South Florida Industrial Market: A Shifting Landscape Amid Demand

Leasing Activity and Demand

In the first half of 2023, leasing activity spanned 4.1 million square feet across Miami-Dade, Broward, and Palm Beach counties. While this figure is robust in historical context, all three regions saw a slight decline compared to the previous year.

Regional Variation in Leasing

In Miami, leasing activity dropped 57.2% compared to the first half of 2022, with a recorded 2.5 million square feet this year. Broward County followed suit, with Q2 activity at 55.6% of the volume seen in the previous year.

Eric Messer, Senior Research Manager at Cushman & Wakefield, notes that the market is recalibrating to pre-pandemic demand levels. However, leasing activity for new industrial projects remains steady, indicating sustained vitality.

Supply and Rental Rates

Tight vacancy rates and limited supply are driving upward pressure on rental rates. All three South Florida counties boast sub-5% vacancy rates, with Miami's industrial space registering a mere 1.6% vacancy rate in Q2.

Palm Beach County stands out with the highest asking rates in the region, witnessing a 6.4% quarter-over-quarter increase to $15.23 per square foot. Meanwhile, Miami's rates surged 19.7% year-over-year to $14.18 per square foot, with new constructions priced between $16 and $19.

Development and Pre-Leasing Trends

To address demand, developers are launching approximately 7.8 million square feet of industrial space across South Florida. Miami leads the surge, with 5.7 million square feet under construction.

Pre-leasing activity is notable, with over 30% of Miami's development pipeline already pre-leased. Broward County's pre-leasing lags behind but demonstrates optimism, such as CTS Engines' 216,000-square-foot lease at Osprey Logistics Park.

Leasing Transactions and Future Outlook

Leasing transactions in Q2 primarily involved renewals. Despite the slight decline in demand during the first half of 2023, strong pre-leasing suggests that pricing control will persist. Historically, tenant negotiation leverage only emerges when vacancies approach 8% to 10%.

The South Florida industrial landscape remains dynamic, embodying resilience, innovation, and a narrative of transformation.