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MARKET VIEW | INDUSTRIAL BROWARD | MIAMI-DADE | PALM BEACH


EXECUTIVE SUMMARY

MARKET TRENDS

BROWARD’S INDUSTRIAL CONSTRUCTION IS ROARING WHILE RENTS ARE SKYROCKETING

Q3 2017 INDUSTRIAL REPORT

Q3 2017

Q2 2017

FORECAST

3.73%

h

g

230,974

g

g

1,609,951

g

h

166,370

g

g

9.94

g

g

VACANCY

NET ABSORPTION

The Broward Industrial market experienced a strong 3rd quarter. The industrial sector remains the biggest beneficiary

CONSTRUCTION

from the growing e-commerce segment as the need for modern distribution and storage facilities arises.

COMPLETIONS

In the last quarter, rental rates grew by 2.7% to an all-time high of $9.47 per square-foot. At the same time, vacancies decreased

GROSS LEASE RATE

by 5 basis-points, while absorption was increasing to 234,974 square-foot. Investment activity rose in the last quarter as

RELATIVE TO PRIOR PERIOD | SOURCE: COSTAR PROPERTY®

overall transaction volume increased by 163%. Construction in the industrial segment is currently 1.6 million square-foot.

OUTLOOK With e-commerce disrupting the retail, an increasing need for “last-mile delivery” has become a driving force behind the expansion of the industrial segment. Demand for quality industrial space remains strong, as new industrial space is more functional and offers operation cost benefits. Demand for quality industrial space remains unbroken as rental rates increase. Investors are attracted to the Broward market as fundamentals are similar to Miami-Dade but margins are higher.

JOB GROWTH BY INDUSTRY FTL

US

SOURCE: US DEPARTMENT OF LABOR STATISTICS

INFORMATION

-4.0%

-3.0%

-2.0%

-1.0%

0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

MANUFACTURING TOTAL NONFARM MINING AND LODGING FINANCIAL ACTIVITIES OTHER GOVERNMENT CONSTRUCTION TRADE, TRANSPORTATION AND UTILITIES LEISURE AND HOSPITALITY EDUCATION AND HEALTH SERVICES PROFESSIONAL AND BUSINESS SERVICES

ONE COMMERCIAL REAL ESTATE | BROWARD | INDUSTRIAL | Q3 2017

2


MARKET ACTIVITY

COMPLETIONS, ABSORPTION AND VACANCY TRENDS COMPLETIONS

About 230,974 square-foot of industrial space were absorbed in the past quarter and 166,370 square-foot of new supply was added to the market. Broward’s vacancy decreased by

ABSORBTION

VACANCY

SOURCE: COSTAR PROPERTY®

1,200,000

5.50%

5 basis-points to the previous period with gross asking rents increasing by 2.8% to $9.94 per square-foot. Southwest Broward

5.00%

1,000,000

is the area with the highest vacancy in the market with about 8.15%. The submarket experienced 70,948 square-foot, the

4.50% 800,000

2nd largest supply of new space after Central Broward, which added 181,370 square-foot since the beginning of the year.

4.00% 600,000 3.50%

The booming e-commerce sector is merging industrial and retail landscapes and creating a need for regional distribution

400,000 3.00%

centers. Providing on-demand delivery has caused the industrial market to become the greatest beneficiary of challenges in the

200,000

2.50%

retail sector. In combination with a growing population and increasing local demand industrial rents and new construction are propelling in Broward.

0

2.00%

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Port Everglades takes a crucial role in the Broward industrial market as it is one of the most active containerized cargo ports in the U.S. and serves as South Florida’s main seaport for petroleum products.

ECONOMIC OVERVIEW

Broward’s industrial market is also benefiting from the areas uninterrupted job growth. Jobs went up 3.3% year on year, with

Q3 2017

GROWTH

UNEMPLOYMENT RATE

3.8%

- 13.6%

average of 1.1%. Demand for industrial space is driven by a

POPULATION GROWTH

1,952,630

+ 1.81%

diverse cross-section of industries such as pharmaceutical,

MEDIAN HOUSEHOLD INCOME

57,958

+ 3.99%

LABOR FORCE

845,000

+ 3.29%

unemployment rates dropping to 3.8%. The manufacturing industry expanded by 2.9%, which is above the nationwide

logistics, food & beverage, and manufacturing. Currently there are about 1.6 million square-foot under construction. Core5 Industrial Partners and Helms Development

