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


EXECUTIVE SUMMARY

MARKET TRENDS

MIAMI INDUSTRIAL MARKET SHOWS FIRST SIGNS OF SATURATION

Q3 2017 INDUSTRIAL REPORT

VACANCY

The Miami Industrial market ended the 3rd quarter under mixed

Q3 2017

Q2 2017

FORECAST

4.12%

g

g

174,347

h

g

2,951,607

g

h

578,075

h

g

10.12

g

b

circumstances. The industrial sector remains the biggest beneficiary from the growing e-commerce sector as need for

NET ABSORPTION

modern distribution and storage facilities arises. CONSTRUCTION

In the last quarter, rental rates grew by 4.2% to an all-time high of $10.12 per square-foot. At the same time, vacancies

COMPLETIONS

increased by 15 basis-points, while absorption rates were declining to 174,000 square-foot. Investment activity dwindled

GROSS LEASE RATE

in the last quarter as overall transaction volume declined by 37%. Construction in the industrial segment is currently 2.9

RELATIVE TO PRIOR PERIOD | SOURCE: COSTAR PROPERTY®

million square-foot, with 578,075 square-foot being delivered. The next quarter will experience a record-breaking supply of about 1.9 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. As supply reaches record highs, the market shows first signs of saturation with increasing vacancies and slowing rent growth.

JOB GROWTH BY INDUSTRY MIAMI

US

SOURCE: US DEPARTMENT OF LABOR STATISTICS

INFORMATION MANUFACTURING FINANCIAL ACTIVITIES CONSTRUCTION PROFESSIONAL AND BUSINESS SERVICES -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%

TOTAL NONFARM MINING AND LODGING OTHER GOVERNMENT TRADE, TRANSPORTATION AND UTILITIES LEISURE AND HOSPITALITY EDUCATION AND HEALTH SERVICES

ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | INDUSTRIAL | Q3 2017

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MARKET ACTIVITY

COMPLETIONS, ABSORPTION AND VACANCY TRENDS COMPLETIONS

About 174,347 square-foot of industrial space was absorbed in the past quarter and 578,075 square-foot of new supply was added to the market. Miami-Dade’s vacancy increased by 15 basis-points to the previous period with gross asking rents increasing by 4.1% to $10.12 per square-foot. Medley is the area with the highest vacancy in the Miami area with about 7.2%, this

ABSORBTION

VACANCY

SOURCE: COSTAR PROPERTY®

1,600,000

4.50%

1,400,000 4.00% 1,200,000

can be explained by the elevated construction activity in the market adding over 2.04 million square-foot of industrial product since the beginning of the year, which accounted for about 2/3 of the total supply in Miami-Dade. Medley represents a prime location for industrial development due to its location relative

1,000,000

3.50%

800,000 3.00%

600,000

to major freight logistics facilities such as US-27, Florida’s Turnpike Extension, Miami International Airport, Florida East Coast Railway and Port Miami. The booming e-commerce sector is merging industrial and retail landscapes and creating a need for regional distribution

400,000 2.50% 200,000

0

2.00%

centers. Providing on-demand delivery has caused the industrial

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

market to become the greatest beneficiary of challenges in the retail sector. In combination with a growing population and increasing local demand, industrial rents and new construction are propelling in Miami-Dade. The Port Miami is crucial to the local consumption and in

ECONOMIC OVERVIEW

many cases the Miami area is the final destination for cargo shipped through the ports. Recently the Port Miami completed its expansion and dredging project and now has the capacity

Q3 2017

GROWTH

to accommodate Super-Post-Panamax ships and some of the

UNEMPLOYMENT RATE

5.1%

- 4.08%

largest cargo ships travelling from the East. With the advances

POPULATION GROWTH

2,760,930

+ 1.42%

MEDIAN HOUSEHOLD INCOME

46,962

+ 4.14%

LABOR FORCE

1,173,000

+ 1.73%

in transportation through Port Miami, fresher agricultural produce will be processed and stored locally. This will lead to an increase in demand for storage space and coolers. Some areas, which have traditionally been industrial areas such as the Central East and Bird Rd Market are undergoing

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

a major shift to more retail/entertainment oriented activities. This transformation results in a significant increase in sale prices and rental rates. As this occurs, industrial activity is forced to move to less expensive locations. Currently there are about 2.9 million square-foot under construction. Amazon broke ground in June on its 855,000

AVERAGE ASKING RENTS TRENDS

square-foot fulfillment center, located in the Carrie Meek

FLEX

WAREHOUSE

OVERALL

SOURCE: COSTAR PROPERTY®

International Business Park in proximity to Opa-Locka Executive Airport. The project is expected to create 1,000 and will be Amazon largest facility in South Florida by the end of 2018. Other major projects include the 500,000 square-foot KLX Aerospace Solution’s headquarter, which signed a built-to-suit lease with Flagler Global Logistics to become the first tenant in its Countyline Corporate Park at NW 107th St and 97th Ave. Completion is anticipated for the end of 2017. The new facility will create at least 100 jobs and retain 600. Another notable development is the $250 million 467,000 square-foot new headquarter of NBC Universal Telemundo in the Miami Airport Area. Completion is expected for the 2nd quarter of 2018. The new headquarter is expected to add another 150 new jobs, with an average salary of $89,000.

ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | INDUSTRIAL | Q3 2017

20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

3


LEASING ACTIVITY

PRICE TRENDS CAP RATE

In previous real estate cycles, the Miami market saw primarily smaller industrial leases signed in comparison to larger leases. This time leases in the range of 40,000 squarefoot to 70,000 square-foot are the norm. In recent months, large users such as machinery manufacturer John Deere and Amazon have been expanding in the market. Another example is KLX Aerospace Solutions, which is expanding its distribution center and headquarters for a total of 500,000 square-foot, and Telemundo Enterprises/NBC Universal’s world headquarters taking up 497,000 square-foot in Miami. These types of tenants were previously few and far between, but today they are responsible for the bulk

American Consolidation Logistics entered in a leasing agreement for a 93,799 square-foot facility located in the South Florida Logistics center in the Miami North submarket. The center provides the only space for controlled atmospheres for fumigation in the country. The location near the airport is crucial for the company since most of

6.80% 6.60%

170

6.40% 6.20%

150

6.00%

130

5.80% 5.60%

110

5.40%

90

5.20% 5.00%

70

Q1 2015

Q3 2015

Q1 2016

Q3 2016

Q1 2017

Q3 2017

TRANSACTION VOLUME WAREHOUSE

FLEX

SOURCE: REAL CAPITAL ANALYTICS

$.90BN $.80BN $.70BN $.60BN $.50BN $.40BN

its products are transported by plane and re-assures its

$.30BN

customers that it’s products as quickly as possible stored

$.20BN

in specialty refrigeration units.

SOURCE: REAL CAPITAL ANALYTICS

190

of new absorption in the Miami-Dade market.

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

$/SF

$.10BN $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

SALES ACTIVITY The Miami industrial investment market is fueled by its strategic location for companies from Latin America entering the market, a growing population and fast-changing consumer trends such as online sales and the rise of subscription-based services. Miami is seeing an influx of institutional capital as cap rates grow increasingly favorable. Nevertheless, overall sales volume slumped by 37% compared to last quarter, to $170 million. As sales were slowing, the price per square-foot decreased by 42% to $78 per square-foot and cape rates rose to 5.74%.

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

Center Point Properties acquired the largest warehouse facility in Miami-Dade County for $59 million.

INVESTMENT SALES | LANDLORD REPRESENTATION | TENANT REPRESENTATION

The facility encompasses 961,345 square-foot and traded

ASSET MANAGEMENT | PROJECT MANAGEMENT

at $61 per square-foot. Seagis Property Group acquired Airport Industrial Center, a small-bay warehouse property in the Airport West submarket of Miami-Dade County for $23.44 million. The center is 207,420 square-foot large which equated to a per square-foot price of $113.

ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | 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 Miami

Total

3,297,174

4.20%

(7,311)

-

9,876

9.67

Warehouse

3,244,837

3.76%

9,260

-

9,876

9.50

Flex

52,337

31.66%

(16,571)

-

-

14.48

East Miami

Total

4,292,452

4.81%

55,622

-

-

16.24

Warehouse

4,103,714

4.25%

52,122

-

-

15.79

Flex

188,738

16.95%

3,500

-

-

21.50

Hialeah

Total

30,825,631

2.62%

(72,252)

-

77,860

6.83

Warehouse

30,499,960

2.64%

(68,252)

-

77,860

6.75

Flex

325,671

1.23%

(4,000)

-

-

49.50

Medley

Total

35,221,485

7.20%

575,710

2,042,116

406,090

9.08

Warehouse

34,568,416

7.28%

571,726

2,042,116

406,090

9.05

Flex

653,069

2.94%

3,984

-

-

14.80

Miami Airport East

Total

21,570,771

3.85%

(1,336)

162,837

168,716

9.94

Warehouse

20,244,899

3.16%

78,486

162,837

168,716

9.50

Flex

1,325,872

14.43%

(79,822)

-

-

16.99

Miami Airport North

Total

12,661,384

1.76%

211,432

-

-

9.17

Warehouse

11,317,094

1.93%

196,137

-

-

9.02

Flex

1,344,290

0.37%

15,295

-

-

12.81

Miami Airport West

Total

44,746,890

3.78%

183,007

284,927

962,083

10.88

Warehouse

38,878,794

3.91%

233,350

284,927

962,083

10.32

Flex

5,868,096

2.87%

(50,343)

