MARKET REPORT
SOUTH FLORIDA | INDUSTRIAL
Q4 23
1
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023
A BOUTIQUE BROKERAGE WITH INSTITUTIONAL QUALITY SUPPORT ONE Commercial Real Estate was born from a commitment to be a change agent for clients and industry professionals. Founded by Daniel de la Vega, the President of ONE Sotheby’s International Realty, we offer superior results to owners, occupiers, and developers of commercial real estate by obtaining and sharing intelligence as well as applying our knowledge, experience, competence and technical skills. Our team members have experienced several cycles that have taught valuable lessons. We have decades of on-the-ground experience and market knowledge in South Florida advising clients in all aspects of commercial real estate. We provide the insight necessary to lead informed and efficient decision making. The commercial real estate landscape has changed. Florida is impacted by global economic and political events more than most. Capital is forming new markets, redefining old ones, and continues to shape the fabric of our ever-growing landscape. Understanding these changes allows us to continue serving our clients and communities. By embracing the data and analytics we can identify movements, address obstacles, forecast challenges, and secure a vision for the future. This edition of the ONE Commercial Market Report examines the industrial markets in Miami-Dade, Broward, and Palm Beach counties.
Daniel de la Vega Chief Executive Officer ONE Commercial Real Estate
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023
2
Miami-Dade County Q4 2023 | INDUSTRIAL REPORT RISING INTEREST RATES DAMPEN MIAMI’S INDUSTRIAL SALES VOLUME, BUT FULLY LEASED PROPERTIES DRIVE SIGNIFICANT TRANSACTIONS AND INVESTOR INTEREST
EXECUTIVE SUMMARY Rising interest rates drove 2023 sales volume abruptly back down in line with pre-pandemic levels, after a historic boom in 2021-22. Sales volume over the past 12 months totals $1.6 billion, just below the five-year average of $1.8 billion. Despite this moderation in volume, healthy rent gains and tight vacancies continue to attract investors to the market, with recent activity centered on fully leased properties with stable cash flows. In fact, the largest transaction of 2023 involved
1 YEAR AGO
CURRENT
INVENTORY SF
267,768,297
273,855,847
UNDER CONSTR SF
8,560,335
6,218,771
12 MO NET ABSORP SF
7,192,737
1,785,269
VACANCY RATE
2.00%
3.52%
MARKET RENT/SF
$18.70
$20.18
MARKET SALE PRICE/SF
$239
$247
MARKET CAP RATE
5.47%
5.89%
CHANGE
SOURCE: COSTAR
the sale of four fully leased buildings in Beacon Logistics
Longpoint Partners acquiring a 25-building industrial portfolio
Park in December. The property was purchased by
totaling over 1.3 million SF across Miami-Dade and Broward
Property Reserve, the commercial real estate division of
counties. The portfolio was 97% leased by 77 tenants at the time
The Church of Jesus Christ of Latter-day Saints, from
of sale and traded for over $262 million, or just over $188/SF. The
Codina Partners for a total of over $174 million, or over
acquisition follows Longpoint’s strategy of acquiring high-quality
$277/SF. Two buildings in the park were built in 2023,
industrial assets in critical logistics hubs. The buyer also stated
while the remaining two had been built in 2019 and 2021.
the opportunity for further capital improvements and operational
Property Reserve already owns Building C in the park,
upgrades to the portfolio.
which is slated to deliver in 2024 and has over 232,000 SF available for lease at a $15.50/SF NNN asking rent.
Cap rates have begun to rise over the past 12 months, mainly due to the rise in interest rates. Properties larger than 20,000 SF have
Another major deal involved Bridgepoint Cold Logistics,
seen cap rates rise from lows in the mid-4% range in 2022 to over
a 312,000-SF cold storage property purchased by Ponte
6% today. Two recent trades highlighting this rise in cap rates
Gadea in December. The 2023-built property was also
include the December sale of five industrial and one office property
fully leased to FreezPak and was purchased for $113
in the Palmetto Industrial Park. East Capital Partners acquired the
million, or over $362/SF. The property was preleased
properties for $38.5 million, or just over $196/SF at a cap rate of
by the tenant back in 2022, and the current lease has
6.5% with 91% occupancy. The property had last traded in 2017
an expiration date of August 2043. The facility features
for $15.6 million, or over $79/SF, indicating the strong long-term
50-foot clear heights, 39 interior loading docks, three
pricing appreciation of the asset despite the recent softening in cap
drive-ins, and 185 parking spaces. The sale follows over
rates. The second large trade in December involved the Lakes Edge
60 transactions for cold storage properties in Miami just
Innovation Center in Doral. The flex property with over 80,000 SF,
in 2023, indicating continued investor interest for this
which was renovated to serve both office and industrial tenants,
industrial subtype.
traded for $17.5 million, or just over $218/SF, at a cap rate of 6%
Portfolio trades made a return at the end of 2023, with 3
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023
with 100% occupancy.
MARKET REPORT
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023
4
SALES VOLUME & MARKET SALE PRICE PER SF Despite this interest rate-driven cap rate expansion, a limited
$280
$1.8B
supply of space and healthy demand should continue to
$260
$1.6B
result in rent growth and value outperformance relative
$240
$1.4B
to other U.S. markets with more significant imbalances
$220
$1.2B
between demand and supply. This relative outperformance,
$200
$1B
$180
$800M
$160
$600M
$140
$400M
$120
$200M
$100
$0
MARKET SALE PRICE/SF
FORECAST
21
22
23
24
SALES VOLUME
25
26
PRICE/SF UNITED STATES
PRICE/SF
SALES VOLUME
$2B
$300
along with an eventual loosening of financial conditions, should help attract continued investment going forward.
