Q1 2023 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 19.8% of the metro’s total inventory of warehouse/distribution space. In the ten- year period beginning with Q4 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 1.9%. 

Asking and Effective Rent
Asking rents advanced by 4.5% during the third quarter of 2022 to an average of $8.07, higher than only the Northeast/Miami Gardens submarket’s $7.77. This advance extends the submarket’s run of gains to nine quarters, during which asking rents have advanced by a total of 31.6%. The Hialeah/East Miami Shores submarket’s current asking rent levels are lower than the metro’s average of $9.61, while asking rent growth in the third quarter compares favorably to the metro average of 3.9%. Effective rents, which take into account concessions offered to new lessees, increased more quickly, up by 5.0% during the third quarter. The faster pace of effective rent growth suggests that that landlords are enjoying more pricing power at the negotiating table. 

Competitive Inventory, Employment, Absorption
Total employment in the Miami metropolitan area increased by 23,900 jobs during the third quarter, while industrial employment grew by 2,000. Since the beginning of Q4 2012, the average growth rate for industrial-using employment in Miami has been 1.5% per year, representing the average annual addition of 2,000 jobs. Over the same time period, the metro experienced an average annual absorption rate of 2.7 million square feet. During the third quarter, metropolitan absorption totaled 1.2 million square feet, of which the Hialeah/ East Miami Shores submarket captured 17.1%, or 212,000 square feet. This is the second consecutive quarter during which this submarket recorded positive absorption, amounting to 383,000 square feet since Q2 2022. Over the last four quarters, submarket absorption totaled 719,000 square feet, 27.7% greater than the average annual absorption rate of 563,000 square feet recorded since the beginning of Q4 2012. The submarket’s average vacancy rate fell by 90 basis points during the third quarter to 1.4%, which is 7.4 percentage points lower than the long-term average, and 0.4 percentage points lower than the current metro average.

Outlook
No speculative warehouse/distribution inventory will be introduced for the rest of the calendar year, and Reis estimates that net total absorption will be positive 6,000 square feet. Relative to the submarket inventory, this amount of absorption is not enough to move the average vacancy rate, which is projected to remain at 1.4%. During 2023 and 2024, developers are expected to deliver a total of 281,000 square feet of warehouse/ distribution space to the submarket amounting to 10.5% of the new construction introduced to Miami. Industrial job growth during 2023 and 2024 is expected to average 1.1% annually. The Hialeah/East Miami Shores submarket will claim a portion of this demand, posting absorption averaging 113,000 square feet per year, 14.0% of the projected metro total. Because this amount does not exceed the forecasted new construction, the submarket vacancy rate will increase by 20 basis points to finish 2024 at 1.6%. Between now and year-end 2022 asking rents are expected to increase 4.0% to a level of $8.39. On an annualized basis through 2023 and 2024, asking and effective rents are anticipated to climb by 14.0% and 14.1%, respectively, to finish 2024 at $10.90 and $10.54.