New Industrial Supply Attracts Steady Demand in Miami

More than 3.3M SF of new industrial space was delivered in the Miami market in Q2 2024, a wave of new speculative inventory that now totals 4.5M SF since the beginning of this year—an amount approaching last year’s total of more than 5M in new supply.

This flood of warehouse space has been met by steady demand for new facilities fueled by positive demographic growth and robust port activity, long-term trends that bode well for future growth.

Miami’s industrial market notched more than 531K SF of positive net absorption in the second quarter, putting net absorption for the first half of the year at 1M SF, according to CBRE’s latest market report.

The total absorption would have been higher, but it was offset by occupancy loss in older warehouse stock. Net absorption has been concentrated in submarkets with a strong development pipeline, including Hialeah Gardens, the report said.

The overall vacancy rate in Miami rose to 5% at the end of the second quarter, up from 3% at the end of 2023.

“While tenants are moving into a wave of new industrial inventory, older buildings developed before 2000 are losing occupancy,” CBRE said.

“Despite this, vacancy rates in most submarkets remain below 5%. Considering the delivery of 4.5M SF of new industrial product in the first half of the year, the Miami market continues to experience robust positive absorption,” the report said.

Market fundamentals continue to normalize from the pandemic boom that saw nearly 18M SF of leasing activity in 2021 in Miami and annual rent growth that peaked at 25%.

The average asking lease rate in Miami in Q2 2024 was $15.46 NNN. “Despite more building options, and greater negotiating leverage as rents in the market soften, most tenants will still face significant rent hikes upon lease expiration,” CBRE’s report said.

Steady leasing volume in Miami, which totaled 10M SF in the first half of 2024, has been propelled by large deals encompassing more than 100K SF. Deals in the second quarter include a 161,787 SF lease inked by Sentry Tire USA, Caribbean Trading Enterprises’ 142,800 SF lease, and a 107K SF lease signed by Global Engine Maintenance.

There currently is 5M SF of industrial inventory under construction in Miami, an infill market with high land values due to its scarcity of land.

Construction starts have slowed down for four consecutive quarters. The impact of new construction on vacancy levels is projected to moderate considerably after this year, the report said.

“There is a scarcity of modern inventory with ample clear height and electric power near the port, providing confidence to developers that new supply will lease as demand improves,” CBRE said.