MARKET ACTIVITY Construction has ramped up in the past few years, with over 6.2 million SF underway as of the first quarter of 2024, well-above the 10-year average of 4.7 million SF. Starts have receded somewhat, totaling over 4.1 million SF in 2023, below the two-year historical average of over 5.4 million SF and in-line
MARKET CAP RATE
with the 10-year historical average of 4.1 million SF. As starts
8.5%
FORECAST
slow, deliveries are expected to peak in 2024, pulling back by
8.0%
2025 and allowing vacancies to remain tight thereafter.
7.5%
The bulk of construction activity is concentrated West of the 7.0%
Turnpike, where land is still available. Over 90% of rentable building area, is concentrated in the northern part of Miami
6.5%
and between the Palmetto Expressway and the Everglades,
6.0%
as these areas provide some of the lowest cost developable 5.5%
land parcels still available. Over 70% of properties underway in this area are located within the northeast portion of
5.0%
the Outlying Miami-Dade, Miami Airport West, and North
4.5%
21
22
23
SPECIALIZED
LOGISTICS
24
FLEX
25
MIAMI
26
UNITED STATES
Miami Beach submarkets. These submarkets, with access to I-75, the Florida Turnpike and Palmetto Expressway, are only a 20- to 30-minute drive from the PortMiami, Miami
MARKET RENT PER SF $40
International Airport, and Port Everglades. Despite the elevated construction pipeline in the area, vacancies for
FORECAST
these three submarkets remain below 7% as they generally $35
offer below-average rents, proximity to a sizable blue-collar workforce and transport corridors, all attractive drivers of
$30
tenant demand. $25
Over 90% of buildings underway are larger than 100,000 $20
SF, with over 39% larger than 300,000 SF. The largest properties are two warehouses with more than 700,000 SF
$15
each. The properties are part of Phase II of the Bridge Point $10
$5
5
Commerce Center in the North Miami Beach Submarket. The 21
22
23
SPECIALIZED
LOGISTICS
24
FLEX
25
MIAMI
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023
UNITED STATES
26
five-building development is set to deliver around 2.7 million SF once completed, with three buildings delivered in Phase
INDUSTRIAL | MIAMI-DADE
TOP BUYERS PAST 12 MONTHS
OUTLOOK
THE CHURCH OF JESUS CHRIST OF LATTER-DAY SAINTS
Despite the strong performance of the overall market, asking
LONGPOINT REALTY PARTNERS
rent growth has begun to slow from a peak of over 18% in the second quarter of 2022 to around 7.9% at the end of 2023Q4.
PONTE GADEA
That said, Miami’s industrial rent growth is the 11th highest
PROLOGIS, INC.
in the nation for similarly sized markets with more than 200
PARKER DAVIS HVAC INTERNATIONAL, INC
million SF in inventory. While vacancies expand across U.S. markets with more significant supply/demand imbalances,
MIAMI-DADE COUNTY
Miami vacancies are set to remain well below the U.S. average
PELLA
peaking at around 4% over the forecast period, due to the
ORION REAL ESTATE GROUP
area’s supply constraints. This market tightness is expected
SPIEGEL ASSOCIATES
to continue to deliver outsized rent gains relative to the U.S., averaging over 5%, well above the more than 4% rent gains for
FAROPOINT $20M
$60M
$100M
$140M
$180M
$220M
the U.S. average from 2024 through 2027.
SALES VOLUME - PAST 1 YEAR
Population growth has returned to Miami-Dade County after I already being fully leased to tenants such as City Furniture
two years of losses from 2020 through 2021. That said, the county has 37,000 fewer residents than in 2019. A closure in
and Novo Health Services.
international travel during the pandemic resulted in a drag Due to the limited availability of modern space in the market,
to population growth in the area, which has historically been
new construction tends to lease fast, with most properties
driven by international net migration. Additionally, a rise in
underway expected to be fully occupied by the second half of
the cost of living, with inflation in South Florida doubling the
2025. So far, properties underway are over 30% preleased,
national average, has driven net domestic out-migration as
leaving over 5 million SF still available.
residents leave in search of a lower cost of living in central, northern Florida as well as in Georgia and Texas.
