“It’s getting a little hairy. Somebody’s going to be upset.”

That is CBRE First Vice President Larry Genet’s outlook for the South Florida industrial market, where rental rates are hitting record highs and investors are clamoring to get in.

During Bisnow’s E-Commerce, Logistics and Supply Chain Solutions event Tuesday, panelists said the South Florida market is competitive, but with e-commerce still in its early innings, there will be plenty of room for growth.

“The state has become like one big distribution market,” said Duke Realty Regional Senior Vice President Ed Mitchell, who described goods coming into Florida’s four major ports and trucks doing multiple runs each day down Highway 27, between cheap warehouses in rural Polk County and last-mile distribution centers in populated South Florida.

“I have a 600K SF warehouse just full of Gatorade,” he said.

But modern-day tenants “want a different building than what was built 15 years ago,”  CenterPoint Properties SVP PJ Charlton said.

Industrial users are seeking big spaces where their fleets of trucks can do turnarounds, extra trailers can be parked, and Uber drivers or couriers can have a staging area. In the buildings, they want high ceilings and wide column bays, the panelists said.

As tenants are squeezing administrative workers into warehouse space, more attention is paid to interior offices than in the past. The tenants want to be close to major highways, but also in areas where workers can go out for lunch or take clients to meetings. Security, too, is an issue.

With that long wish list, tenants who find space are the lucky ones. At the end of 2017, Miami-Dade's industrial vacancy rate was 4.7%; Broward's was 2.8% — the lowest in 10 years; and Palm Beach was at 3.1%, a historic low.

Genet said that he has been looking for infill opportunities to put into production.

“There aren’t 40-, 50-acre parks anymore, unless you find a lock lake or a golf course,” he said.

JLL Managing Director Brian Smith said long-blighted urban areas that are close to major highways and population centers like Opa-locka are targets for industrial development. Charlton said CenterPoint has spent $2M in Opa-locka in the past year, mostly on buildings from the 1960s and '70s.

If tenants can find space, it will cost them. Rates hit an all-time high of $9 per SF last year and have since jumped to about $10.25.

“It’s my job to push rents,” Genet said. He noted that the rise of industrial rents was coming as a shock to some tenants who are reaching the end of long-term leases they signed decades ago. “Getting bumped back up to market rate can be painful."

As profits rise, industrial real estate has become a hot asset class for investors.

Ed Easton, who developed a small empire of industrial properties, said that today, “Most property is owned by big REITs with deep pockets.” But “there are a lot of investors looking for partners,” and that is where he has seen opportunity lately.

Case in point: publicly traded behemoth Prologis this week merged with its main competitor, DCT Industrial Trust, in an $8.4B stock-for-stock transaction. Prologis will now have a 71M SF U.S. portfolio to add to its 387M SF of North American properties, and it identified South Florida as one of the high-growth markets it will focus on.

Prologis South Florida Vice President Scott Gregory told Bisnow that the deal will give Prologis 2M SF here, but declined to comment further on the merger.

The industrial experts on stage agreed the industry is still experiencing the early stages of e-commerce, and that it will only get hotter.

“Online grocery — that hasn’t even begun,” JLL Managing Director Brian Smith said. "There’a whole other world of Class-B and Class-C industrial users.”

“Walmart is not going to sit back and say, ‘OK, Amazon take all this business,’" Duke Realty Senior Vice President Ed Mitchell said. "Home Depot, big-box retailers — they’re not even here yet.”

Gregory agreed, and pointed out that in New York, “Prologis had a deal with Amazon for a big distribution center, and Walmart came in and took it.”

Soon, Smith said, the industrial market could see packages delivered by drones, blimps that function as floating warehouses or even warehouses under the sea. But in the meantime, brokers would be wise to focus on off-market deals: finding corporations selling off excess real estate or mom-and-pops now realizing the value of land they have been sitting on.

“Connecting the dots — whoever’s out there, getting in front of them, that’s who’s going to succeed,” he said.