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As industrial took off in 2020, so did new construction in Florida markets. In many of those areas, completions have reached historic levels.

In the second half of 2020, large-scale speculative construction projects or expansions at existing industrial parks were announced in multiple Florida markets, according to Cushman and Wakefield’s “Florida Industrial Construction” report.

There was 15.4 million square feet (MSF) under construction at the end of 2020. In addition, another 29.7 MSF is poised to come online in the next three years.

Out of this new construction, speculative building dominated. At the end of 2020, 5.8 MSF of speculative building had been completed. C&W says Build-to-Suits accounted for 43% of all completions. Many of those speculative projects under construction have yet to attract tenants. By the end of 2020, only 56% achieved any pre-leasing.

“In several cases, developers moved ahead with entitlements hoping to land a sizeable build-to-suit for a new-to-market or expanding tenant,” according to C&W.

Drilling down into individual markets, Miami leads the way with 8.7 million square feet of industrial space proposed. Tampa Bay (6.0 million), Lakeland (5.8 million), Jacksonville (3.7 million), Broward (2.4 million), Orlando (2.0 million) and Palm Beach (1.2 million) are next.

Tampa Bay leads with 3.4 million square feet of industrial space under construction. It is followed by Miami (2.7 million), Broward (2.2 million), Orlando (2.2 million), Jacksonville (1.9 million), Lakeland (1.7 million) and Palm Beach (1.4 million). The highest preleasing was found in Lakeland (91%), Jacksonville (84%), Orlando (60%) and Miami (50%).

In a recent report focusing on Jacksonville, Colliers International found that construction, which represents about 1.9% of the current industrial stock, created a “trickle-up” effect where industrial users are shedding dated space for quality new construction product. The trend has produced a combination of rising industrial vacancy—which hit 5.4% in the fourth quarter—and rising rents—which increased to $5.21 per square foot.

While other asset classes are closely monitoring the vacancy rate—typically because a rising rate leads to tempered if not negative rent growth—Colliers says that increased vacancy is actually a welcome relief in the Jacksonville industrial market. In 2018, the local vacancy rate reached lows of 2%, giving users limited options. Today, the increased rate of 5.4% still points to healthy market conditions, and new construction activity is well matched to demand.

Nationally, industrial space is getting absorbed. In a recent report, Moody’s Analytics said the warehouse/distribution space absorbed 35.4 million square feet in Q4, its highest mark since Q1 2019 when 70.7 million square feet were absorbed.

Construction for the new warehouse/distribution space fell to 25.8 million square feet in Q4 after hitting 38.2 million square feet added in Q3, according to Moody’s Analytics. The space has posted an average of 36.8 million square feet of new inventory added per quarter in the prior six quarters.

 

Source: GlobeSt.

amazon warehouse

South Florida’s industrial market performed well in the fourth quarter and in 2020, as Amazon leased about 3 million square feet throughout the year, according to a recently released report.

The region’s average asking rent rose slightly to $8.88 in the year’s final quarter, up 1.6 percent year-over-year, according to the report from Newmark. The fourth quarter vacancy rate hit a low 4.9 percent, thanks to pre-leasing activity. About 6 million square feet of industrial space is currently under construction in the tri-county area, with more than half of it already leased.

Here is a breakdown for each of the counties:

Miami-Dade County

Miami-Dade’s vacancy rate stayed consistent at 4.5 percent for the fourth quarter. Average asking rent was $8.33, up 1 percent quarter-over-quarter, and up about 4 percent year-over-year.

The county saw 266,000 square feet of space delivered during the quarter. Miami-Dade represented more than half the region’s net absorption, with 2.7 square feet absorbed during 2020. Fifteen buildings totaling more than 3.1 million square feet are under construction, with 56 percent of that already leased. That means that it will not have much of an impact on the county’s vacancy rate this year, according to Newmark.

The top lease deals in the county included Keuhne & Nagel leasing 209,610 square feet at 3401 Northwest 72nd Avenue in Miami and IFS Neutral Maritime leasing 93,320 square feet of space at 1350 Northwest 121st Avenue in Miami.

Top industrial sales in the county included the $16.2 million sale of Doral warehouse by a family that owns an international logistics company.

