Driving some of these high sales numbers and the building boom are the basic fundamentals of the market. Miami-Dades vacancy rate at the end of the second quarter was at 8.2 percent, with rates even lower in Medley at 5.8 percent and Airport North at 4.8 percent, according to Jones Lang LaSalle reports.
Average asking rental rates for the second quarter are at $4.60 plus taxes, insurance and common-area maintenance with rates the highest in Airport West at $6.13 plus the additional costs, according to Jones Lang. Vacancies have been declining since hitting a double-digit peak in 2009 at the height of the recession. Net absorption of vacancy space for the year to date is almost one million square feet.
When youre looking at the absorption rate, relative to the vacancy rate, it tells you there is still room for more development in this market, said Todd Watson, a regional vice president of Denver-based DCT Industrial Trust, which last year acquired land for new development at Miamis Pan American West Industrial Park. Miami is the perfect example of those two trends coming together at the right time.
Vacancies are slightly higher in Broward with a 9.9 percent vacancy at the end of the second quarter, according to Jones Lang. Average rental rates are $6.16, plus taxes insurance and common-area maintenance. Absorption is much slower with only about 364,00 square feet absorbed year to date.
Further strengthening the Miami-Dade market is the anticipated increased demand when the Panama Canal expansion finishes in 2014. Instead of all the large container ships from Asia heading to California with their cargo, they will now be able to head directly to the East Coast to make deliveries. Right now, Norfolk is the only eastern port set up to accommodate these ships, but PortMiami plans to be ready.
The $1 billion vehicle tunnel is under construction. The port channel will be dredged to a depth of 50 feet to allow the passage of larger ships. The rail connection linking the port to a Florida East Coast Railway yard in Hialeah is being restored. These projects are expected to help the ports cargo business double in the next decade and triple by 2035.
Miami already benefits from its position as the Gateway to Latin America, where demand continues to increase for shipping goods to Latin America and the Caribbean.
The Panama Canal expansion only enhances that growth, said Brian Smith, executive director with Cushman & Wakefield in Miami. The demand is real today. The pent-up demand has been coming for two years because companies were hesitant to make a move.
As the economy rebounds and with his business growing, industrial tenants like Jose Aguirre are taking advantage of the opportunity to expand. Aguirres business, Miami International Freight Solutions, has been growing steadily over the past four years and he is optimistic about the future. He recently moved his warehouse from Hialeah to Miami Lakes, increasing from 121,000 square feet to 190,000 square feet. His company ships largely electronics and apparel to Latin America.
We thought it was the right time to lock down a long-term lease, Aguirre said. We dont think prices are going to stay this attractive for much longer.
The cost of building new industrial property didnt work during the boom days when land in Miami-Dade skyrocketed as high as $1 million per acre, or about $23 square foot. But during the recession when prices dropped to about $400,000 an acre, or $9 per square foot for raw land, the numbers started to add up.