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


EXECUTIVE SUMMARY

MARKET TRENDS

PALM BEACH INDUSTRIAL MARKET EXPERIENCES TIGHT SUPPLY JUSTIFIES NEW DEVELOPMENT

Q3 2017 INDUSTRIAL REPORT

Q3 2017

Q2 2017

FORECAST

2.79%

h

h

NET ABSORPTION

393,278

g

h

distribution and storage facilities arises.

CONSTRUCTION

256,748

g

g

In the last quarter, rental rates grew by 3.55% to an all-

COMPLETIONS

12,397

h

g

10.47

g

g

VACANCY

The Palm Beach Industrial market experienced a strong 3rd quarter. The industrial sector remains the biggest beneficiary from the growing e-commerce segment as need for modern

time high of $10.47 per square-foot. At the same time, vacancies decreased by 62 basis-points, while absorption

GROSS LEASE RATE

was increasing to 393,278 square-foot. Investment activity declined in the last quarter as overall transaction volume

RELATIVE TO PRIOR PERIOD | SOURCE: COSTAR PROPERTY®

decreased by 30%. Construction in the industrial segment is currently 256,748 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. Palm Beaches available stock continues to remain tight, as construction has not yet picked up yet. With the continuing strengths of the economy a boom in construction activity in the industrial segment can be expected.

JOB GROWTH BY INDUSTRY PALM BEACH

US

SOURCE: US DEPARTMENT OF LABOR STATISTICS

INFORMATION TRADE, TRANSPORTATION AND UTILITIES FINANCIAL ACTIVITIES -4.0%

-3.0%

-2.0%

-1.0%

-2.0%

-1.0%

0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

8.0%

9.0%

8.0%

9.0%

10.0%

TOTAL NONFARM MANUFACTURING MINING AND LODGING OTHER GOVERNMENT CONSTRUCTION LEISURE AND HOSPITALITY EDUCATION AND HEALTH SERVICES PROFESSIONAL AND BUSINESS SERVICES

ONE COMMERCIAL REAL ESTATE | PALM BEACH | INDUSTRIAL | Q3 2017

2


MARKET ACTIVITY

COMPLETIONS, ABSORPTION AND VACANCY TRENDS COMPLETIONS

About 393,278 square-foot of industrial space was absorbed in the past quarter and 12,397 square-foot of new supply added to the market. Broward’s vacancy decreased by 62 basis-points

ABSORBTION

VACANCY

SOURCE: COSTAR PROPERTY®

600,000

4.50%

to the previous period with gross asking rents increasing by 3.55% to $10.47 per square-foot. Southern Boulevard is the

500,000

4.00%

area with the highest vacancy in the market with about 30.25%. The submarket has experienced the largest supply of new

400,000

industrial stock adding 353,835 square-foot of warehouse space since the beginning of the year. Southwest Boulevard with its great accessibility to Florida’s Turnpike has experienced

3.50% 300,000 3.00%

much building activity in recent years. Absorption has not been able to keep up as 102,060 square-foot were absorbed since

200,000

the beginning of the year.

2.50%

100,000

The booming e-commerce sector is merging industrial and retail landscapes and creating a need for regional distribution centers. Providing on-demand delivery has caused the industrial

0

2.00%

Q2 2016

market to become the greatest beneficiary of challenges in the

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

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

ECONOMIC OVERVIEW

Palm Beach has one of the most diverse economies in the United States. The county combines its core competencies agriculture and leisure with a strong science and technologybased component. These areas include aerospace, life sciences and health sciences. The Port of Palm Beach employs approximately 2,400 people and ships 100% of the in the Everglades produced raw sugar.

Q3 2017

GROWTH

UNEMPLOYMENT RATE

3.9%

- 11.4%

POPULATION GROWTH

1,493,750

+ 2.77%

MEDIAN HOUSEHOLD INCOME

61,683

+ 4.61%

LABOR FORCE

617,500

+ 2.61%

Palm Beach’s job growth has been uninterrupted, and is adding over 1,500 jobs to the economy per month yielding

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

in an annual growth of 2.6%. The industry with the largest growth has been the construction sector increasing by 10.1% year-to-date. Palm Beach County is the region with the largest amounts of undeveloped land, which recently experienced a development of planned communities, which is spurring demand for storage space.

AVERAGE ASKING RENTS TRENDS FLEX

Even with market fundamentals being positive as vacancies

WAREHOUSE

OVERALL

SOURCE: COSTAR PROPERTY®

enter a record low and a strong rent growths and demand for industrial space reach record heights, new development has not

16.00

yet picked up in Palm Beach. Currently there are about 256,748

14.00

square-foot under construction. The largest project is a SelfStorage development of about 26,941 square-foot on a former mobile home park in Lantana. The facility is operated by Acorn, which operates similar facilities in Sebastian and Boca Raton.

