Industrial vacancies on rise as once scarce space hits market
By Jaime Levy
Space for industrial development has long been scarce in Miami-Dade County, but several industrial real estate brokers say they are seeing the market open with the slowing economy.
Rafael Villamizar, senior associate in the Grubb & Ellis industrial group, said he knows of a handful of sites that have become available very recently.
"People are consolidating operations, rethinking business plans, maybe downsizing from 100,000 to 50,000 square feet," he said. "There has been downsizing. More buildings are available now in the last 60 days than in the last two years."
Joann Soman, general manager of the Miami International Commerce Center - a park that has 3.2 million square feet of industrial space in Airport West - said Sept. 11 signaled a bad economic situation becoming worse.
"Prior to the 11th, we were seeing a lot of subleases - companies downsizing or consolidating and not having the need for their space," Ms. Soman said, adding that the center has about 300,000 square feet available. "Since the 11th, we've found companies are hesitant to make decisions about taking on additional space. We are seeing bigger vacancies than we've seen in the past and larger spaces available in the market now."
Another newly available spot is Grazing Resources' 17-acre facility at 5800 NW 74th Ave. Because tenant Farm Stores is looking for corporate offices in Miami-Dade or Broward counties instead of industrial space, Grazing Resources decided to sell the facility. The asking price is $12 million.
"It's the largest contiguous site available along the Palmetto Expressway in Dade County." said Grazing Resources' broker Ed Lyden, associate for Trammell Crow Co. "There's a scarcity of land in Airport West. They're looking to capitalize on this great piece of real estate. Interest is incredibly high on the property right now because of the scarcity."
Another market shift that analysts have pointed to is a rising popularity of build-to-suit projects - spaces built for a specific company. In Cushman & Wakefield's third-quarter findings, researchers reported build-to-suit activity growing 35% from the same time in 2000.
"While new speculative construction is expected to slow to a snail's pace, build-to-suit, lease-and-own projects are expected to remain active as entrepreneur take advantage of low interest rates."
Walter Byrd, Cushman & Wakefield's senior director of industrial brokerage, attributed the jump in build-to-suit projects to the economic slowdown that is making speculative projects particularly risky.
"This quarter and the last quarter previous, there was a significant amount of build-to-suit in the market at a much greater rate," Mr. Byrd said. "With the slowing economy, landlords are less willing to build on speculation. It's much lower risk for developers to do build-to-suits."
Lowering risk, said broker Ron Berger of Insignia ESG, is a reason why this year's industrial real estate market is likely to stagnate until the economy stabilizes.
"I think this year is gone," said Mr. Berger, managing director of industrial brokerage. "We're not going to see a lot of lease transactions. People are in a holding pattern. They're saying, 'I'm uncomfortable with today's market. Let's just renew where we're at.' They want to put it on hold for the time being."
Ms. Soman said she agreed. She said she is not expecting an influx of potential tenants looking to fill Miami International Commerce Center.
"The market has slowed," Ms. Soman said. "We're not the only ones who have 10% of our space vacant. People are waiting to make decisions because they're not sure what's going to be happening."