Miami Industrial Market’s Future Hinges on Infill, Single-User Properties
After several years of strong absorption in leasing and robust sales volume, there’s no question that Miami’s industrial real estate market is the desired location for national tenants and institutional investors alike. But many insiders are questioning if sustaining that level of growth is possible and if there are still profitable transactions to be found.
The answer is a resounding yes. There is little indication that the Miami industrial real estate market will slow down with vacancy rates hovering in the low 4 percent range. The rise of e-commerce, strong population growth and the region’s role as the gateway to Latin America all bode well for continued leasing growth and have solidified the region as a top-tier industrial real estate market.
It’s been exciting to watch Miami earn a rightful place among the nation’s top brass. The keys to staying relevant in Miami’s increasingly competitive and sophisticated market are to search for opportunities that support the demand for large-scale industrial space for single-users, take a closer look at previously passed over deals, get creative about a parcel’s potential and remain focused on infill strategies.
Although Miami’s growth will continue, there will likely be fewer buildings to purchase. According to the Commercial Industrial Association of South Florida, nearly 5.3 million square feet of industrial warehouse space changed hands in 2017 for a total of $418.7 million. The square footage was 21 percent more than the amount that sold in 2016, even though there were 21 fewer buildings in 2017 than the previous year.
Warehouses of more than 100,000 square feet are more in demand than ever before as large corporations grow their supply chain and logistics operations in the market to serve last mile e-commerce fulfillment and distribute to their Latin American clients.
In a recent example, DCT Industrial delivered three buildings totaling 435,143 square feet within DCT Commerce Center Phase II. Approximately 134,200 square feet was preleased to an international freight forwarder, and John Deere leased 116,400 square feet to distribute to its Latin American clients. DCT Commerce Center started as a land acquisition in 2015 in an area that was formerly outside of the Urban Development Boundary (UDB).
The consolidation of third-party logistics providers also supports the growing need for larger spaces. But the availability of land in South Florida can make this challenging. There are opportunities, but developers will need to be nimble and understand complex land use regulations and permitting to realize opportunities.
One such project underway is Seneca Commerce Center, which is coming on line later this year. It’s a highly unusual development because it required infilling a lake. The 663,133-square-foot commerce park will feature three Class A buildings on what was submerged land at 3450 W. Hallandale Beach Blvd. These large, single-user facilities are an important component of the Miami market and competition for land is fierce.
Developers like DCT are focused on uncovering sites that others either do not recognize or choose not to pursue because of the difficulties of getting it across the finish line. They may consider and evaluate a site for years, then finally transact when the surrounding infrastructure matures or market rents rise in order to justify the investment. In the end, when developing infill sites, proximity to transportation and population dictate which sites are prioritized.
Leading DCT’s Orlando and South Florida markets, Watson is responsible for the company’s capital deployment, which includes development and acquisitions, as well as leasing for the Orlando and South Florida portfolios and managing the market teams.
— By Todd Watson, Senior Vice President of DCT Industrial. This article was originally published in the May 2018 issue of Southeast Real Estate Business.