Broward County

Broward’s vacancy rate continued to rise, reaching 5.6 percent at the end of the fourth quarter, the highest in the region. That’s an increase, quarter-over-quarter and year-over-year, of about 2 percent and 6 percent, respectively. But the vacancy rate remained below the 6 percent vacancy rate reported at the end of 2015.

The county saw 373,000 square feet of new space delivered during the quarter. About two-thirds of the 1.6 million square feet under construction is available for lease.

The average asking rent in the fourth quarter was $9.39, down 0.3 percent, year-over-year, and down 0.7 percent, quarter-over-quarter. Increased availability from second-tier space helped rents decrease, according to Newmark.

Amazon signed three of the top leases in the quarter in Broward for about 1 million square feet. Overall, Amazon is responsible for most of the largest leases signed during the year.

Elion Partners had two of the top purchases of the quarter, paying $31.5 million for a Dania Beach building and $12 million for Bennett Auto Supply in Pompano Beach.

Palm Beach County

The county’s vacancy rate was 5.4 percent in the fourth quarter, a new record high since at least the fourth quarter of 2015. Newmark credited this to the delivery of five buildings totaling over 768,000 square feet.

The average asking rent was $9.84, up 1 percent, quarter-over-quarter, and up 0.4 percent, year-over-year.

About 1.3 million square feet is under construction in the county, 1 million of it for an Amazon distribution center. The county had 77,000 square feet of industrial space absorbed during the fourth quarter.

The largest leases signed during the quarter include two in West Palm Beach: Tire Hub leasing 40,500 square feet of space at 305 Haverhill Road and Jamlyn Supply leasing 38,880 square feet of space at 6051 Southern Boulevard.

Top deals during the quarter included an Atlanta-based industrial investment group buying a newly built warehouse in the Palm Beach Park of Commerce for $27.2 million.

 

Source: The Real Deal

The number of industrial buildings coming online nationally slowed slightly in the first nine months of 2018, after several years of strong growth.

A total of 237 million square feet of new industrial space was delivered across the country from January through September, down slightly from 243 million square feet year over year, according to a new report by Avison Young.

The slowdown follows a major growth period for industrial development across the country, with 1.5 billion square feet of new space coming online since 2012, the report said.

“The surge in deliveries in previous years left many markets struggling to absorb the new space, and developers unwilling to start new projects,” Avison Young principal Erik Foster said. “As the existing space is filled, new projects will start getting launched.”

Markets like Los Angeles and Chicago have been leading the way in industrial market growth, and developers have benefited from record low vacancy rates and strong rent growths. But after years of growth, even those markets slowed this year.

Chicago saw 10 million square feet of new industrial space in the first three quarters of 2018 — a steep drop from the 22.6 million year over year, according to Avison Young. Los Angeles saw 5.4 million square feet of new industrial space through three quarters, which is about 77 percent of the way to its 2017 total of 7 million square feet.

In Chicago, the drop in deliveries caused vacancy rates to continue falling, with the 5.7 percent vacancy in the third quarter a 20 basis point drop year-over-year. That’s not the case in Los Angeles, where vacancy in the Inland Empire area increased to 4.9 percent but is still near record lows.

While deliveries are down so far in 2018, they won’t be for long: More than 337 million square feet of new industrial space is under construction across the country, the report said.

New Jersey has already eclipsed its 2017 industrial delivery total, with 10.3 million square feet of new space coming online through three quarters of this year, compared with 9.7 million square feet delivered all last year.

In Miami, demand for warehouse space has pushed vacancy rates to a record low 2.7 percent in the third quarter, falling 33 basis points year-over-year. But more than 4 million square feet of industrial space under construction will increase the supply.

“Secondary markets across the country are now benefiting from the same economic factors that caused a surge of industrial development in larger markets,” Foster said.

Growth in e-commerce is leading companies to increase the amount of industrial space needed for productive storage and delivery. Columbus, Ohio, for example, has seen 4.3 million square feet of industrial deliveries so far this year, eclipsing 2017’s year-end total of 3 million new square feet. In Greenville, South Carolina, 2.8 million square feet has been delivered through the end of the third quarter, eclipsing 2017’s total of 2.3 million square feet of new development.

 

Source: The Real Deal