Last week Andrew and I presented the 2010 Miami-Dade County Industrial Market Study to over 240 members of the Commercial Industrial Association of South Florida. This is 15th year we have reported on the industrial market conditions in South Florida.
The Market Trends Section reported a growth in industrial space for the year of 2008 of just over 267,000 SF a decline of about 87% from the prior year. This downward trend was also evident in the industrial employment sector showing an employment decline of 7,600 to a total employment of just over 175,000. For the year of 2009 projected total freight at the Port of Miami declined by 8% while freight through Miami International Airport declined by 20%.
The Market Activity Section shows volume of warehouse sales remained the same at 74 buildings but a decline in the average sale price from $71/SF to $69/SF. The dollar amount of the sales decreased by 55% to $108,328,400. The industrial condominium market also slowed with a 25% decline in sales volume in 2009 and an average price decline from $144/SF to $122/SF.
Because of the variety of warehouse/industrial properties in various locations Miami-Dade County is divided into seven regions based on similar types of properties in each region. All regions are reporting an increase in the amount of rental space available, vacancy rates are as high as 18%-20% and rental rates have declined to as low as $3.50/SF in some areas.
First year rental rates have declined from the mid $7.00/SF to as low as $3.50/SF. Some industrial property owners in larger buildings are renting for $1.00/SF plus all expenses (NNN) for the first year of a three year lease. Existing tenants are requesting rent rate reductions, abatement of rent or other concessions in exchange for longer term leases. Property managers are reviewing these requests on a case by case basis.
Vacancy rates should continue to increase from 13% and could rise to as high as 18% as a result of no new companies moving into this market. Existing companies are relocating from older less efficient buildings to newer buildings taking advantage of the lower rental rates in newer building with better access, parking and loading areas. This is forcing properties with functional problems to become even more rate competitive.
The major issues facing commercial property owners are the burden of additional governmental regulation and enforcement. Property owners are being forced to install expensive wired fire alarm systems, re-inspection for code compliance whenever a tenant applies for an occupational license.
The encouraging news in cargo compared to other US Customs districts is that Miami’s decline of 15% in trade from June 2008 to June 2009 was the smallest of all districts except Norfork/Mobile/Charleston. With the construction of two cargo facilities, the Miami International Airport will have an additional 800,000 SF of cargo space plus a new fumigation facility. At the Port of Miami the dredging of the channel to 50’ depth will make Miami only one of three ports on the Eastern Seaboard with this depth which can take advantage of the widening of the Panama Canal. These factors will improve Miami’s international trade as the economy recovers and secure Miami’s future as a major air and sea port.