As other major U.S. commercial real estate markets struggle with rising inflation and interest rates, South Florida’s industrial, office and retail sectors are holding steady thanks to low vacancy rates, rising average asking rents and bountiful sales volume.
Industrial
Blackstone dropped $1.3 billion for industrial properties in Miami-Dade County last year, an indicator that South Florida commercial sector’s strong performance will continue in 2023, according to a presentation by broker Sebastian Juncadella.
The investment giant led all industrial buyers in sales volume in 2022, Juncadella told a ballroom full of commercial brokers and developers at the DoubleTree by Hilton Hotel Miami Airport & Convention Center on Wednesday.
“Overall, the industrial space is doing very well,” Juncadella said. “[In Miami-Dade], developers have rushed to meet demand. We built the most ever in 2022, and we’ll set a record across the U.S. for [new industrial construction] in 2023.”
Juncadella, with Miami-based Fairchild Partners, joined Rafael Romero with JLL and Kevin Gonzalez with Colliers in giving separate presentations on Miami-Dade’s industrial, retail and office markets at the 2023 CRE Outlook Conference. It was hosted by the Miami chapter of the Certified Commercial Investment Member Institute, or CCIM.
New York-based Blackstone is also the biggest spender in Airport West, among the most coveted industrial sub-markets in Miami-Dade, Juncadella said. In June, Blackstone paid $7.6 billion for PS Business Parks, a predominantly industrial Real Estate Investment Trust based in Glendale, Calif. With its purchase, Blackstone acquired PS’ Miami International Commerce Center, a 3.5 million-square-foot business park in Doral, Juncadella said.
“Blackstone inherited one of the best business parks in Miami,” he said. “No one comes close to the amount of money they spent in Airport West.”
San Francisco-based Prologis ranked as the second largest buyer of Miami-Dade industrial properties last year, with $1.1 billion in acquisitions. The firm led the charge in pushing asking rents to record highs in the county since the onset of the pandemic, Juncadella said.
“Prologis started pushing rents up,” Juncadella said. “They would send us proposals that were outlandish, way higher than anyone else. Slowly, but surely, they moved the needle, pushing over 20 percent rent growth, year-over-year.”
Office
The migration of out-of-state firms to the South Florida region has created a paradigm shift in the average square footage that office tenants are seeking, Colliers’ Gonzalez told the CCIM crowd.
“In the past, Miami tenants on average have been 500 square feet,” Gonzalez said. “If you look at the recent transition, and as we mature, the average size of these tenants [has] been 2,500 square feet.”
Between 2021 and last year, 76 new-to-market companies inked 2.5 million of new leased office space in Miami-Dade, Broward and Palm Beach counties, Gonzalez said.
The South Florida office market’s “poster child or darling” has been the Brickell submarket, led by 830 Brickell, a 55-story office tower that is under construction, Gonzalez added.
Developed by Vlad Doronin’s OKO Group and Jonathan Goldstein’s Cain International, 830 Brickell is 100 percent preleased and has achieved rents of more than $100 a square foot, Gonzalez said. “That’s great news for Brickell,” he said. “Downtown Miami is finally starting to see some of the benefits of the rent spread.”
Co-working sites have played a huge role in filling tenant demand, Gonzalez noted. “I can’t think of one co-working operator that is not 95 percent occupied,” he said. “Going forward, as we adopt a hybrid office model, those co-working operators will be essential.”
Retail
South Florida has one of the strongest retail real estate sectors in the country, JLL’s Romero said during his presentation. Landlords in the tri-county region are commanding asking rents of $34.21 per square foot, compared to $23.47 per square foot nationally, Romero said.
The South Florida retail overall vacancy rate was 3.4 percent last year, compared to 4.3 percent for the entire U.S. retail market, Romero added. “Last year, we opened more stores than we closed,” he said. “That hasn’t happened since 1995.”