SUBMARKET SALES TRANSACTIONS PAST 12 MONTHS SUBMARKET
SALES VOLUME
TRANSACTIONS
TRANSACTED SF
AVERAGE SF
MARKET CAP RATE
MARKET SALE PRICE/SF
OUTLYING MIAMI-DADE
$306,090,000
7
1,039,244
148,463
5.4%
$266
MEDLEY
$232,231,900
41
1,055,954
25,755
5.9%
$243
MIAMI AIRPORT WEST
$217,949,596
62
881,256
14,214
5.7%
$280
HIALEAH
$168,857,623
64
1,142,738
17,855
6.0%
$194
SOUTH CENTRAL MIAMI
$157,614,100
31
602,099
19,423
5.8%
$326
NORTH MIAMI BEACH
$132,352,499
48
871,506
18,156
5.9%
$212
MIAMI AIRPORT NORTH
$122,534,442
19
637,833
33,570
6.0%
$250
EAST MIAMI
$73,545,500
13
266,432
20,495
5.9%
$354
MIAMI AIRPORT EAST
$57,426,000
20
197,335
9,867
5.9%
$240
SOUTH DIXIE HWY
$37,721,000
19
233,854
12,308
6.1%
$266
MIAMI LAKES
$36,719,526
15
276,554
18,437
6.0%
$208
SOUTHWEST DADE
$24,441,900
58
315,169
5,434
6.3%
$246
WEST MIAMI/CORAL TER
$24,060,000
11
171,431
15,585
6.1%
$304
CENTRAL MIAMI
$20,842,099
8
167,978
20,997
6.0%
$230
SOURCE: COSTAR
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023
6
RECENT SIGNIFICANT SALES 3995 W 108TH STREET | BRIDGE POINT COLD LOGISTICS Outlying Miami-Dade Submarkets | Hialeah, FL 33018 SALE DATE
Dec 2023
BUYER
Ponte Gadea USA, Inc. (USA)
SALE PRICE
$113M ($362/SF)
SELLER
Bridge Industrial (USA) + 1
LEASED
100%
SALE TYPE
Investment
HOLD PERIOD 11 Months RBA
312,103 SF
YEAR BUILT
2023
9221 W 44TH AVENUE | BEACON LOGISTICS PARK - BLDG. A Outlying Miami-Dade Submarket | Hialeah, FL 33018 SALE DATE
Dec 2023
BUYER
Property Reserve, Inc. (USA)
SALE PRICE
$58.5M ($285/SF)
SELLER
Codina Partners (USA) + 1
LEASED
100%
SALE TYPE
Investment
HOLD PERIOD 11 Months RBA
205,250 SF
YEAR BUILT
2023
10733 NW 123RD STREET | PAN AMERICAN NORTH DISTRIBUTION CNTR Medley Submarket | Medley, FL 33178 SALE DATE
Jun 2023
BUYER
Prologis, Inc. (USA)
SALE PRICE
$50.9M ($274/SF)
SELLER
Blackstone Inc. (USA)
CAP RATE
4.0% (Actual)
BROKER
Eastdil Secured, LLC
LEASED
100%
SALE TYPE
Investment
SALE CONDO
Bulk/Portfolio Sale
HOLD PERIOD 45 Months RBA
185,520 SF
YEAR BUILT
2013
2800 NW 39TH AVENUE South Central Miami Submarket | Miami, FL 33142 SALE DATE
Jan 2024
BUYER
Miami-Dade County (USA)
SALE PRICE
$45M ($227/SF)
SELLER
Simkins Prop Inc. (USA)
LEASED
100%
BROKER
KW Commercial - Keller Williams Capital
SALE TYPE
Investment
HOLD PERIOD 156 Months RBA
198,500 SF
YEAR BUILT
1973
8501 NW 90TH STREET Medley Submarket | Miami, FL 33166 SALE DATE
Nov 2023
BUYER
Pella (USA)
SALE PRICE
$45M ($168/SF)
SELLER
Lawson Industries, Inc. (USA)
LEASED
100%
SALE TYPE
Investment
HOLD PERIOD 20+ Years RBA
268,232 SF
YEAR BUILT
1999 SOURCE: COSTAR
While lower income residents have been exiting the county, Miami-Dade has enjoyed an inflow of high-net-worth individuals, which brought in $6.4 billion in new wealth to the metro in 2021. Former residents of New York, New Jersey, Massachusetts, and California now make up 50% of adjusted gross income flowing into Miami-Dade, with recent license exchange data pointing to a continued inflow of new residents from these states. With a recovery in in-migration and a healthy tourism sector benefiting from the shift in consumer spending towards travel and dining out, Miami continued to have slower, yet robust growth in 2023. Its annual job growth of 4.1% exceeded the U.S. growth of 2.8% through November 2023. Gains has been driven by other services; manufacturing; professional and business services; trade, transportation, and utilities; and government. The net job change from pre-pandemic peak through November 2023 was 6.8%, above the U.S. net growth of 3.0%. Oxford Economics forecasts that Miami will see an average job growth rate of 1.0% in 2024 and grow by 0.4% per year from 2025 through 2028, above U.S. average job growth.
Broward County Q4 2023 | INDUSTRIAL REPORT BROWARD INDUSTRIAL PROPERTIES EXPERIENCE ROBUST PRICING APPRECIATION, YET FACE CHALLENGES
EXECUTIVE SUMMARY Last year’s sales volume abruptly came back down in line with pre-pandemic levels after a historic boom in 2021-22. Sales volume in 2023 totaled $986 million, below five-year average volume but
1 YEAR AGO
CURRENT
INVENTORY SF
142,271,271
143,520,849
UNDER CONSTR SF
1,265,784
388,300
12 MO NET ABSORP SF
1,500,899
-290,743
still above long-term average annual volume of
VACANCY RATE
3.58%
4.62%
$897 million over the past 10 years. Still, major
MARKET RENT/SF
$18.69
$20.38
trades continued to occur through the second half
MARKET SALE PRICE/SF
$233
$239
of the year, with large portfolio trades continuing
MARKET CAP RATE
6.09%
6.59%
to highlight institutional investor demand for
SOURCE: COSTAR
CHANGE
South Florida industrial properties. These include Longpoint Partners’ December acquisition of a
The most recent comparable sale in the market occurred
25-building industrial portfolio totaling around
in December 2022, involving the 133,000-SF Pompano
1.4 million SF across Miami-Dade and Broward
Business Center II, located at 30001 W Copans Road. The
Counties. 14 of those properties were located in
property, built in 2019 and 100% leased at sale, traded for
Fort Lauderdale and drove an estimated $157
over $25 million, or over $190/SF, indicating minimal pricing
million in activity for the fourth quarter, or over
improvement in the market since 2022 despite healthy rent
50% of volume. The portfolio was composed of 2
gains since then.
and 3 Star properties of between 11,000 SF and 213,000 SF and traded for $188/SF. It was 97% leased by 77 tenants at the time of sale. Longpoint stated that this infill portfolio offers significant upside opportunity through capital improvements and operational upgrades.
