Industrial Deliveries Accelerate in Miami to Meet Intensified Demand
There’s a large amount of speculative construction underway that is expected to be absorbed quickly.
Miami-Dade County is expected to continue to see a large amount of net in-migration in its metro areas as tax laws and the warm climate draws people in.
That’s according to the Midyear 2022 Miami Industrial Market report by Marcus & Millichap which says that the rise in construction will have a minimum impact on vacancy. A larger population raises the demand for essential goods which will require retailers to maintain or expand both their distribution and warehouse footprints.
Although there’s a large amount of speculative construction underway, historically low vacancy rates in Miami suggest construction is still warranted and will be absorbed quickly.
Elevated supply additions slightly outpace demand, translating to a moderate vacancy increase. Nevertheless, at 3.1 percent, the metro’s year-end rate is 100 basis points below the 2019 posting.
In 2021, PortMiami saw an increase in its container volume, making it the busiest cargo year. South Florida ports were more attractive to companies as supply chain issues arose due to routes that avoided congestion. Miami International Airport also saw an 18% rise in international freight. In the first quarter of this year, the airport submarket saw a vacancy rate of 2.3%. The report says those conditions will remain while companies look for space that has easy access to major trade routes.
It’s predicted that Miami-Dade will add another 400,000 square feet of deliveries by the end of the year with Medley and South Dixie Highway accounting for a majority of deliveries this year. So far there are over 1.3 million square feet online in each area.
As the demand for space increases, the metro’s overall mean sale price rose 14% during a 12-month period in March at $248 per square foot. The average cap rate compressed 40 basis points to 5.4%. That means as interest rates rise, there could be an impact on the deal flow.
The average rent rate in Miami-Dade will most likely climb by $1 per square foot this year. Last year the rate rose 12.2%. The report says the year-end recording will align with other South Florida markets at $12.90 per square foot.
In the last four quarters, there was a rise in closings in the $20 million-plus range. The larger warehouses and distribution centers traded for $180 to $300 per square foot. The highest number of trades in 2021 were reported in the Hialeah and Miami Airport submarkets. Transactions in Hialeah were in the $80 to $170 per square foot range, while Miami Airport properties were in the $150 to $250 per square foot range. Warehouses were traded the most.
This year, the delivery volume in 2022 will pass the five-year average by over 2.2 million square feet of space with inventory expanding by 2.7%.