Q1 2023 Miami Metro Industrial Report
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Metro Analysis
Executive Briefing on Market (Flex R&D) Conditions
The average Asking Rent was $14.31 in the Miami metro
- Rent in the Miami metro was up 3.5% from Q2 2022. Rent Has risen for seven consecutive quarters in the Miami metro.
- Rent is expected to finish 2022 at $14.83 in the Miami
metro.
The average Vacancy Rate was 1.8% in the Miami metro
- The Miami metro had the lowest vacancy in the nation.
- Vacancy in the Miami metro drifted downward by 30 basis points.
- The Miami metro had the lowest vacancy level since Q3 2009.
Market Overview
A summary of key real estate supply and demand market indicators reveals that during the third quarter the Miami Flex/R&D market recorded positive net absorption, advancing effective rents, and downward movement in the market’s vacancy rate. It is important to study each of these critical measures of market equilibrium in more detail and from both a historical and forecast perspective.
Asking and Effective Rent
Asking rents in Florida’s second most populous city rose by 3.5% during the third quarter of 2022 to an average of $14.31. The market’s run of seven consecutive quarterly gains, which began in Q1 2021, has increased asking rents by a cumulative total of 22.8%. Since the beginning of Q4 2012, the metro as a whole has recorded an annual average increase of 3.2%. Effective rents, which take into account concessions offered to new lessees, rose more quickly, up by 3.7% during the third quarter. During the past four quarters, positive movement in asking rent was recorded in all seven of the metro’s submarkets.
Competitive Inventory, Employment, Absorption
Total employment in the Miami metropolitan area grew by 23,900 jobs during the third quarter, representing a growth rate of 1.9%, 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. The metro experienced absorption of 55,000 square feet during the third quarter. Over the last four quarters, market absorption totaled 265,000 square feet, more than double the average annual absorption rate of 117,800 square feet recorded since the beginning of Q4 2012. From an historical perspective, the third quarter vacancy rate is 2.9 percentage points lower than the 4.7% average recorded since the beginning of Q4 2012.
Outlook
Between now and year’s end, no new competitive Flex/R&D stock will be introduced to the metro, and Reis estimates that net total absorption will be positive 5,000 square feet. Relative to the market inventory, this amount of absorption is not enough to move the average vacancy rate, which is expected to stay at 1.8%. During 2023 and 2024, construction activity under surveillance is projected to deliver a total of 29,000 square feet. Industrial job growth during 2023 and 2024 is expected to average 1.1% annually. The market vacancy rate will finish 2023 at 2.1% and will rise 0.3 percentage points to 2.4% by year end 2024. Between now and year-end 2022 asking rents are expected to advance 3.6% to a level of $14.83. On an annualized basis through 2023 and 2024, asking and effective rents are expected to climb by 11.7% and 11.6%, respectively, to finish 2024 at $18.49 and $17.42.
Executive Briefing on Market (Distribution) Conditions
The average Asking Rent was $9.61 in the Miami metro
- Rent in the Miami metro was up 3.9% from Q2 2022.
- Rent has risen for nine consecutive quarters in the Miami metro.
- Rent is expected to finish 2022 at $9.96 in the Miami
metro.
The average Vacancy Rate was 1.8% in the Miami metro
- The Miami metro had the third lowest vacancy in the nation and the fourth lowest in the South Atlantic.
- Vacancy in the Miami metro declined by 80 basis points.
- The Miami metro had the lowest vacancy level since Q3 2009.
Market Overview
A comprehensive assessment of the Miami warehouse/ distribution market suggests that the largest concentrations of competitive warehouse/distribution space are located in the Miami Airport submarket, representing 25.9 million square feet and
20.6% of the metropolitan inventory, followed by Hialeah Gardens/Medley, with a 20.0% share, and Hialeah/East Miami Shores (19.8%). Since the beginning of Q4 2012, the fastest growing area has been the Miami Lakes submarket, adding 7.9 million square feet over that period, or 36.8% of total metropolitan warehouse/distribution completions.
Asking and Effective Rent
Asking rents in Florida’s second most populous city rose by 3.9% during the third quarter of 2022 to an average of $9.61. This advance extends the market’s run of gains to nine quarters, during which asking rents have advanced by a total of 24.2%. Since the beginning of Q4 2012, the metro as a whole has recorded an annual average increase of 3.9%. Effective rents, which take into account concessions offered to new lessees, advanced more quickly, up by 4.4% during the third quarter. The faster pace of effective rent growth indicates that landlords are enjoying more pricing power at the negotiating table. During the past four quarters, positive movement in asking rent was recorded in all seven of the metro’s submarkets.
Competitive Inventory, Employment, Absorption
Total employment in the Miami metropolitan area increased by 23,900 jobs during the third quarter, amounting to a growth rate of 1.9%, 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. The metro experienced absorption of 1.2 million square feet during the third quarter. Over the last four quarters, market absorption totaled 4.8 million square feet, nearly double the average annual absorption rate of 2.7 million square feet recorded since the beginning of Q4 2012. In a long-term context, the third quarter vacancy rate is 5.2 percentage points lower than the 7.0% average recorded since the beginning of Q4 2012.
Outlook
Reis is tracking construction activity that is expected to deliver 360,000 square feet to the metro by the end of the year, and net total absorption will be positive 474,000 square feet. In response, the vacancy rate will continue to drift downward to finish the year at 1.7%. During 2023 and 2024, developers are projected to deliver a total of 2.7 million square feet. Industrial job growth during 2023 and 2024 is projected to average 1.1% annually. Because this amount does not exceed the forecasted new construction, the market vacancy rate will increase by 80 basis points to finish 2024 at 2.5%. Between now and year-end 2022 asking rents are expected to climb 3.6% to a level of $9.96. On an annualized basis through 2023 and 2024, asking and effective rents are anticipated to increase by 12.4% and 12.3%, respectively, to finish 2024 at $12.58 and $12.15.
Other Q1 2023 Industrial Reports
Q1 2023 Hialeah/E. Miami Shores Industrial Report
Q1 2023 Miami Airport Industrial Report
Q1 2023 South Dade Industrial Report