Q3 2022 South Dade Industrial Report

Submarket Overview

The South Dade submarket, one of seven distinct geographic concentrations within Miami, contains 11.9 million market rate rental square feet, or 9.5% 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 1.1 million square feet, amounting to an annualized inventory growth rate of 0.9%; over the same period, the metro growth rate has been 1.8%.

Asking and Effective Rent

During the first quarter of 2022, asking rents increased by 1.8% to an average of $9.02, higher than four of the metro’s seven submarkets. Since the same reporting period last year, asking rents have climbed by 4.9%, up from $8.60. The South Dade submarket’s current asking rent levels and growth rates compare favorably to the metro’s averages of $8.28 and 1.6%. Effective rents, which exclude the value of concessions offered to prospective tenants, advanced by 1.9% during the first quarter to an average of $8.67.

Competitive Inventory, Employment, Absorption

Total employment in the Miami metropolitan area grew by 17,800 jobs during the first quarter, while industrial employment grew 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 recorded an average annual absorption rate of 2.5 million square feet. During the first quarter, the metro experienced absorption of 282,000 square feet, but absorption was flat in the South Dade submarket. The first quarter’s unchanged occupancy total in the submarket follows two consecutive quarters of positive absorption, amounting to 389,000 square feet. Over the last four quarters, submarket absorption totaled 416,000 square feet, nearly triple the average annual absorption rate of 155,300 square feet recorded since the beginning of Q2 2012. The submarket’s average vacancy rate held steady at 0.6% during the first quarter, which is 3.6 percentage points lower than the long-term average, and 2.6 percentage points lower than the current metro average.

Outlook

Reis’s new construction analysts report that 121,000 square feet of new multi-tenant warehouse/ distribution inventory will be introduced to the submarket by the end of the year, and net total absorption will be positive 99,000 square feet. In response, the vacancy rate will drift upward by 0.2 percentage points to 0.8%. During 2023 and 2024, developers are expected to deliver a total of 263,000 square feet of warehouse/distribution space to the submarket amounting to 10.9% of the new construction introduced to Miami. Industrial employment growth at the metro level during 2023 and 2024 is expected to average 0.8% annually, enough to facilitate an absorption rate averaging 1.1 million square feet per year. The South Dade submarket will claim a small fraction of this demand, posting absorption averaging 49,000 square feet per year, 4.5% of the projected metro total. Because this amount does not exceed the forecasted new construction, the submarket vacancy rate will increase by 140 basis points to finish 2024 at 2.2%. Between now and year-end 2022 asking rents are expected to rise 2.8% to a level of $9.27, while effective rents will advance by 2.5% to $8.89. On an annualized basis through 2023 and 2024, asking and effective rents are projected to increase by 4.0% and 3.9%, respectively, to finish 2024 at $10.03 and $9.60.