to the same period last year, and continue to trend upward, according to the report.
Since the onset of the pandemic, industrial investment activity in Palm Beach has reached $506.7 million, but industrial asset pricing has experienced some softening, declining by 5.2 percent, Avision Young said. The largest industrial investment sale during the quarter was the sale of a 79,845-square-foot warehouse at 3125 Fortune Way in Wellington. Chandaris Investment LLC paid $15.1 million, or $190 per square foot for the building.