These two recent trades stand in stark contrast to a trade that occurred in August 2021 in which building B of Miramar Centre Business Park, a 302,000-SF property built in 2014, traded for over $236/SF despite being 50% vacant at sale. The property had sold for $125/SF back in 2019, highlighting the run-up in pricing that industrial assets saw
One of the largest individual trades of 2023, which
in the Fort Lauderdale metro from 2019 through 2021. These
provides some pricing insight, involved the sale
three trades indicate that industrial pricing has contracted
of The Pompano Distribution Center II at 4000 N
by over 10% from peak pricing in 2021, having moderated
Dixie Hwy. The property, built in 2015, totals over
since late 2022.
128,000 SF and traded for over $24 million, or over $188/SF. Sterling Investors purchased the property in August from Zurich Alternative Asset Management and was 100% leased to the Spice Lab, a manufacturing tenant, at the time of sale.
9
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023
Although low cap rates were still recorded in 2023, including the 3.6% cap rate on Link Logistics’ purchase of a sevenproperty portfolio, a general rise in cap rates has driven a moderation in pricing. Rising cap rates are more apparent among individual sales of properties smaller than 30,000
MARKET REPORT
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023 10
SALES VOLUME & MARKET SALE PRICE PER SF SF, as many deals in this category have closed with
$300
$2B
reported cap rates in the range of 5-8% since the
$280
$1.8B
second half of 2023.
$260
$1.6B
$240
$1.4B
Strong investor demand in recent years has driven
$220
$1.2B
strong pricing appreciation of over 50% since 2019,
$200
$1B
$180
$800M
growth seen in the second half of 2021. This pricing
$160
$600M
outperformance has expanded the premium for Fort
$140
$400M
Lauderdale industrial properties from 1.4 times the
$120
$200M
U.S. average back in 2019 to over 1.6 times higher
$0
today. Despite the market’s recent outperformance, a
MARKET SALE PRICE/SF
FORECAST
$100
21
22
23
24
SALES VOLUME
25
26
though gains have slowed somewhat after peak pricing
slowing economy and higher interest rates will likely
PRICE/SF UNITED STATES
PRICE/SF
SALES VOLUME
$2.2B
$320
remain a drag on market activity at least until an eventual loosening of financial conditions occurs.
MARKET CAP RATE 8.5%
MARKET ACTIVITY
FORECAST
Strong tenant demand has driven rents to record levels
8.0%
in the Fort Lauderdale market. Asking rents currently
7.5%
stand at over $20.00/SF, some of the highest rents across all Florida markets. Since 2019, Fort Lauderdale
7.0%
industrial rents have increased 57%, well above the U.S. 6.5%
average rent gain of 36%, with Logistics assets driving most of the rent growth. Asking rent levels across South
6.0%
Florida are now more in line with supply constrained 5.5%
5.0%
markets in the Bay Area and Hawaii. 21
22
SPECIALIZED
23
24
FLEX
LOGISTICS
25
FORT LAUDERDALE
26
UNITED STATES
Asking rents for logistics properties with more than 100,000 SF stand at over $14/SF, more than 20% below rents for 10,000 to 100,000 SF assets of over $18/SF.
MARKET RENT PER SF
Despite this difference, rent gains for assets larger than
$28
100,000 SF have outperformed since 2021, resulting in
$26
a reduction of the rent premium of smaller assets from
$24
peak levels of over 39% down to 27% today.
$22
Asking rents for properties of less than 100,000 SF can
$20
range between $10/SF to well over $20/SF depending
$18
on asset location and use. For example, on the lower end
$16
a recent triple-net lease was signed in January 2024 for
$14
2,500 SF at an industrial showroom built in 1978 in Dania
$12
Beach with an effective rate of $15.5/SF NNN. On the
$10
higher end, a 2,100-SF lease was signed in November
$8
21
22
SPECIALIZED
11
23
LOGISTICS
24
FLEX
FORT LAUDERDALE
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023
25
26
UNITED STATES
of 2023, at an auto services building which was built in 1961, in Pompano Beach at an effective rate of $20/SF
INDUSTRIAL | BROWARD
TOP BUYERS PAST 12 MONTHS 200,000 SF, are being marketed with asking rents of $14/
BLACKSTONE INC.
SF and $13/SF NNN, respectively.
LONGPOINT REALTY PARTNERS PROLOGIS, INC.
Despite the strong performance of the overall market,
SUMMIT REAL ESTATE GROUP
asking rent growth has begun to slow from a peak of over 18% in the second quarter of 2022 to around 9.0%
HALLANDALE PHARMACY
as of 2024Q1. That said, Fort Lauderdale’s industrial
STOCKBRIDGE CAPITAL GROUP, LLC
rent growth remains one of the strongest in the nation.
