With industrial real estate sale prices in Miami-Dade County hitting record levels and vacancy rates dropping, theres suddenly a mini building boom under way in the warehouse district west of Miami International Airport.
After several years when industrial warehouse construction ground to a halt in Miami-Dade, there is now nearly one million square feet of warehouse space under construction or expected to break ground within the next month or two.
The vast majority of the space is being built without tenants because the owners are so confident in the markets future. And thats only the beginning. There are at least another two million square feet in the pipeline.
South Broward is also seeing a small surge, with 350,000 square feet under construction.
Construction is being driven largely by industrial investors with ready access to capital who have decided that South Florida, and Miami in particular, is a hot market where they want to own more property. As prices for acquisitions started to rise, they decided it simply made more sense to build.
Theyre all looking at Miami as a tier-one city, said Jose Juncadella, principal with Fairchild Partners. This is one of the best locations for them to have an investment because its a constrained market and you have a lot of demand for land. We have great fundamentals.
That combination is driving prices up to record levels. More than six million square feet of industrial buildings changed hands in South Florida during the first half of this year at a transaction volume of $485.3 million, according to Jones Lang LaSalle, a national brokerage firm.
The industrial market has bounced back faster than anyone expected, said Steve Medwin, managing director with Jones Lang LaSalle in Miami. The institutions are all here scouring the market. They want to have that dot on the map. Each time a quality asset comes on the market, theres a tremendous number of bidders, resulting in much higher prices than anyone would expect.
The biggest of those deals was AEW Capital Managements $340 million April purchase of the 4.2-million-square-foot Flagler Station Business Park from Fortress Investment Group. That deal, which included 33 buildings at a price of $81 per square foot, was the largest industrial sales transaction in the country for the month.
But on a per-square-foot basis, another recent deal set a Miami-Dade County record. Prudential Real Estate Investors paid $46.6 million or $137 per square foot to Eaton Vance for a three-building portfolio in Miamis International Corporate Park.
This price run-up started last year and shows no signs of slowing down. While most of the action has been focused in Miami-Dade, Broward County has seen some isolated cases like REEFs sale of the Weston Business Center late last year to TIACREF for nearly $85 million, or $125 per square foot. That was only 15 months after REEF bought the property for $95 per square foot. More recently, Industrial Developments International purchased 42 acres at the Davie Business Center in Fort Lauderdale for $21 million with plans to build a 750,000-square-foot business park.
There are just not a lot of investment-grade properties available in Broward County, said Harry Tangalakis, senior vice president of CBRE in Fort Lauderdale. But we are starting to see new development again.