CHANGE AS PER YEAR-TO-DATE | SOURCE: US DEPARTMENT OF LABOR STATISTICS

are currently developing a 224,572 square-foot distribution center in Pembroke Pines, which is scheduled by the beginning of next year. The facility is part of a larger three-building scheme, which was broken out in phases and is ought to be deliver a total of 750,000 square-foot of class A space. Exeter Property Group is currently delivering a 212,160 square-foot industrial

AVERAGE ASKING RENTS TRENDS

space in Sawgrass Bend Commerce Center, which is the first

FLEX

WAREHOUSE

OVERALL

SOURCE: COSTAR PROPERTY®

phase of a two-building development of equal size. The building is located next to Exeter’s already existing two warehouses in the park. The project is scheduled for the end of 2018.

16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0

Q2 2016

ONE COMMERCIAL REAL ESTATE | BROWARD | INDUSTRIAL | Q3 2017

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

3


LEASING ACTIVITY

PRICE TRENDS CAP RATE

The tight market with vacancies at 3.8% experiences a continued demand from users of the aviation, logistics and construction segment, who are seeking warehouse/ distribution space.

$/SF

SOURCE: REAL CAPITAL ANALYTICS

7.55%

150 140

7.50%

130 120

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

7.45%

110 7.40%

100 90

7.35%

80

HapCor, an international retailer of brands such as Campbells, Pepperidge Farm, Borden Dairy and Badia Spice, entered in a leasing agreement for a 32,013 square-foot

70

7.30%

60 7.25%

50

Q1 2015

warehouse in The Miramar Park of Commerce.

Q3 2015

Q1 2016

Q3 2016

Q1 2017

Q3 2017

TriVantage leased 25,594 SF at Flagler Station Phase III. TriVantage is expanding and will move from their 17,000 SF facility in Doral to a new Class A space. This adds to the trend that companies are growing and see value in upgrading

TRANSACTION VOLUME WAREHOUSE

FLEX

SOURCE: REAL CAPITAL ANALYTICS

their current facilities. One major factor in the location search was the desire to leave the congested streets of central Doral to the well-located Flagler Station.

$.40BN $.35BN $.30BN $.25BN $.20BN

SALES ACTIVITY

$.15BN $.10BN

Broward County’s investment market experienced steep increase by 163% to $210 million for industrial product. As Miami-Dade’s industrial investment market becomes

$.05BN $0BN Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

tighter, investors are seeking product further north, where they find similar market fundamentals, with cap rates of 100 basis-points above the ones in Miami. Even though cap rates increase slightly to 7.34%, per square-foot prices increased to $144 per square-foot. That is a sign that rental rates are increasing quicker than property values, which can interpret as a sign that values will adjust in the next period.

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

Duke Realty bought the Bridge Point I-95 distribution center in Fort Lauderdale for $54.83 million. The two buildings of 306,466 square-foot at 2100 to 2200 W. Sunrise Blvd traded for a price, which equated to $179 per square-foot. Bridge Development completed the industrial project earlier this year on the 17.5-acre site just off Interstate 95.

INVESTMENT SALES | LANDLORD REPRESENTATION | TENANT REPRESENTATION ASSET MANAGEMENT | PROJECT MANAGEMENT

TH Real Estate acquired two warehouses for a combined $54 million. The warehouses total in 373,285 squarefoot and were built in 2001 and 2004. The property was 93% leased at the time of sale and equated to $145 per square-foot

ONE COMMERCIAL REAL ESTATE | BROWARD | INDUSTRIAL | Q3 2017

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INDUSTRIAL STATISTICS SUBMARKET

TYPE

TOTAL INVENTORY (SF)

VACANCY (%)

YTD NET ABSORBTION

YTD DELIVERIES

UNDER CONSTRUCTION

QUOTED RATES

Central Broward

Total

20,590,197

3.83%

79,594

181,370

194,887

10.43

Warehouse

17,861,618

3.93%

21,216

181,370

140,096

10.11

Flex

2,728,579

3.18%

58,378

-

54,791

13.64

Coral Springs

Total

6,649,149

2.77%

137,342

-

363,210

8.34

Warehouse

5,451,799

2.57%

79,383

-

363,210

8.04

Flex

1,197,350

3.64%

57,959

-

-

11.86

Northeast Broward

Total

12,865,660

4.57%

184,577

-

37,050

10.01

Warehouse

11,383,772

4.37%

191,256

-

37,050

9.07

Flex

1,481,888

6.05%

(6,679)

