As Records Fall, South Florida Industrial CRE Lures Institutional Capital To Local Projects
Last year, Miami added nearly 10,000 jobs in logistics alone — more than double the number added in any previous year and almost half the number created across the state according to Transwestern’s most recent market reports.
Miami’s industrial vacancy rate has been below 5% since 2015, and even with new product having come online, it is still just 4.5%, with activity strongest in North Miami Beach, the Miami Airport area and Medley. The last quarter of 2018 saw the industrial market absorb nearly 1.2M SF, the strongest single-quarter performance in four years.
“It’s been a crazy couple years,” CBRE Senior Vice President Larry Genet said.
Genet thinks the sector is still in its infancy with e-commerce accounting for 10% of all retail sales in the U.S. in the first quarter, according to the U.S. Department of Commerce.
”If it goes another 30%, that's tens of millions of square feet of warehouse space,” he said.
Recent projects that have made waves include Bridge Development Partners' sale last week of a 221K SF industrial facility in Fort Lauderdale, Bridge Point Riverbend, to SB Capital Management for $38.2M. The facility’s nearly 80% leased.
CenterPoint Properties in May signed a lease at Port Everglades, in Hollywood, to build two buildings that will total 296K SF and make up the International Logistics Center. A 145K SF building is 100% pre-leased, while 125K SF is spec. And there's the under-construction Bridge Point Commerce Center, which will offer more than 2.1M SF on the border of Miami Gardens and Miramar.
“That was a monster,” said Genet, who is in charge of leasing.
Genet will be a speaker at Bisnow’s South Florida Industrial & Logistics Update event June 27. He plans to discuss where rental rates are going, how much longer this cycle will hold, and what tenants are taking space.
"There is lots of organic expansion — so people who are in 20K SF are going to 40, people who are in 40 are going to 60," he said.
The growth in logistics is going beyond just e-commerce. As the economy has continued to grow, it has benefited more sectors.
Duke Realty Vice President Stephanie Rodriguez, another panelist at the event, said the challenge lies not with demand, but with the competition.
"We are very land-constrained here in South Florida, so trying to find creative ways for sites to be developed is something that everyone is challenged with right now," Rodriguez said.
With Amazon promising one-day shipping and other retailers trying to keep pace, she expects to see more urban infill — though sites need ample parking for delivery vehicles. While delivery-by-drone might be a future reality, tenants aren't asking for sites with drone ports quite yet, she said.
During his decades in South Florida real estate, Butters Construction & Development CEO Malcolm Butters has developed industrial facilities for FedEx and Amazon. Currently, Butters is partnering with a fund managed by BlackRock to build an industrial park on a 22-acre site in Tamarac, at the southwest corner of North Hiatus Road and West McNab Road.
Butters is also developing 850K SF in east Pompano Beach, near Dixie Highway, with Industrial Property Trust and building a 165K SF distribution center for Pepsi in Medley. And soon, Butters teased, he will announce "a very big deal in Miami."
"The world is getting bigger," Butters said. "The capital is all institutional."
Now, small local firms often partner with big players like Shorenstein, Centerpoint or Prologis. That allows for bigger deals and for risk to be spread around, while on-the-ground firms like his can collect fees for development and property management and have an ownership stake.
Port Miami Head of Business Development & Marketing Don Wrinkle wrote in an email that the busy shipping industry has him working with terminal operators at the port to find solutions to congestion and angling for terminal upgrades to handle additional volumes.
He also helps clients find warehousing and get Free Trade Zone designation to avoid some tariffs. He has been struck by how big transport carriers, as well as the small, local trucking companies, have been incorporating new technology.
Hear more from Wrinkle, Butters, Genet and Rodriguez at Bisnow's South Florida Industrial & Logistics Update June 27.