Top Miami industrial locations soar
By Marilyn Bowden
Miami-Dade's more desirable industrial markets are thriving, brokers say, while areas with older inventory struggle with high vacancies and functional obsolescence.
Overall, the county's industrial sector had about 4 million square feet of absorption in the past year, said Michael K. Silver, first vice president at CBRE, and total vacancy is about 6.2%.
"For the past three or four years," he said, "there was no speculative construction, but in the last quarter of 2011 there were three substantial sales of industrial land — two in Airport West and one in Medley — and we expect about a million square feet of new space in 2012.
"Airport West always leads the way," Mr. Silver said, "and is our most expensive submarket." He quoted rental rates there for new class A in the range of $9.25-$9.50 a square foot, industrial gross, and rates in second-generation space at $8.25-$8.75, "but with continued absorption, rates are starting to climb."
Brain Smith, executive director of industrial brokerage at Cushman & Wakefield, said activity in Airport West is "a mixed bag. The size range of 35,000 square feet and below is still very active, with very little vacancy, but above 35,000 square feet lags behind.
"There's still healthy activity, but not quite what everyone had expected for this year. But we are very optimistic that the second half of 2012 will see some larger deals. There are some large prospects actively looking at space."
Medley, Mr. Smith said, "has seen a huge turnaround, with absorption of 1 million square feet in the past six to eight months. That market has gotten so tight that rates have increased."
James L. Armstrong IV, The Easton Group's vice president, said Medley is now the county's strongest market.
"Out near the turnpike, which is all newer buildings, vacancy is around 5%," he said.
"Having said that, there are still soft spots in the market. Hialeah and Central Miami, due to the fact that they are comprised of older, less-functional buildings with lower ceilings and less than ideal truck-loading, present more of a challenge, although there are some good deals to be made there.
"It works for light distributors or companies that do some assembly, don't need to be close to the airport, are looking for a lower rate and can live with the building's problems."
"There is always a demand among companies that can take advantage of space that is not as functional," said John Vaught, senior vice president at Transwestern.
Mr. Silver quoted vacancy in Hialeah and Liberty City at about 12%, with rental rates of $3.50-$4.50 a square foot, industrial gross.
Hialeah, Mr. Smith said, has also been challenged by flight to quality as tenants leave for newer properties in North Dade, Gratigny, Miami Lakes and Palmetto Lakes.
Looming in the near future, Mr. Vaught said, are several factors that probably will change the local industrial market significantly.
"There is a change in the overall supply train," he said, "and Miami is becoming much more important. The expansion of the Panama Canal is one major component. Another is the Port of Miami's infrastructure investments."
A third, he said, is Port Miami's likely receipt of a grant that will allow almost any business to become a free-trade zone on an accelerated basis under the federal government's foreign trade zones alternative site framework.
"As supply chains become more complex," Mr. Vaught said, "the decision process that a company goes through to select locations and distribution centers also are very complex, and rent per square foot is one of the least important factors. We are definitely seeing companies wanting quality industrial real estate and willing to pay for it."
Mr. Smith said he hasn't seen heightened activity yet as a direct result of the Panama Canal widening, but some companies are basing their strategic planning in part on what may occur in South Florida as a result of it.
The big question, Mr. Silver said, is "what commodities are going to stay to service the people in the tri-county area, and how much new warehouse space we are going to need. There is a consensus that Miami-Dade will benefit from the canal widening, but how much more warehouse space does that equate to?"
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