-

-

13.96

Outlying Broward

Total

42,248

0.00%

-

-

-

-

Warehouse

5,861

0.00%

-

-

-

-

Flex

36,387

0.00%

-

-

-

-

Pompano Beach

Total

30,612,639

2.36%

(37,361)

-

344,997

9.06

Warehouse

27,266,997

2.39%

(63,205)

-

344,997

8.82

Flex

3,345,642

2.13%

25,844

-

-

11.14

Southeast Broward

Total

30,269,291

1.98%

351,535

30,000

-

11.27

Warehouse

25,866,869

2.00%

309,183

30,000

-

10.88

Flex

4,402,422

1.83%

42,352

-

-

15.89

Southwest Broward

Total

17,712,954

8.15%

64,071

70,948

649,807

9.31

Warehouse

14,153,501

7.48%

207,152

-

563,017

8.42

Flex

3,559,453

10.83%

(143,081)

70,948

86,790

13.96

West Sunrise

Total

9,855,360

4.75%

99,468

-

20,000

9.70

Warehouse

6,972,946

3.87%

138,050

-

20,000

8.95

Flex

2,882,414

6.87%

(38,582)

-

-

12.16

Total

128,597,498

3.73%

879,226

282,318

1,609,951

9.94

Warehouse

108,963,363

3.52%

883,035

211,370

1,468,370

9.47

Flex

19,634,135

4.87%

(3,809)

70,948

141,581

13.45

SOURCE: COSTAR PROPERTY®

SIGNIFICANT LEASE TRANSACTIONS PROPERTY ADDRESS

TENANT NAME

SIZE

LEASE TYPE

SUBMARKET

1951 North Commerce Parkway

VPX Sports

67,200

New

Outlying Broward

9587 Premier Pkwy

HapCor

32,013

New

Southwest Broward

117 NW 3rd Avenue

World Emblem International Inc

16,984

Renewal

Southeast Broward

SIGNIFICANT SALES TRANSACTIONS PROPERTY ADDRESS

BUYER NAME

SIZE

SALES PRICE $

$/SF

SUBMARKET

2100 W Sunrise Blvd

Duke Realty Corp

306,466

54,830,000

179

Central Broward

5607 Hiatus Rd

TH Real Estate

373,285

54,000,000

145

Southwest Broward

2504 NW 19th Street

First Industrial Realty Trust

172,553

22,650,000

131

Pompano Beach

15712 SW 41st St

TH Real Estate

103,116

16,219,063

157

Southwest Broward

4000 N. Dixie Highway

Zurich Alternative Asset Management

127,771

15,000,000

117

Pompano Beach

MAJOR DEVELOPMENT PIPELINE PROPERTY ADDRESS

COMPLETION

SIZE

DEVELOPER

SUBMARKET

20311 Sheridan St

Q1 2018

224,572

Core5/Helms

Southwest Broward

4030 NW 126th Ave

Q4 2018

212,160

Exeter Property Group

Coral Springs

5255 Johnson Rd

Q1 2018

151,050

Elite Aluminium Corp

Coral Springs

2200 W Sunrise Blvd

Q4 2017

140,096

Bridge Development

Central Broward

1650 NW 18th St

Q1 2018

133,262

Butters Construction & Development

Pompano Beach

ONE COMMERCIAL REAL ESTATE | BROWARD | INDUSTRIAL | Q3 2017

5


STEVEN NOSTRAND President & COO ONE Commercial Real Estate

PALM BEACH

snostrand@onecommercialre.com

JULIAN SCHEEFF Director of Intelligence ONE Commercial Real Estate jscheeff@onecommercialre.com

Western Broward Southwest Ranches Plantation Sunrise Weston Parkland Broward | North End Hillsboro Beach Lighthouse Point Bay Colony Sea Ranch The Landings East Fort Lauderdale Las Olas Isles Harbor Beach Fort Lauderdale Beach

BROWARD COUNTY

Lauderdale-by-the-Sea

Rio Vista Victoria Park & Colee Hammock Sunrise Key Coral Ridge / C.R. Country Club Broward | South End Hollywood Beach Hallandale Beach

MIAMI-DADE

ONE Commercial Real Estate 1000 Brickell Avenue, Suite 500 Miami, FL 33131 305.704.9787

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Market View Q3 2017 | Industrial - Broward  
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