-

-

19.64

Miami Lakes

Total

12,296,109

4.18%

202,919

-

-

8.17

Warehouse

10,848,004

4.22%

192,256

-

-

7.97

Flex

1,448,105

3.83%

10,663

-

-

10.17

North Miami Beach

Total

37,085,806

3.93%

84,980

602,888

286,864

8.36

Warehouse

35,648,113

3.95%

76,321

602,888

286,864

8.30

Flex

1,437,693

3.48%

8,659

-

-

12.77

Outlying-Miami Dade

Total

229,685

0.00%

-

-

1,022,149

7.34

Warehouse

229,685

0.00%

-

-

1,022,149

7.34

Flex

-

0.00%

-

-

-

-

South Central Miami

Total

13,378,979

7.03%

84,559

-

-

21.67

Warehouse

12,683,134

7.19%

54,361

-

-

20.93

Flex

695,845

3.94%

30,198

-

-

26.27

South Dixie Hwy

Total

8,957,830

2.87%

150,811

270,706

-

10.60

Warehouse

8,127,092

3.01%

150,414

270,706

-

10.44

Flex

830,738

1.49%

397

-

-

13.80

Southwest Dade

Total

10,094,123

2.12%

(23,270)

25,387

17,969

10.15

Warehouse

8,310,530

1.79%

9,211

25,387

17,969

9.74

Flex

1,783,593

3.64%

(32,481)

-

-

12.07

West Miami/Coral Ter

Total

4,637,213

1.17%

(16,552)

-

-

15.60

Warehouse

4,282,638

0.73%

(13,052)

-

-

15.78

Flex

354,575

6.53%

(3,500)

-

-

15.07

Total

239,295,532

4.12%

1,428,319

3,388,861

2,951,607

10.12

Warehouse

222,986,910

4.12%

1,542,340

3,388,861

2,951,607

9.83

Flex

16,308,622

4.11%

(114,021)

-

-

16.88

SOURCE: COSTAR PROPERTY®

ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | INDUSTRIAL | Q3 2017

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SIGNIFICANT LEASE TRANSACTIONS PROPERTY ADDRESS

TENANT NAME

SIZE

LEASE TYPE

SUBMARKET

3200 NW 67th Ave

American Consolidation & Logisitcs 93,799

New

Miami Airport East

8355 NW 12th St

Triton Logistics

Renewal

Miami Airport East

74,329

7821 NW 67th Street

Miami Dade Police Department

70,760

Renewal

Miami Airport North

213 SE 10th Ave

N/A

70,000

New

Hialeah

10800 NW 100th Street

N/A

65,141

New

Medley

SIGNIFICANT SALES TRANSACTIONS PROPERTY ADDRESS

BUYER NAME

SIZE

SALES PRICE $

$/SF

SUBMARKET

3300 NW 123rd St

Centerpoint

961,345

59,000,000

61

Opa-Locka

5501 NW 72nd Avenue

Seagis Property Group

207,420

23,438,460

113

Miami Springs

12805 N Le Jeune Road

Prologis

117,052

16,000,000

137

Opa-Locka

7500 NW 70th St

Cofe Properties

193,932

15,600,000

80

Doral

16569 SW 117 Ave

Spinel Investment Company

60,076

7,096,300

118

South Dade

MAJOR DEVELOPMENT PIPELINE PROPERTY ADDRESS

COMPLETION

SIZE

DEVELOPER

SUBMARKET

NW 42nd Ave

Q4 2018

855,000

Amazon

Opa-Locka

NW 97th Ave

Q4 2017

500,000

Flagler Real Estate Services

Outlying Miami-Dade

12200 NW 25th St

Q2 2018

467,000

NBC Universal Telemundo

Miami Airport

11420 NW 122nd St

Q4 2018

199,410

Liberty Property Partnership

Medley

3740 W 104th St

Q4 2017

197,427

Flagler Real Estate Services

Outlying Miami-Dade

ONE COMMERCIAL REAL ESTATE | MIAMI-DADE | INDUSTRIAL | Q3 2017

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STEVEN NOSTRAND President & COO ONE Commercial Real Estate snostrand@onecommercialre.com

BROWARD

JULIAN SCHEEFF Director of Intelligence ONE Commercial Real Estate jscheeff@onecommercialre.com Miami | North End Aventura Golden Beach Bal Harbour Surfside Sunny Isles The Islands Bay Harbor Islands Indian Creek Normandy Isles La Gorce Sunset Islands Venetian Islands Fisher Island Key Biscayne Miami Beach South Beach Mid Beach North Beach Downtown Miami Midtown Edgewater Downtown Miami

MIAMI-DADE COUNTY

Palm/Hibiscus/Star Islands

Brickell Western Miami Doral Miami | South End Coconut Grove Coral Gables Pinecrest Palmetto Bay CocoPlum Gables Estates Snapper Creek Lakes Ponce-Davis & High Pines Old Cutler Bay Deering Bay

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 - Dade  
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