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For most of the last few years, Amazon has been the dominant force in South Florida’s industrial market, but the e-commerce giant’s recent pullback hasn’t had a negative impact on the region’s warehouse market, industry insiders said at Bisnow‘s South Florida Industrial Outlook event last week.

“The last few years it has all been Amazon, right? They were making 90% of that e-commerce growth. They were really bailing us out of all that space we could not lease,” Bridge Industrial Vice President Aaron Hirschl said at the event. “Now it’s everybody else playing catch-up. It is 85% of all the e-commerce deals are other groups other than Amazon. It’s really good to see that positive growth there.”

The vacancy rate for South Florida industrial properties dropped to 1.8% in the third quarter, according to JLL research. Rents have grown 60% year-over-year, to an all-time record of $14.35 per SF. Construction is speeding up as a result: So far in 2022, approximately 2.3M SF of new product has been delivered. Over the next 18 months, JLL projects deliveries to hit 7.8M SF.

“Much of that is still fueled by e-commerce, even in the absence of the industry’s leader,” Prologis Vice President Jason Tenenbaum said at the event, held at the GalleryOne Fort Lauderdale by Hilton. “I’d say e-commerce continues to be the predominant player, I am guessing in the majority of our portfolios, and that’s notable particularly because of Amazon’s specific slowdown this year,” he said. “I would say the vast majority of our work is centered around that space.”

Tenenbaum said that he expects more leasing in the e-commerce space to come from third-party logistics companies as retailers themselves look to outsource their distribution. Those companies, called 3PLs, have accounted for more than 35% of all warehouse leasing in South Florida so far this year, according to a just published CBRE report.

“I think as pricing and rents continue to rise and supply is constrained, you will see a lot more of all of our clients electing to 3PL their supply chain,” Tenenbaum said.

After e-commerce, the biggest driver of demand in the industrial market is in the food and beverage industry and their need for cold storage, developers at the event said. The global cold storage market was over $9.6B last year and is projected to reach $11.3B this year and hit $25.4B by 2027, according to an October market report by Reportlinker.

“If you look at where the demand is the most nationally, clearly cold storage will be it,” BBX Logistics Properties Mark Levy said. “In South Florida, if you look at the footprint of the market as a percentage of the total base, it’s a very, very small amount of cold storage space product that has been delivered.”

Tenenbaum said that the tourism industry in particular has been active in looking for cold storage properties, a piece of the market that had been largely absent for the previous two to three years.

“There was a time in the last 24 to 36 months where the tourism activity was way down. Now it’s back at a high pre-pandemic levels,” Tenenbaum said. “As tourism has come back and the cruise ships are set to sail again, that’s a really active space.”

Levy said that while the cold storage market is “still tremendously undersupplied,” building the space on a speculative basis is still a rarity. But Bridge Industrial launched a spec cold storage warehouse in Hialeah last year, and signed FreezePak to a 312K SF lease in March.

“I remember when Bridge was working on that development and we thought ‘Those guys are crazy! There is no way that they are going to get those rents,’” Hirschl said. “And sure enough, they leased it out and knocked it out of the park. They proved a thesis and it was really cool to see it happen.”

Kroger, the largest grocery chain in the country, doesn’t have a supermarket in South Florida, but it opened a 60K SF warehouse in Opa-Locka this year to start delivering groceries directly to customers’ homes. Kroger said in its September earnings report that its delivery sales grew by 34% from the previous year.

“Kroger does not have any grocery stores here but they are renting near people’s homes,” Hirschl said. “That trend is really interesting to see if they can really penetrate the market here.”

Butters Construction & Development Director of Acquisitions Adam Vaisman said on a panel that, in addition to e-commerce and food and beverage companies, manufacturing is an increasing presence in the market. He said his firm signed a 200K SF lease with a manufacturing firm in Broward County and was getting ready to break ground.

“You will definitely see more of the manufacturing jobs, especially given our labor pool here in South Florida,” Vaisman said. “We are definitely starting to see that and I think that trend is starting to pick up if you continue to have global instability the way we do.”

But while manufacturers and cold storage providers largely need specialized space, e-commerce users are taking any space they can get in a market with soaring rents and sub-2% vacancy.

“Location is the most important always, so for e-commerce users, if they can’t find a new building and it’s a market they need to be in, they will make it work with a Class-B space or a Class-C space,” said Seagis Property Group Vice President of Florida Acquisitions and Leasing Bradlee Lord. “Public transportation will only get increasingly worse as the population grows. With Covid in 2020, the roads were still relatively busy. Location matters as congestion gets worse.”

 

Source: Bisnow

 

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Commercial property purchases have shown few signs of slowing down after a banner year, according to a recent report from JLL Capital Market’s Miami office.

South Florida commercial real estate transactions rose to $25 billion in 2021. That’s a 183% increase from the $8.8 billion in transactions across Miami-Dade, Broward, and Palm Beach counties recorded the year before.

The momentum has spilled over into this year. In the first three months of 2022, JLL recorded $6 billion in commercial real estate transactions completed across the tri-county area industry-wide, up 51% from the first quarter of 2021. (Data from the first quarter of 2022 is preliminary and subject to change, a JLL spokeswoman told the Business Journal.) This sharp rise in deal activity could be found across the industrial, multifamily, office and retail sectors.

Danny Finkle, senior managing director of JLL’s Miami office, credits the new wave of transactions to Florida’s “business-friendly environment and excellent quality of life.”

“Institutional investors have recognized this cultural shift and are tailoring their investment criteria to target markets like South Florida,” Finkle stated in a recent JLL release.

A significant portion of the property sales centered on multifamily housing. In 2021, there were $14.69 billion in real estate transactions involving residential rentals, an increase of 277% from the previous year. In the first quarter 2022, there have been $2.75 billion in trades involving South Florida apartment buildings, a 76% hike compared to the year-ago quarter.

In the office sector, there were $5.38 billion in trades in 2021, a 235% jump from the year prior. In the first quarter of this year, there have been $1.05 billion in office sales, a year-over-year increase of 10%.

Meanwhile, retail property transactions rose 136% in 2021 year over year to $3.88 billion in South Florida. Then another $1.28 billion of retail transactions took place in the first quarter of this year, a 186% hike compared to the year-ago quarter.

As for industrial, sales volume increased 63% from the previous year to $2.3 billion in 2021. In the first quarter of 2022, a total of $908.29 million in industrial transactions took place, a 76% leap from the year-ago quarter.

Companies and well-off individuals have been migrating to South Florida in greater numbers due to the region’s popularity, weather, and lack of income taxes, brokers and developers have told the Business Journal. It’sa trend that’s expected continue through the rest of 2022, making South Florida a prime spot for investment. Multifamily properties likely saw the biggest increases because rents are surging at a faster rate in the Miami area than almost any other metro in the U.S.

The migration has tipped e-commerce into overdrive, creating a shortage of warehouse and distribution space as companies seek to fulfill the orders of a humming economy amidst a continuing supply-chain crunch.

JLL stated that its Miami office handled 121% more investment sales, debt, and equity transactions in 2021 than the year before. To accommodate that growth, JLL promoted Cody Brais, Kenny Cutler and Max La Cava to director status.

Headquartered in Chicago, JLL has 3,000 capital market specialistsacross 50 nations. The data in JLL’s report was supplied from Real Capital Analytics, a New York-based real estate analysis company that has recorded $40 trillion in commercial real estate transactions since its founding in 2000.

 

Source: SFBJ