STERLING INVESTORS
While vacancies expand across U.S. markets with more
MIDTOWN REALTY GROUP
significant supply/demand imbalances, Fort Lauderdale
GLOBAL PARTNERS, LP
vacancies are set to remain well below the U.S. average
RIVERGATE COMPANIES $0M
at around 4% over the forecast period due to the area’s $20M
$40M
$60M
$80M
$100M
$120M
$140M
$160M
$180M $200M
SALES VOLUME - PAST 1 YEAR
supply constraints. This market tightness is expected to continue to deliver outsized annual rent gains relative to
NNN. Despite similar lease sizes, the older auto services asset earned a rate that is 1.3 times higher. Newer, 100,000-plus-SF assets built since 2018 have average asking rents of over $16/SF, as these properties have been built in lower-density areas. Still, rent growth for these properties remains strong at over 13% annually, as these are over 90% occupied. Rent levels can vary for these properties depending on lease size. For example, Bridge Point 595 has over 47,000 SF available in a property built in 2021 being marketed with an asking rent of $17.50/SF NNN. On the other hand, larger spaces at East Pompano Industrial Center, totaling over 150,000 SF, and at East Pompano Industrial Center, totaling over
the U.S., averaging over 6%, well above around 4.6% rent gains for the U.S. average from 2024 through 2027.
OUTLOOK Construction activity has slowed in the past few years, with only around 390,000 SF underway as of the first quarter of 2024. This is down from a peak in construction activity seen in the first half of 2020, when there was more than 3.4 million SF underway. Construction starts pulled back significantly in 2023, with around 370,000 SF breaking ground for the year, well below levels of over 1 million SF seen in each of the prior six years. A slower economic environment, coupled with elevated financing costs, will likely keep
SUBMARKET SALES TRANSACTIONS PAST 12 MONTHS SUBMARKET
SALES VOLUME
TRANSACTIONS
TRANSACTED SF
AVERAGE SF
MARKET CAP RATE
MARKET SALE PRICE/SF
NORTHEAST BROWARD
$253,956,239
51
1,534,743
30,093
6.5%
$224
CENTRAL BROWARD
$201,222,408
78
892,817
11,446
6.8%
$235
POMPANO BEACH
$163,107,297
52
836,289
16,082
6.6%
$235
SOUTHEAST BROWARD
$122,324,476
89
660,380
7,420
6.6%
$252
WEST SUNRISE
$65,353,000
18
303,909
16,884
6.5%
$235
SOUTHWEST BROWARD
$65,012,300
12
369,402
30,784
6.3%
$237
CORAL SPRINGS
$53,530,000
22
304,591
13,845
7.0%
$249
SOURCE: COSTAR
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023 12
RECENT SIGNIFICANT SALES 1919 NW 19TH STREET | BUILDING 7 Central Broward Submarket | Fort Lauderdale, FL 33311 SALE DATE
Dec 2023
BUYER
Longpoint Realty Partners (USA)
SALE PRICE
$47.1M ($3.2K/SF)
SELLER
Seagis Property Group LP (USA)
LEASED
100%
BROKER
CBRE
HOLD PERIOD 20+ Years
SALE TYPE
Investment
RBA
14,628 SF
SALE COND
Bulk/Portfolio Sale
YEAR BUILT
1988
1800 SW 13TH COURT Pompano Beach Submarket | Pompano Beach, FL 33069 SALE DATE
Jun 2023
BUYER
Prologis, Inc. (USA)
SALE PRICE
$41M ($267/SF)
SELLER
Blackstone Inc. (USA)
CAP RATE
4.0% (Actual)
BROKER
Eastdil Secured, LLC
LEASED
100%
SALE TYPE
Investment
SALE COND
Bulk/Portfolio Sale
HOLD PERIOD 17 Months RBA
153,482 SF
YEAR BUILT
2022
20311 SHERIDAN STREET | SOUTH FLORIDA DISTRIBUTION CNTR S.W. Broward Submarket | Fort Lauderdale, FL 33332 SALE DATE
Jul 2023
BUYER
Summit Real Estate Group (USA)
SALE PRICE
$39.8M ($177/SF)
SELLER
Vital Pharmaceuticals, Inc. (USA)
CAP RATE
4.7% (Actual)
BROKER
Cushman & Wakefield
LEASED
0%
SALE TYPE
Investment
SALE COND
Excess Land
HOLD PERIOD 53 Months RBA
224,572 SF
YEAR BUILT
2018
740 S POWERLINE ROAD | BUILDING 4 N.E. Broward Submarket | Deerfield Beach, FL 33442 SALE DATE
Jul 2023
BUYER
Link Logistics Real Estate (USA)
SALE PRICE
$35.8M ($235/SF)
SELLER
PGIM Real Estate (USA)
CAP RATE
3.6% (Actual)
BROKER
Cushman & Wakefield
LEASED
100%
SALE TYPE
Investment
HOLD PERIOD 186 Months RBA
152,613 SF
YEAR BUILT
2008
720 S POWERLINE ROAD | BUILDING 2 N.E. Broward Submarket | Deerfield Beach, FL 33442 SALE DATE
Jul 2023
BUYER
Link Logistics Real Estate (USA)
SALE PRICE
$34.7M ($219/SF)
SELLER
PGIM Real Estate (USA)
CAP RATE
3.6% (Actual)
BROKER
Cushman & Wakefield
LEASED
100%
SALE TYPE
Investment
HOLD PERIOD 20+ Years RBA
158,086
YEAR BUILT
2003 SOURCE: COSTAR
construction activity largely muted in the near future. Fewer groundbreakings will result in a slowdown in deliveries, which are set to remain at or below 1 million SF over the next several years, allowing vacancies to remain tight for the foreseeable future. Close to 80% of industrial properties with more than 100,000 SF are located in the Southwest Broward, Pompano Beach, Southeast, and Northeast Broward submarkets. The majority of these properties are located in the Southwest Broward Submarket, which runs from the Turnpike to the east to U.S. Highway 27 in the west, bordering the Everglades. New supply remains attractive in the market, as around 70% of these assets were built before 2010, resulting in a weighted average year built of around 2000. Construction activity is concentrated in three buildings each at or over 170,000 SF located in the Coral Springs, West Sunrise, and Southeast Broward submarkets. The largest property underway is located in the Coral Springs Submarket and totals over 216,000 SF at Foundry Commercial’s Osprey Logistics Park which is already fully pre-leased. The availability rate for new construction has fallen in the past few quarters as the largest two properties underway, Ospray Logistics Park and 5601 N Hiatus Road, attracted sizable tenants. Still, recently delivered properties and those underway with more than 100,000 SF have an availability rate of around 20%, representing over 1.4 million SF of available space. These new larger spaces may take longer to lease, as large tenant demand has slowed, though muted supply additions, coupled with tight vacancy rates of around 7% for existing assets larger than 100,000 SF, point to limited competitive supply, which should help leasing prospects going forward.
