Real Estate

How E-commerce is affecting South Florida’s industrial real estate market

Packages passed down a conveyor belt before receiving a shipping label at Amazon in Shakopee, Minn. Last summer, Amazon broke ground on its 855,000-square-foot fulfillment center in Opa-locka, bringing its industrial footprint in Miami-Dade county alone to close to 1.5 million square feet of space, across multiple buildings in multiple submarkets and neighborhoods.
Packages passed down a conveyor belt before receiving a shipping label at Amazon in Shakopee, Minn. Last summer, Amazon broke ground on its 855,000-square-foot fulfillment center in Opa-locka, bringing its industrial footprint in Miami-Dade county alone to close to 1.5 million square feet of space, across multiple buildings in multiple submarkets and neighborhoods. TNS

The Amazon Effect. We’ve all heard the term, which has been used to describe the overwhelming success of the e-commerce giant responsible for changing the way we shop, delivery expectations, our daily lives and even the American lexicon, with terms like PrimeNesia.

PRIMENESIA (noun): When you order so much on Amazon Prime that you don’t know what’s in the box.

Yes, it’s a thing.

But as the ability to purchase an item online and find it on your doorstep within a day, and in some cases a matter of hours, has become the norm, it’s also had a dramatic impact on the commercial real estate landscape across the country. And South Florida is no exception.

Last summer, Amazon broke ground on its 855,000-square-foot fulfillment center in Opa-locka, bringing its industrial footprint in Miami-Dade county alone to close to 1.5 million square feet of space, across multiple buildings in multiple submarkets and neighborhoods.

And it’s not just Amazon. In Miami-Dade, roughly 4.5 million square feet of speculative industrial warehouse space was under construction and/or delivered in 2018, with the majority of that product being absorbed/leased by third party logistics companies (3PLs) as the buildings came online.

That pace continued into 2019, as Miami-Dade already recorded approximately 4 million square feet of industrial of leasing activity year-to-date, which accounted for 1.6 million square feet of leasing absorption, according to the latest figures from Cushman & Wakefield Research.

The second half of the year should be just as active, as other large logistics-driven tenants continue to absorb newly minted industrial space throughout South Florida, with e-commerce driving the proverbial bus on tenant/user activity.

Point of fact, it has been widely reported that Amazon was responsible for roughly 50 percent of the nation’s e-commerce sales and 5 percent of all combined offline and online sales in 2018. And as the seemingly insatiable consumer demand to have products delivered more and more quickly continues to grow, most e-commerce companies, not just Amazon, continue to position themselves closer to the consumer.

It’s the “Close to Clicks” theory.

In order to fulfill next-day and same-day deliveries while keeping shipping costs low, e-commerce distributors have been forced to look at distribution points that are closer to more dense areas, where they can quickly reach a large portion of the local population.

So, in the case of our land-constrained, traffic-laden, ever-growing South Florida market, that means exploring sites located closer and closer to those clicks.

But when you combine that location-driven need with the natural geographic boundaries of South Florida, i.e., the Atlantic Ocean to the east and the Everglades to the west, industrial developers have had to look outside the box in order to find that proper industrial site sandwiched between those sharks and gators.

From refilling lakes, to building atop construction debris landfills, to razing bottling plants, obsolete buildings and lumberyards, these developers have had to get creative to find the right location for that last-mile site, forever changing the physical landscape of our relatively young metropolis.

Miami-Dade reports having some 2.7 million residents, good for the seventh-largest county in the country, according to the Miami Herald. And Miami was also recently rated as the sixth-fastest-growing population nationwide.

Combine South Florida’s consistent and now more-dense population growth, the Amazon Effect, a healthy economy and limited land supply and you have a formula for sustained, well-located warehouse space demand for the foreseeable future.

And it’s because of these unique South Florida market dynamics that I expect the pace of industrial warehouse development across our ever-changing landscape to only continue and be as consistent as the seemingly never-ending construction on the Dolphin and Palmetto expressways.

Gian Rodriguez is managing principal of Cushman & Wakefield Miami & Fort Lauderdale.

▪ This opinion piece was written for Business Monday in the Miami Herald. It reflects the view of the writer and not necessarily that of the newspaper.

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