To many leading experts, the future of Florida’s commercial real estate market lies within the industrial sector. At a recent CRE panel, Scott Gregory, Vice President of Prologis, a global leader in industrial real estate development and logistics, explained that advancing technology is a driving factor behind a surge in industrial activity.
One way new technologies effects on the industrial market and logistics has been the rise of e-commerce, particularly as it relates to next day/same day delivery. Online retailers have been increasing their footprints in proximity to large population centers in order to expedite delivery times. For example, over the previous two years Amazon has leased 2.46 million square feet in Tampa Bay in order to service Central Florida and has plans for an additional 1.9 million square feet in Jacksonville.
In addition to large distribution centers, e-commerce tenants are seeking smaller footprint distribution centers in urban areas to act as intermediary centers for express deliveries to consumers. As online retail sales trend upward, we expect the expansion of these tenants to continue – further strengthening the Florida Industrial markets.
Here are the main takeaways:
Industrial property: a growth sector for Miami going into 2017
Miami-Dade County’s industrial market is well positioned for continued growth, primarily driven by mid-sized tenants that represent 70.0 percent of total leasing activity in South Florida. However, big box tenants are also contributing to this growth as new occupiers such as Amazon, Hikvision and John Deere, are entering the market and absorbing larger blocks of space.
This strong tenant activity, combined with supply constraints, have contributed to strong rent growth – a trend expected to continue over the next 12 months.
As demand continues to outpace new supply, developers remain bullish on the market, which has 23.7 million square feet of planned industrial construction.
Construction shifts Orlando market
In Orlando, the industrial market is experiencing one of the strongest periods in its history, with every submarket posting positive absorption during the fourth quarter. Mid-sized tenants may also see a more favorable market as additional space creates competition among landlords.
Over the past year, large blocks of available space have dwindled in Orlando, leaving the largest tenants pursuing build-to-suit. With demand outweighing supply, the trend of rising rates is expected to continue as more tenants are choosing to pre-lease from proposed industrial projects. In fact, 70.0 percent of product currently under construction in the market today is already pre-leased, as tenants are accepting the higher rents for newer and higher quality space.
Industrial activity being fueled by large corporate tenants
The Jacksonville market tightened in 2016 with vacancy steadily declining to 6.3% – its lowest level in a decade. This is good news for landlords who have been able to raise rent.
These increased rents make speculative development an increasingly attractive option, thus more industrial project announcements are expected in the coming year. One of these comes from Amazon, with three warehouses already planned that will deliver 1.8 million square feet of industrial space to the market and add 2,700 jobs.
All three markets should continue to strengthen going into 2017, which is not only a positive factor for Florida’s industrial real estate markets, but also for the economy as a whole.
About the Author
Marc is the JLL Research Manager for the State of Florida, overseeing commercial real estate analysis across six markets with a strong focus on examining economic and demographic trends and variables that affect the performance of the office, industrial and retail markets in addition to the state’s overall economic health. In this role, Marc is responsible for monitoring real estate activity throughout the state, as well as analyzing market fundamentals and trends occurring in each market in order to provide insightful analysis and assistance to local and national clients regarding real estate strategies. Marc is also responsible for leading strategic advisory services to clients in Florida.Contact Marc.