Palm Beach County Q4 2023 | INDUSTRIAL REPORT PALM BEACH INDUSTRIAL WITNESSES SHIFT IN TRANSACTION DYNAMICS AMIDST LOWER VOLUME & RISING CAP RATES
EXECUTIVE SUMMARY Sales volume in 2023 totaled $346 million, below long-term average annual volume of $404 million over the past 10 years. Fewer institutional buyers have been active over the past year, with private players making up over 70% of transaction activity, up from 50% on average over the prior five years. This has resulted in smaller transactions, with the average sales price falling from around $7 million in 2022 to $3.5 million in 2023. Additionally,
1 YEAR AGO
CURRENT
INVENTORY SF
67,757,220
69,259,823
UNDER CONSTR SF
2,494,086
2,372,021
12 MO NET ABSORP SF
255,416
437,464
VACANCY RATE
2.98%
4.45%
MARKET RENT/SF
$15.87
$17.07
MARKET SALE PRICE/SF
$183
$184
MARKET CAP RATE
6.05%
6.60%
CHANGE
SOURCE: COSTAR
the average size of properties traded has also
Strong investor demand in recent years has driven Palm
dropped, from over 27,000 SF in 2022 to 15,000 SF
Beach industrial pricing to new heights, with the average
in 2023.
annual transaction price standing at $230/SF, up from
Still, some large transactions occurred in 2023, the largest single property trade involving McCauley Property Company selling a 119,000-SF warehouse located at 644-646 Park of Commerce Way in
$125/SF three years ago. This pricing outperformance has allowed Palm Beach industrial properties to retain their pricing premium over the U.S. average, at over 1.2 times higher today.
Boca Raton, to Ares Industrial Real Estate Income
Still, rising interest rates and a slowing economy have slowed
Trust Inc. for over $27 million, or approximately
pricing gains and overall activity in recent quarters. Industrial
$233/SF in February. The property delivered
properties larger than 10,000 SF traded at average pricing of
in 2023 and was fully vacant at sale, indicating
$229/SF in 2023, compared to $284/SF when interest rates
continued investor interest for new construction.
were near record lows in 2021. One of the lowest cap rates
Another institutional deal also drove sales volume in the second half of 2023, with Arden Group, a private REIT, purchasing the Landmark Commerce Center for $43 million or $219/SF in October of 2023. The three properties in the center total over 195,000 SF and were 98% leased at sale to over
recorded this year was 3.9%, on Alliance Partners’ purchase of two fully occupied multitenant buildings at the Lantana Industrial Park totaling over 50,000 SF. However, rising cap rates are the overarching trend, with average annual transaction cap rates rising from the mid-4% range in early 2022 to the mid-5% to 6% since the second half of 2023.
40 tenants, indicating additional investor interest
Despite the market’s recent outperformance, a slowing
in fully leased income producing properties over
economy and higher interest rates, resulting in a near-
the last year. Arden stated that the acquisition
term pricing correction, will likely continue to drive slower
continues the ALP strategy of buying well-located
transaction activity relative to the boom in 2021 and 2022.
assets with strong occupancy rates.
Going forward, higher cap rates, coupled with softening
15
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023
MARKET REPORT
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023 16
SALES VOLUME & MARKET SALE PRICE PER SF $240
fundamentals, will likely remain a drag on market
$700M
FORECAST
$220
$600M
$200
$500M
$180
$400M
$160
$300M
$140
$200M
$120
$100M
activity at least until an eventual loosening of financial
SALES VOLUME
MARKET SALE PRICE/SF
conditions occurs.
MARKET ACTIVITY Strong tenant demand has driven rents to record levels in the Palm Beach market. Asking rents currently stand at around $17.10/SF, the third-highest rents across all Florida markets, after Fort Lauderdale and Miami. Since
$100 21
22
23
SALES VOLUME
24
25
$0
26
41%, above the U.S. average rent gain of over 36%, with logistics assets driving most of the rent growth. Asking
PRICE/SF UNITED STATES
PRICE/SF
2019, Palm Beach industrial rents have increased over
rent levels across South Florida are now more in line with supply constrained markets in the Bay Area and Hawaii.
