INDUSTRIAL MARKET SUMMARY
The Miami industrial real estate market continues its strong performance. In Q3 2021 vacancy rate was 3.1% and the availability rate is 5.3% at the close of the quarter with a $14.45 per sq. ft. average (gross) lease rate. Rent growth had been declining for the past two years but the impact of the coronavirus pandemic and the explosion of e-commerce, rent growth has improved in recent quarters to 12.1%. Growth in Miami is now 5% stronger than the nation.
There is over 4.4 million sq. ft. of new construction in the works, and about 15 million sq. ft. has been built since the beginning of 2018. About 3.5 million SF has been delivered in the market in the past year. This is including the one million SF Home Depot distribution center in Hialeah, which completed construction in early 2021. Construction starts have slowed slightly in the past year. The largest speculative projects are in the 200,000 SF-300,000 SF range; examples are the two buildings at Gratigny Logistics Center in the North Miami Submarket, which totals 447,000 SF and is due to complete in coming quarters.
Vacancy rates in Miami are around 3.1% and are back at record lows after compressing nearly 200 basis points in recent quarters. Vacancies could stabilize once the 4.5 million SF under construction delivers and leases.
Annual rent has been rebounding after two years of slowing significantly, and annual gains are now about five percentage points stronger than the National Index. The average rent in Miami has grown 79% since 2011, while the National Index grew 61%. Still, at over $14.50/SF, the average rent in Miami is one of the highest in the country, which is 52% higher than the national average. This rent growth keeps attracting investors looking for industrial properties in the region. Within the market, average rents reach $23/SF in the South Central Miami Submarket, which is more than 130% higher than the national average. Despite high rents, the submarket has maintained growth near 12% in the past year, compared to 7% annual growth in the National Index.
Annual industrial sales volume has bounced back from a four-year low in 2020 Q3 and is now about 50% higher than the metro’s 10-year average. Deals over $20 million have increased in recent quarters. Nine such properties have sold to date, about twice the average from the same time frame, the three years prior to the pandemic. The rebound has been boosted by the sale of the recently developed Home Depot Distribution Center in Hialeah.
Overall, unemployment is still about six percent below the region’s pre-pandemic peak as of 2021 Q3. However, the pace of job growth has increased recently with about 13,000 jobs added in August 2021, the best month for employment growth in Miami this year. Employment in professional, business, and financial activities sectors is well above pre-pandemic levels. Miami’s full economic recovery will depend heavily on the return to both domestic and international travel at a normal rate. The metro will benefit from a return to regular international travel after restrictions have been lifted.
Our team expects further growth in sales prices and inventory of industrial buildings to continue hitting new lows. Demand from users and investors also continues to grow. Leasing will remain strong the rest of the year and more users continue to absorb space and it is taking longer to deliver new construction.