Q1 2023 Miami Airport Industrial Report

Submarket Overview
With 25.9 million square feet, amounting to 20.6% of the total metro inventory, the Miami Airport submarket is the largest of the seven distinct geographic concentrations that form the Miami warehouse/distribution market. In the ten-year period beginning with Q4 2012, new additions to the submarket totaled 3.1 million square feet, amounting to an annualized inventory growth rate of 1.3%; over the same period, the metro growth rate has been 1.9%.

Asking and Effective Rent
Asking rents advanced by 3.9% during the third quarter of 2022 to an average of $10.64, a level surpassed only by the South Central submarket’s $11.69. The submarket has now experienced seven consecutive quarterly gains in asking rent, for a cumulative total of 24.0%. The Miami Airport submarket’s current asking rent levels are higher than the metro’s average of $9.61, while asking rent growth in the third quarter is equal to the metro average of 3.9%. Effective rents, which take into account concessions offered to new lessees, advanced more quickly, up by 4.8% during the third quarter. The faster pace of effective rent growth indicates that landlords are enjoying more pricing power at the negotiating table.

Competitive Inventory, Employment, Absorption
Total employment in the Miami metropolitan area grew by 23,900 jobs during the third quarter, while industrial employment expanded 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 posted 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 Miami Airport submarket captured 462,000 square feet, the highest level of absorption among Miami’s seven submarkets. This is the second consecutive quarter during which this submarket recorded positive absorption, amounting to 734,000 square feet since Q2 2022. Over the last four quarters, submarket absorption totaled 669,000 square feet, 66.8% greater than the average annual absorption rate of 401,000 square feet recorded since the beginning of Q4 2012. The submarket’s average vacancy rate declined by 180 basis points during the third quarter to 2.3%, which is 3.6 percentage points lower than the long-term average, but 0.5 percentage points higher 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 77,000 square feet. As a result, the vacancy rate will continue to drift downward to finish the year at 2.0%. During 2023 and 2024, developers are expected to deliver a total of 353,000 square feet of warehouse/distribution space to the submarket amounting to 13.2% of the new construction introduced to Miami. Industrial job growth during 2023 and 2024 is projected to average 1.1% annually. The Miami Airport submarket will claim a portion of this demand, posting absorption averaging 92,000 square feet per year, 11.4% of the projected metro total. Because this amount does not exceed the forecasted new construction, the submarket vacancy rate will increase by 60 basis points to finish 2024 at 2.6%. Between now and year-end 2022 asking rents are expected to increase 3.6% to a level of $11.02. On an annualized basis, asking and effective rents are projected to rise at a rate of 12.1% through year end 2024, reaching average rates of $13.85 and $13.43 per square foot, respectively.