12.00 10.00 8.00 6.00 4.00 2.00 0

Q2 2016

ONE COMMERCIAL REAL ESTATE | PALM BEACH | 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 2.8% experiences a continued demand from users of the aviation, logistics and construction segment, who are seeking warehouse/ distribution space. Even though demand for new space was strong, the market lacked larger transactions.

$/SF

SOURCE: REAL CAPITAL ANALYTICS

7.60%

150 140

7.50%

130 120

7.40%

110

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

7.30%

100 90

7.20%

80 70

ABC Supply, a major distributor of construction

60

materials across the US, signed a 39,069 square-foot lease

50

7.10% 7.00%

Q1 2015

in the Palm Beach Airport Area.

Concrete Products signed a lease over 14,000 Square-foot in Lake Park East.

Q3 2015

Q1 2016

Q3 2016

Q1 2017

Q3 2017

TRANSACTION VOLUME WAREHOUSE

FLEX

SOURCE: REAL CAPITAL ANALYTICS

$.10BN $.09BN $.08BN $.07BN $.06BN $.05BN $.04BN $.03BN $.02BN $.01BN $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 Palm Beach industrial investment volume declined by 30% in the last quarter. The investment market is still lacking some of the larger transaction. Moreover, cap rates rose slightly as per square foot prices decreased, which means that overall stock received a price reduction.

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

The Silverman Group acquired the two industrial buildings at 701 Boutwell Rd. in Lake Worth, FL from Panattoni Development Company, Inc. for $30.24 million, or $120 per square foot. The buildings were completed in December 2016 and were 35% occupied at time of sale.

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

Strategic Storage bought a 42,997 square-foot flex office building in Palm Beach Gardens submarket. The property was acquired for redevelopment purposes. Planned is a 77,300 square-foot self-storage facility.

ONE COMMERCIAL REAL ESTATE | PALM BEACH | INDUSTRIAL | Q3 2017

4


INDUSTRIAL STATISTICS SUBMARKET

TYPE

TOTAL INVENTORY (SF)

VACANCY (%)

YTD NET ABSORBTION

YTD DELIVERIES

UNDER CONSTRUCTION

QUOTED RATES

45th Street

Total

1,595,056

2.01%

30,180

-

-

14.49

Warehouse

1,127,529

0.45%

38,753

-

-

8.03

Flex

467,527

5.77%

(8,573)

-

-

22.10

Arvida Pk of Commerce

Total

4,963,249

2.28%

56,062

-

23,446

13.22

Warehouse

2,821,438

1.01%

52,123

-

23,446

12.50

Flex

2,141,811

3.94%

3,939

-

-

14.05

Austin Park/Hill/53rd

Total

2,714,279

0.29%

35,149

-

1,500

8.03

Warehouse

2,561,038

0.14%

37,954

-

1,500

7.80

Flex

153,241

2.77%

(2,805)

-

-

10.16

Boca Raton East

Total

3,296,813

1.16%

6,863

-

-

12.31

Warehouse

2,266,287

0.79%

4,248

-

-

11.08

Flex

1,030,526

1.98%

2,615

-

-

17.23

Boca Raton West

Total

193,707

0.00%

5,202

-

-

-

Warehouse

149,707

0.00%

5,202

-

-

-

Flex

44,000

0.00%

-

-

-

-

Boynton Beach

Total

5,233,185

1.99%

124,021

91,479

-

8.55

Warehouse

4,388,236

2.14%

103,517

91,479

-

8.28

Flex

844,949

1.19%

20,504

-

-

13.62

Central Palm Bch Area

Total

5,576,527

0.80%

11,703

-

-

8.56

Warehouse

4,982,143

0.75%

1,128

-

-

8.43

Flex

594,384

1.22%

10,575

-

-

10.82

Delray Beach

Total

2,987,042

1.77%

80,556

3,287

-

14.84

Warehouse

2,507,594

1.83%

80,546

3,287

-

14.49

Flex

479,448

1.45%

10

-

-

22.79

DtwnPB to Tri-RailSta

Total

2,140,526

1.87%

21,279

-

-

10.15

Warehouse

1,895,782

0.77%

23,979

-

-

9.95

Flex

244,744

10.38%

(2,700)

-

-

10.73

Electronics Way

Total

1,609,504

2.74%

72,345

-

17,500

7.83

Warehouse

1,425,316

3.09%

72,345

-

17,500

7.86

Flex

184,188

0.00%

-

-

-

7.32

Jupiter

Total

3,036,950

0.54%

17,691

-

-

12.18

Warehouse

2,045,699

0.65%

13,440

-

-

11.78

Flex

991,251

0.29%

4,251

-

-

15.74

Lake Park East

Total

255,532

4.90%

-

-

-

8.50

Warehouse

255,532

4.90%

-

-

-

8.50

Flex

-

0.00%

-

-

-

-

Lake Park West

Total

1,849,442

0.86%

6,054

4,300

-

12.27

Warehouse

1,509,566

0.89%

3,494

4,300

-

12.33

Flex

339,876

0.71%

2,560

-

-

12.05

Lake Worth East

Total

2,492,353

0.72%

(3,359)

-

30,341

11.65

Warehouse

2,062,516

0.87%

(4,359)

-

30,341

12.08

Flex

429,837

0.00%

1,000

-

-

8.95

Lake Worth West

Total

3,153,882

7.78%

146,851

15,000

-

8.85

Warehouse

2,527,038

9.16%

151,232

15,000

-

8.60

Flex

626,844

2.20%

(4,381)

-

-

13.31

...

