Industrial Market in Florida

Over the past two years, the national and global economies have experienced various fluctuations, ranging from geopolitical events and higher interest rates to the ongoing war in Ukraine and recovery from the pandemic. Despite the fluctuating global economic forces, activity and demand for industrial space in Central Florida remain strong. The following will focus on the industrial markets for Fort Lauderdale, Miami-Dade, and Naples.

Fort Lauderdale

Fort Lauderdale is one of the country’s largest industrial markets, with 494 deals closed in the previous year, placing it at the top of its cohort. Deal flow mirrored typical transaction activity over the last five years. During the same time, annual sales volume averaged $983 million, with a 12-month high in investment volume of $2.0 billion. Since last year, the market cap rate has decreased. It is currently the lowest cap rate in Fort Lauderdale over the previous five years and is still lower than the national average. Market rent growth is presently at its peak, sitting above 18 percent. Rent growth began to rise in 2020 but is forecasted to decline steadily over the next four years, back to pre-pandemic levels. Fort Lauderdale is also currently experiencing a low vacancy rate of three percent, a dramatic decrease from the 2020s six percent rate.

Miami

Since the start of the coronavirus pandemic, Miami’s industrial market has grown immensely. Over the last few quarters, demand has consistently outpaced net deliveries, and the metro’s vacancy rate has fallen to 2.4 percent. Owners have taken advantage of improving market conditions and are rapidly raising rents. Rent growth of 20.1 percent yearly is far above the national average and outperforms the metro’s five-year annual average of 9.1 percent. Due to a scarcity of land suitable for large-scale industrial development, Miami is one of the most expensive industrial markets on the East Coast. The average price per square foot is approximately $240, which is significantly higher than the national average of $151.

Leasing trends have increased significantly since the start of the COVID-19 pandemic. Ever since the halfway point of 2020, the metro has averaged approximately 3.8 million square feet of quarterly leasing volume, compared to an average of roughly 2.8 million square feet per quarter from 2015 to 2019. Leasing activity in Miami may slow in the coming quarters, but not due to a lack of demand. Dade County’s industrial space is limited, and the metro’s land constraints limit the possibility of large-scale construction. As a result, leasing volume may soon slow down due to a lack of available space rather than a market weakness.

Deal volume in Miami has remained strong in recent quarters, and same-store pricing has increased faster than the national average. Average cap rates are also well below the national average. Industrial properties in Miami have continued to trade in high volume at high prices. Deal activity has been consistent even during these times of rising interest rates. Many of the most significant transactions in recent months have involved sale-leasebacks by owner-users taking advantage of the favorable sales environment. The last several recurring sales demonstrate the considerable price appreciation for Miami’s industrial assets in recent years.

Naples

Industrial rents in the Naples market rose at a 12.3 percent annual rate in the fourth quarter of 2022, with an average yearly gain of 8.2 percent over the previous three years. In addition to the 330,000 square feet delivered over the last three years (a cumulative inventory expansion of 2.5 percent), 940,000 square feet are currently under construction. Naples’s low vacancy rate is expected to rise to about 5 percent in the upcoming year, according to recent leasing trends seen throughout the market.

Naples, classified as a tertiary market, has seen some promising trends this past year. The area had an uncommonly high number of deals closed over the last twelve months, ranking among the best of its peers with 110 transactions. That was significantly higher than the five-year average for transaction volume in this area.