Industrial Market Overview:
The Miami industrial real estate market continued it’s strong growth. For Q2 2022, vacancy rate is down even further to 2.5% and the availability rate is at 4.4% at the close of the quarter with a $17.06 per sq. ft. average (gross) lease rate. Year-over-year rent growth is up to 20.7% in the industrial market, outpacing the national average of 11.9%. The Miami metro area is averaging 3.8 million sq. ft. of quarterly leasing volume since mid-2020, compared to an average of about 2.8 million sq. ft. per quarter from 2015–2019. Miami ranks as one of the priciest industrial markets on the East Coast due to the lack of available, buildable land and overall inventory.
There is roughly 8 million sq. ft. of new construction in the works, with 5 million sq. ft. to be delivered over the next 12 months. Miami has less square feet under construction than the national average at 3.1% of inventory compared to 3.6%. Industrial properties built since the beginning of 2020 are almost 100% leased. Speculative projects under construction should be able to lease before or shortly after completion.
Vacancy rates in Miami are back at record lows. The average rent in Miami is one of the highest in the country at an average of over $17 per sq. ft. Leasing activity may slow over the next few quarters due to a lack of supply coming online. Increases in the cost of land and construction costs will further limit new construction delivering to the market.
After a record-breaking year in 2021, sales volume continues to be strong. The 12-month sales volume is $2,181,552,823, at 53.1% 12-month sales volume growth. Average pricing in Miami is $227 per sq. ft., well above the national average price.
The Industrial Outdoor Storage (IOS) or Industrial Service Facility (ISF) asset class has been the strongest performer within the Industrial real estate market on both a national and local level. Rent growth locally has been over 25% year over year, and some submarkets have seen over 50% rent growth. Land that is improved (paved, drained, and fenced) is leasing for over $15,000/mo. per acre. Tenant demand for IOS sites has been very strong, especially in the 1-4 acre size range. The strong demand is expected to continue the rest of 2022 and into 2023 as the asset class continues to become more institutionalized.
Buyers for IOS sites have been aggressively pursuing land sites throughout South Florida which has pushed sale prices over $3,000,000 per acre in premium locations such as Doral/Airport West. As existing and new investment groups continue to have interest in these sites, sale prices are expected to remain strong as long as the tenant demand remains.
Although the industrial real estate in South Florida has never been stronger, the higher interest rates and potential slowdown in the economy can present a risk going forward. The Fed’s interest rate hikes are substantially increasing the cost of capital for buyers across the board. The increased debt service is affecting land and warehouse pricing. Cap rates have expanded at least 50 basis points. Despite concerns in the economy, leasing has remained strong. However, sales are starting to slow down, and buyers are being more selective on properties. The higher interest rates are making low cap rate deals (4% or lower) financiallyunfeasible. As cap rates go up, prices move inversely. Sales pricing for industrial properties have peaked for now. The window is closing for property owners looking to sell for premium pricing.
Contact the Industrial Team at 786-433-2380 or MiamiIndustrialTeam@ComReal.com for more information!