... ... ... ... ... ... ...

ONE COMMERCIAL REAL ESTATE | PALM BEACH | INDUSTRIAL | Q3 2017

5


INDUSTRIAL STATISTICS (CONTINUED) SUBMARKET

TYPE

TOTAL INVENTORY (SF)

VACANCY (%)

YTD NET ABSORBTION

YTD DELIVERIES

UNDER CONSTRUCTION

QUOTED RATES

Lewis Terminals

Total

3,258,559

2.28%

26,287

-

-

8.34

Warehouse

3,176,094

2.34%

23,487

-

-

8.34

Flex

82,465

0.00%

2,800

-

-

-

Palm Bch Cty Outlying

Total

3,197,192

2.28%

40,738

9,110

7,241

11.84

Warehouse

3,038,351

2.13%

40,738

9,110

7,241

11.84

Flex

158,841

5.10%

-

-

-

-

Palm Beach Airport

Total

4,172,995

3.18%

249,193

-

166,392

9.68

Warehouse

3,584,258

2.14%

270,446

-

166,392

9.37

Flex

588,737

9.46%

(21,253)

-

-

11.12

Palm Beach Gardens

Total

692,645

9.84%

(57,046)

-

-

11.42

Warehouse

359,919

17.03%

(61,300)

-

-

9.50

Flex

332,726

2.06%

4,254

-

-

13.43

Port Area

Total

367,627

0.00%

-

-

-

-

Warehouse

348,727

0.00%

-

-

-

-

Flex

18,900

0.00%

-

-

-

-

Southern Blvd.

Total

1,564,508

30.25%

102,060

353,835

-

8.36

Warehouse

1,498,562

31.58%

101,220

353,835

-

8.36

Flex

65,946

0.00%

840

-

-

-

West of Turnpike

Total

4,738,628

2.25%

(1,825)

-

10,328

12.27

Warehouse

3,418,293

2.07%

(33,512)

-

-

11.98

Flex

1,320,335

2.70%

31,687

-

10,328

12.58

Westroads Area

Total

2,266,149

0.00%

3,300

-

-

7.37

Warehouse

2,080,408

0.00%

3,300

-

-

7.37

Flex

185,741

0.00%

-

-

-

-

Total

61,356,350

2.79%

973,304

477,011

256,748

10.47

Warehouse

50,030,033

2.80%

927,981

477,011

246,420

9.87

Flex

11,326,317

2.75%

45,323

-

10,328

13.43

SOURCE: COSTAR PROPERTY®

ONE COMMERCIAL REAL ESTATE | PALM BEACH | INDUSTRIAL | Q3 2017

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SIGNIFICANT LEASE TRANSACTIONS PROPERTY ADDRESS

TENANT NAME

SIZE

LEASE TYPE

SUBMARKET

3200 NW 67 Avenue

American Consolidation & Logisitcs

93,799

New

Miami Airport East

8355 NW 12 Street

Triton Logistics

74,329

Renewal

Miami Airport East

7821 NW 67 Street

Miami Dade Police Department

70,760

Renewal

Miami Airport North

213 SE 10 Avenue

N/A

70,000

New

Hialeah

10800 NW 100 Street

N/A

65,141

New

Medley

SIGNIFICANT SALES TRANSACTIONS PROPERTY ADDRESS

BUYER NAME

SIZE

SALES PRICE $

$/SF

SUBMARKET

3300 NW 123 Street

Centerpoint

961,345

59,000,000

61

Opa-Locka

5501 NW 72 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 70 Street

Cofe Properties

193,932

15,600,000

80

Doral

16569 SW 117 Avenue

Spinel Investment Company

60,076

7,096,300

118

South Dade

MAJOR DEVELOPMENT PIPELINE PROPERTY ADDRESS

COMPLETION

SIZE

DEVELOPER

SUBMARKET

NW 42 Avenue

Q4 2018

855,000

Amazon

Opa-Locka

NW 97 Avenue

Q4 2017

500,000

Flagler Real Estate Services

Outlying Miami-Dade

12200 NW 25 Street

Q2 2018

467,000

NBC Universal Telemundo

Miami Airport

11420 NW 122 Street

Q4 2018

199,410

Liberty Property Partnership

Medley

3740 W 104 Street

Q4 2017

197,427

Flagler Real Estate Services

Outlying Miami-Dade

ONE COMMERCIAL REAL ESTATE | PALM BEACH | INDUSTRIAL | Q3 2017

7


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 - Palm Beach  
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