“The road to recovery is gaining strength with tenant demand and increased tour activity in the market,” reports Cushman & Wakefield. Reis reports an increasingly strong performance for the local warehouse/distribution market, last counted at 53.5 million square feet of existing inventory. Net absorption of 355,000 square feet in 2011 all told, alongside no new supply, was followed by 535,000 during the first half of 2012, again with no supply additions. Vacancy, accordingly, has been on the decline. At 10.3%, the second-quarter rate was down 30 basis points for the period and was down 100 year-over-year. July followed with absorption at negative 62,000 square feet—a downturn that Reis expects will be promptly reversed by the resumption of positive numbers. Vacancy ended the month up 20 basis points. Rent growth, sharply negative in 2011 all told, has turned positive. At $6.05 psf and $5.49 psf, second-quarter asking and effective averages for warehouse/distribution space were up 0.3% and 0.5% from the quarter before and were up 0.5% and 0.7% year-to-date. July brought no additional changes. These rates, like rates elsewhere in South Florida, run high by national norms, an effect in part of a recent history of rising land prices. (See Special Real Estate Factors for related commentary.)
Construction is returning, albeit at a prudent pace. Reis expects 351,600 square feet of warehouse/distribution product to deliver in two projects in 2012, neither of which had arrived online per the date of this report. The larger of the two, scheduled to complete in November, is the 264,100-square-foot Building A at Miramar Centre Business Park in Miramar. Construction began last November. Millport Associates is cited by Cushman & Wakefield as the building’s “major tenant.” Industrial Developments International (IDI) is the developer. According to Jones Lang LaSalle, Building A, a speculative project, is the 7th of 10 that will constitute the park at build-out. And a June groundbreaking took place for an 87,500-square-foot spec project at Miramar Park of Commerce, the first building in five years to be built at this park, according to Jones Lang LaSalle. Reis expects completion this December.
Also under construction per report date was a 70,000-square-foot FedEx Ground facility expansion in Pompano Beach, due online in January 2013. In addition, Business Wire reported in June, discount grocer Save-A-Lot has announced plans for a 250,375-square-foot state-of-the-art distribution facility in Pompano Beach. The project, an expansion of an existing 217,800-square-foot facility, is the result of collaboration between KTR Capital Partners and Butters Construction. Reis cites a February 2013 completion date. According to Jones Lang LaSalle, “investors have begun constructing newer warehouses to accommodate the increased demand from tenants and it is anticipated that this trend will continue through the year.” Land sales, accordingly, have increased. IDI spent $21 million in its purchase of 42.3 acres at the Davie Business Center toward the development of 750,000 square feet of industrial space.
Reis expects warehouse/distribution vacancy to end the year up 30 basis points from the second quarter as an effect of new supply, even as net absorption remains positive. Gains in the neighborhood of 2.0% are projected for average rents for the year. Construction will once again be part of the fabric in the period ahead.