23Q4 | Industrial - South Florida Market Report

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.

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