Q3 2022 Hialeah/E. Miami Shores Industrial Report

Submarket Overview

The Hialeah/East Miami Shores submarket, one of seven distinct geographic concentrations within Miami, contains 24.9 million market rate rental square feet, or 20.1% of the metro’s total inventory of warehouse/ distribution space. In the ten-year period beginning with Q2 2012, new additions to the submarket totaled 3.6 million square feet, amounting to an annualized inventory growth rate of 1.5%; over the same period, the metro growth rate has been 1.8%.

Asking and Effective Rent

During the first quarter of 2022, asking rents advanced by 1.9% to an average of $6.85, higher than only the Northeast/ Miami Gardens submarket’s $6.81. The submarket’s streak of seven consecutive quarterly gains, which began in Q3 2020, has increased asking rents by a cumulative total of 11.7%. The Hialeah/East Miami Shores submarket’s current asking rent levels are lower than the metro’s average of $8.28, while asking rent growth in the first quarter compares favorably to the metro average of 1.6%. Effective rents, which exclude the value of concessions offered to prospective tenants, increased by 2.0% during the first quarter to an average of $6.57.

Competitive Inventory, Employment, Absorption

Total employment in the Miami metropolitan area increased by 17,800 jobs during the first quarter, while industrial employment expanded by 2,700. Since the beginning of Q2 2012, the average growth rate for industrial-using employment in Miami has been 0.9% per year, representing the average annual addition of 1,200 jobs. Over the same time period, the metro posted an average annual absorption rate of 2.5 million square feet. Although metropolitan absorption totaled 282,000 square feet during the first quarter, the Hialeah/East Miami Shores submarket did not contribute to this demand; in fact, tenant outmigration returned a net total of 55,000 square feet to the available stock. The first quarter’s negative absorption in the submarket follows two consecutive quarters of positive absorption, amounting to 1.2 million square feet. Over the last four quarters, submarket absorption totaled 1.5 million square feet, nearly triple the average annual absorption rate of 538,500 square feet recorded since the beginning of Q2 2012. The submarket’s average vacancy rate drifted upward by 30 basis points during the first quarter to 3.0%, which is 6.3 percentage points lower than the long-term average, and 0.2 percentage points lower than the current metro average.

Outlook

Reis’s new construction observation team reports that no competitive warehouse/ distribution stock will be introduced to the submarket through the end of 2024. Between now and year- end, net total absorption will be positive 50,000 square feet. Consequently, the vacancy rate will drift downward by 0.2 percentage points to 2.8%. During 2023 and 2024, no additional competitive stock is expected to be introduced to the submarket inventory. Industrial employment growth at the metro level during 2023 and 2024 is anticipated to average 0.8% annually, enough to facilitate an absorption rate averaging 1.1 million square feet per year. The Hialeah/East Miami Shores submarket will claim an insignificant 2.2% of this demand. The submarket vacancy rate will finish both years at 2.6%. Between now and year-end 2022 asking rents are expected to increase 4.2% to a level of $7.14, while effective rents will rise by 4.6% to $6.87. Thereafter, Reis projects that asking rent growth will decelerate to an annualized average of 4.9% during 2023 and 2024 to reach a level of $7.86 per square foot. Effective rents will climb by a more rapid annualized average rate of 5.4%, as market conditions begin to allow landlords to reduce the value of concessions packages.