MARKET CAP RATE
Asking rents for logistics properties with more than
8.5%
FORECAST
100,000 SF stand at over $14/SF, more than 15% below rents for 10,000- to 100,000-SF assets of over $16/SF.
8.0%
Despite this difference, rent gains for assets larger than
7.5%
100,000 SF have outperformed since 2021, resulting in a reduction of the rent premium of smaller assets from
7.0%
peak levels of over 20% down to 18% as of today.
6.5%
Asking rents for properties of less than 100,000 SF
6.0%
can range between $10/SF to well over $20/SF largely depending on lease size. For example, on the lower end
5.5%
a recent triple-net lease was signed in January 2024 5.0%
21
22
SPECIALIZED
23
LOGISTICS
24
FLEX
25
PALM BEACH
26
UNITED STATES
for over 13,000 SF at an industrial warehouse built in 2017 in the Southern Boulevard Submarket with an effective rate of $14.95/SF NNN. On the higher end,
MARKET RENT PER SF
a 1,500-SF lease was signed in November of 2023, at
$26
an industrial warehouse which was built in 1994, in the
FORECAST
West of Turnpike Submarket nearby at an effective rate
$24
of $18.5/SF NNN. Despite similar locations, the older
$22
property with a smaller lease size earned a rate that is $20
1.2 times higher.
$18
Newer, 100,000-plus-SF assets built since 2018 tend to
$16
have average asking rents of around $13/SF, as these $14
properties have been built in lower-density areas and
$12
now face increased competition. Still, rent growth for these properties remains strong, at over 8% annually,
$10
$8
21
22
SPECIALIZED
17
23
LOGISTICS
24
FLEX
PALM BEACH
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023
26
25
UNITED STATES
as these are over 80% leased. Rent levels can vary for these properties depending on lease size. For example,
INDUSTRIAL | PALM BEACH
TOP BUYERS PAST 12 MONTHS the 2023-built Palm Beach Park of Commerce, totaling
THE ARDEN GROUP INC.
over 250,000 SF, is being marketed with asking rents of
ARES MANAGEMENT CORP
$10.95/SF NNN.
ALTERRA PROPERTY GROUP
Despite the strong performance of the overall market,
CROW HOLDINGS
asking rent growth has begun to slow from a peak of
REDFEARN CAPITAL
around 12% in the third quarter of 2022 to over 7.5%
COASTAL WASTE & RECYCLING, INC.
as of 2024q1. That said, Palm Beach’s industrial rent
ALLIANCE PARTNERS HSP, LLC
growth continues to outpace the U.S. average. That said,
ABC SUPPLY CO. INC
Palm Beach’s industrial rent growth remains one of the
SEABREEZE NORTH CORPORATION
strongest in the nation. While vacancies expand across
INVESTMENTS LIMITED $5M
U.S. markets with more significant supply/demand $10M
$15M
$20M
$25M
$30M
$35M
$40M
$45M
$50M
$55M
SALES VOLUME - PAST 1 YEAR
imbalances, Palm Beach’s vacancies are set to remain below the U.S. average, at or below 6% over the forecast
Boca Logistics Park has over 100,000 SF available in a property built in 2023 being marketed with an asking rent of $15.25/SF NNN. On the other hand, larger space at
period. This market tightness is expected to continue to deliver outsized rent gains relative to the U.S., averaging over 5%, above the more than 4% rent gains for the U.S. average from 2024 through 2027.
SUBMARKET SALES TRANSACTIONS PAST 12 MONTHS SUBMARKET
SALES VOLUME
TRANSACTIONS
TRANSACTED SF
AVERAGE SF
MARKET CAP RATE
MARKET SALE PRICE/SF
PALM BCH CTY OUTLYING
$87,110,000
5
873,912
174,782
6.0%
$158
PALM BEACH AIRPORT
$50,625,000
9
238,305
26,478
6.3%
$185
PARK AT BROKEN SOUND
$47,913,483
7
198,110
28,301
6.5%
$199
JUPITER
$43,300,000
22
153,390
6,972
6.6%
$244
DTWNPB TO TRI-RAILSTA
$34,167,593
3
135,590
45,197
6.1%
$209
CENTRAL PALM BCH AREA
$28,491,000
7
162,247
23,178
6.1%
$173
WEST OF TURNPIKE
$28,115,000
9
39,960
4,440
6.3%
$199
DELRAY BEACH
$27,605,000
6
86,012
14,335
6.3%
$233
LAKE WORTH EAST
$17,790,000
11
98,977
8,998
6.6%
$188
BOCA RATON EAST
$14,130,000
6
46,983
7,831
6.3%
$246
LAKE WORTH WEST
$13,980,000
12
80,870
6,739
6.4%
$194
BOYNTON BEACH
$11,811,500
13
52,107
4,008
6.3%
$198
WESTROADS AREA
$8,075,000
4
43,174
10,794
6.1%
$172
SOUTHERN BLVD
$4,050,000
5
75,901
15,180
5.9%
$209
PALM BEACH GARDENS
$3,750,000
1
16,129
16,129
5.9%
$239
LAKE PARK WEST
$3,670,000
4
16,690
4,173
6.2%
$203
AUSTIN PARK/HILL/53RD
$3,350,000
2
21,419
10,710
6.1%
$172
45TH STREET
$1,144,000
2
4,974
2,487
6.3%
$197
ELECTRONICS WAY
$530,000
1
1,800
1,800
6.3%
$163
LAKE PARK EAST
$300,000
1
1,722
1,722
6.2%
$144
-
1
2,254
2,254
6.0%
$174
PORT AREA SOURCE: COSTAR
ONE COMMERCIAL REAL ESTATE | INDUSTRIAL | Q4 2023 18
