Q1 2023 South Dade Industrial Report

Submarket Overview
With 11.9 million square feet, amounting to 9.4% of the total metro inventory, the South Dade submarket is the second smallest of the seven competitive Miami submarkets identified by Reis’s researchers, larger only than Northeast/Miami Gardens. In the ten year period beginning with Q4 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 1.9%.

Asking and Effective Rent
Asking rents climbed by 3.3% during the third quarter of 2022 to an average of $10.21, higher than four of the metro’s seven submarkets. The submarket’s streak of six consecutive quarterly gains, which began in Q2 2021, has increased asking rents by a cumulative total of 18.7%. The South Dade submarket’s current asking rent levels are higher than the metro’s average of $9.61, while asking rent growth in the third quarter compares unfavorably to the metro average of 3.9%. Effective rents, which take into account concessions offered to new lessees, increased more quickly, up by 3.6% 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 grew 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 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 South Dade submarket captured 0.5%, or 6,000 square feet. This is the second consecutive quarter during which this submarket recorded positive absorption, amounting to 36,000 square feet since Q2 2022. Over the last four quarters, submarket absorption totaled 197,000 square feet, 21.9% greater than the average annual absorption rate of 161,600 square feet recorded since the beginning of Q4 2012. The submarket’s average vacancy rate drifted downward by 10 basis points during the third quarter to 0.3%, which is 3.7 percentage points lower than the long- term average, and 1.5 percentage points lower than the current metro average.

Outlook
Between now and year’s end, no new competitive warehouse/distribution stock will be introduced to the submarket, and Reis estimates that net total absorption will be positive 4,000 square feet. Relative to the submarket inventory, this amount of absorption is not enough to move the average vacancy rate, which is expected to remain at 0.3%. During 2023 and 2024, developers are expected to deliver a total of 25,000 square feet of warehouse/distribution space to the submarket amounting to 0.9% of the new construction introduced to Miami. Industrial job growth during 2023 and 2024 is projected to average 1.1% annually. The South Dade submarket, however, will experience negative absorption averaging 79,000 square feet per year. The submarket vacancy rate will finish 2023 at 1.1% and will rise 0.7 percentage points to 1.8% by year end 2024. Between now and year-end 2022 asking rents are expected to advance 3.3% to a level of $10.55. On an annualized basis through 2023 and 2024, asking and effective rents are expected to increase by 10.7% and 10.6%, respectively, to finish 2024 at $12.92 and $12.45.