Insatiable demand and tightening supply pump up South Florida industrial rents
Tenants are filling up new projects faster than developers can build warehouses, according to a new report
South Florida industrial landlords experienced more bountiful returns on their investments during the first quarter, according to a recently released report.
In Miami-Dade, demand consistently outpaced supply, even as industrial developers added about 11 million square feet of new warehouse space in the past three years, the JLL report found. During the same time period, Miami-Dade’s industrial sector absorbed 15.3 million square feet.
Demand also remained strong in Broward County, as e-commerce tenants gobbled up large warehouses and existing tenants rushed to extend leases due to a dwindling supply of new industrial buildings, the report states.
In Palm Beach County, tenant demand was so high that leasing volume slowed down substantially due to a lack of available spaces and new projects, JLL found.
The low inventory combined with robust tenant demand led to another consecutive quarter of substantial rent increases across the tri-county region, the report shows.
In the most recent quarter, tenants absorbed 1.3 million square feet of industrial space, compared to 371,349 square feet during the same period last year, according to JLL. Currently, nearly 4 million square feet of industrial space is under construction.
Earlier this month, Blackstone’s subsidiary Link Logistics unveiled plans to develop 12 industrial buildings on the site of Calder Casino’s horse racing track in Miami Gardens.
The vacancy rate shrunk to 2.6 percent in the most recent quarter, compared to 6 percent in the first quarter of last year. Average asking rents ballooned by 52.8 percent to $11.61 a square foot, compared to $7.60 a square foot in the same period of 2021.
Leasing activity boomed in the first quarter, with a net absorption of more than 850,000 square feet, a record for a single quarter, the report states. In the first quarter of last year, Broward’s industrial sector absorbed 556,371 square feet.
The vacancy rate hit 4.2 percent, matching pre-pandemic levels, and will likely to continue tightening in the next quarter, JLL found. During the same period of last year, the vacancy rate was 7.9 percent.
The average asking rent reached a new high of $11.19 a square foot. Last year, during the same period, landlords were asking an average of $8.58 per square foot, the report states.
Recently, Bal Harbour-based Arkadia Property Group partnered with global investment firm Barings to buy a two-building industrial complex in Coral Springs for $31 million.
Palm Beach County
In the most recent quarter, Palm Beach County had a net absorption of 135,862 square feet, compared to 52,247 square feet during the same period of last year. However, only 321,000 square feet are currently under construction, which will fuel continued price increases, the report shows.
Among the new projects is a proposal by Woodmont Industrial Partners to build a warehouse complex at the Palm Beach Park of Commerce. In January, Woodmont paid $40.4 million for 116.6 acres to build eight Class A buildings at the business park.
The vacancy rate hit 4.5 percent in the most recent quarter, compared to 7.4 percent during the first quarter of last year. The average asking rent rose by 12.6 percent to $10.66 a square foot in the most recent quarter. It was $9.47 a square foot during the same period of last year.