RECENT SIGNIFICANT SALES 644-646 PARK OF COMMERCE WAY | BOCA LOGISTICS PARK Park at Broken Sound Submarket | Boca Raton, FL 33487 SALE DATE
Feb 2023
BUYER
Ares Industrial Real Estate (USA)
SALE PRICE
$27.8M ($233/SF)
SELLER
LEASED
0%
McCraney Property Company (USA)
BROKER
CBRE
HOLD PERIOD 1 Month RBA YEAR BUILT
119,117 SF
SALE TYPE
Investment
2023
SALE COND
High Vacancy Property
1500 N FLORIDA MANGO ROAD | LANDMARK AT COMMERCE CNTR Palm Beach Airport Submarket | West Palm Beach, FL 33409 SALE DATE
Oct 2023
BUYER
Arden Logistics Parks (USA)
SALE PRICE
$18.5M ($208/SF)
SELLER
Alliance Partners HSP, LLC (USA)
LEASED
100%
SALE TYPE
Investment
HOLD PERIOD 26 Months RBA
88,825 SF
YEAR BUILT
1986
101 BENOIST FARMS ROAD West of Turnpike Submarket | West Palm Beach, FL 33411 SALE DATE
Jul 2023
BUYER
Alterra Property Group (USA)
SALE PRICE
$15.8M ($490/SF)
BROKER
Panther Capital Group, LLC
LEASED
100%
SELLER
Ron Kendall Masonry Inc (USA)
BROKER
Panther Capital Group, LLC
SALE TYPE
Investment
HOLD PERIOD 20+ Years RBA
32,231 SF
YEAR BUILT
2000
1155 S CONGRESS AVENUE | PATIO PIPES BUILDING Delray Beach, FL 33445 SALE DATE
Jul 2023
BUYER
Trammell Crow Residential (USA)
SALE PRICE
$12.7M ($433/SF)
SELLER
Eckols ‘77, Ltd (USA)
LEASED
100%
BROKER
Katalyst Real Estate & Development (USA)
HOLD PERIOD 20+ Years RBA YEAR BUILT
29,250 SF
SALE TYPE
Investment
1981
SALE COND
Redevelopment Project
1284 PARK LANE SOUTH Jupiter, FL 33458 SALE DATE
Aug 2023
BUYER
Seabreeze North Corporation (USA)
SALE PRICE
$8M ($355/SF)
BROKER
Compass Florida
CAP RATE
4.8% (Actual)
SELLER
Javier Ramos Suarez (USA)
LEASED
100%
BROKER
The Keyes Company
HOLD PERIOD 83 Months
SALE TYPE
Investment
RBA
22,365 SF
SALE COND
YEAR BUILT
1998 (Reno 2014)
1031 Exchange, Investment Triple Net SOURCE: COSTAR
OUTLOOK Construction has ramped up since 2021, with around 2.4 million SF underway as of the first quarter of 2024. This is some of the highest level of construction activity the area has seen since CoStar began tracking the market. Construction starts jumped in the first quarter of 2023, with over 1.4 million SF breaking ground that quarter, in comparison to the prior peak in construction starts totaling just over 1 million SF in the fourth quarter of 2020. Starts have slowed since, with an additional 500,000 SF breaking ground since the second quarter of 2023. As starts remain elevated, deliveries are expected to peak over the next year, with over 2 million SF expected to deliver in 2024 after 1.5 million SF in deliveries in 2023. This will result in a near-term expansion in vacancies, which are expected to peak at just over 6% in mid-2024 but should remain below the U.S. average. Still, supply pressures will likely remain in the market for some time, with deliveries expected to remain elevated past 2026. More than 80% of space remains available in properties underway, as more than 90% of rentable building area under construction is concentrated in larger assets with more than 100,000 SF. This presents some near-term supply risk, as the vast majority of leases typically fall within 30,000 SF or less. That said, existing properties with more than 100,000 SF are over 90% occupied in Palm Beach, and those built since 2020 are over 70% occupied. Over 50% of industrial properties with more than 100,000 SF are located in the Park at Broken Sound, Palm Beach County Outlying, Palm Beach Airport, Southern Boulevard, and West of Turnpike submarkets. The Palm Beach County Outlying, Southern Boulevard, and West of Turnpike submarkets all have access to Route 98, which runs east to west through the heart of Palm Beach. These submarkets also have the bulk of available land for development and therefore house most of the under-construction properties that are larger than 100,000 SF. The Park at Broken Sound and Palm Beach Airport submarkets are farther east, providing greater proximity to I-95, which runs north to south in Palm Beach. With the fourth-highest personal income in Florida, over 60% higher than the state average, Palm Beach is one of the wealthiest counties in the state and country. The area’s outsized concentration of financial activities and professional and business services jobs helps drives higher median household income levels relative to its southern neighbors of Fort Lauderdale and Miami.
Are you ready for what’s next? Let’s have a conversation.
ONECOMMERCIALRE.COM
(BROWARD COUNTY)
(HEADQUARTERS)
(BREVARD COUNTY)
2780 EAST OAKLAND PARK BLVD
3250 MARY STREET, SUITE 520
1331 SOUTH HARBOR CITY BLVD
FORT LAUDERDALE, FL 33306
COCONUT GROVE, FL 33133
MELBOURNE, FL 32901