INDUSTRIAL MARKET SUMMARY
The Miami industrial market’s Q1 2022 vacancy rate is a decade low 2.7% with a $15.99 per sq. ft. average (gross) lease rate at the close of the quarter. Year-over-year rent growth is up to 18.3% in the industrial market, far above the national average and is outperforming the metro’s five-year annual average of 7.7%.
Miami ranks as one of the priciest industrial markets on the East Coast due to the lack of available, buildable industrial land.
There is roughly 5.9 million SF of new construction in the works, with 3.9 million SF delivered over the past 12 months. New properties lease quickly in Miami, with an average of roughly 3.8 million SF of quarterly leasing volume since mid-2020, compared to an average of
about 2.8 million SF per quarter from 2015–19. Preleasing has never been stronger. However, leasing volume may slow in the near term due to the lack of available space rather than any weakness in the market
Vacancy rates in Miami are back at record lows. Annual rent has been rebounding after two years of slowing significantly. The average rent in Miami is one of the highest in the country at an average of $16/SF compared to the national average of $10.10/SF. Landlords should remain in an advantageous position to push rents over the next few quarters.
Rental growth has been positive for landlords, which continues to push land pricing and set sales records. Tenants, on the other hand, are seeing massive cost escalations on renewals or leases of new space. On lease renewals, landlords are pushing rents to market and offering very few incentives in the form of tenant improvements or free rent. The Supply/Demand balance is in favor of Landlords, and given the limited supply coming to the market, we anticipate a Landlord’s market to continue for some time. Rent growth has been so strong and are moving so quickly that most landlords are not publishing lease rates..
Annual industrial sales volume is up and the average pricing in Miami is well above the national average. Sales volume hit $2 Billion in Q1 2022, close to a record of $2.1 Billion in Q4 2021. The average market sales price is $248/SF, with a 61.2% 12-month sales volume growth. Two buildings totaling 303,000 SF at the Aventura Industrial Center in the North Miami Beach Submarket changed hands in December 2021 for $59 million ($195/SF). The properties previously changed hands in 2012 for only $18.7 million ($62/SF) at a 6.75% cap rate. The buyer, Longpoint Realty Partners, has engaged ComReal to lease up the remaining 110,00 SF vacancy at the newly acquired property.
On the macro side, unemployment is still about one percent below the region’s pre-pandemic peak as of February 2022. Leisure and hospitality employment was still about eight percent below the February 2020 peak as of February 2022, and the pace of job growth in this sector continues to be slow. However, employment in professional, business, and financial activities sectors is well above pre-pandemic levels.
The industrial market in South Florida continues to attract users and investors from across the country and the world. The influx of new buyers has created bidding wars for quality industrial properties. There are still billions of dollars of capital looking to make investments in the area. Investors see the barriers to entry, limitation of land, and the strong population growth as opportunities to buy industrial properties with the potential for high rental growth and future appreciation. The recent rise in interest rates and inflation present challenges for the quarters ahead. However, industrial real estate in South Florida is one of the best places in the country to outrun the inflation.