Q3 2023 Miami Airport Industrial Report

Submarket Overview

With 26.1 million square feet, amounting to 19.8% of the total metro inventory, the Miami Airport submarket is the second largest of the seven distinct geographic concentrations that form the Miami warehouse/distribution market, smaller only than Hialeah Gardens/Medley. In the ten-year period beginning with Q3 2013, new additions to the submarket totaled 2.6 million square feet, amounting to an annualized inventory growth rate of 1.1%; over the same period, the metro growth rate has been 2.2%.

Asking and Effective Rent

Asking rents advanced every month during the second quarter, with June’s increase of 0.5% bringing the cumulative quarterly total up to 2.0%. The submarket has now experienced twenty-five consecutive monthly gains in asking rent, for a cumulative total of 30.7%. The Miami Airport submarket’s June asking rent levels are higher than the metro’s average of $10.19, while asking rent growth in June compares unfavorably to the metro average of 0.6%. Effective rents, which exclude the value of concessions offered to prospective tenants, also increased by 0.5% during June. The identical rates of change show that landlords have succeeded in raising rents while maintaining a stable relationship between asking and effective rent values

Competitive Inventory, Employment, Absorption

Total employment in the Miami metropolitan area increased by 8,700 jobs during the second quarter, while industrial employment expanded by 1,600. Since the beginning of Q3 2013, the average growth rate for industrial-using employment in Miami has been 1.2% per year, representing the average annual addition of 1,600 jobs. Over the same time period, the metro recorded an average annual absorption rate of 3.1 million square feet. During June, metropolitan absorption totaled 73,000 square feet, of which the Miami Airport submarket captured 2,000 square feet. June’s positive absorption in the submarket follows 142,000 square feet of negative absorption observed in May. Over the last 12 months, submarket absorption totaled 335,000 square feet, 3.1% lower than the average annual absorption rate of 345,600 square feet recorded since the beginning of Q3 2013. The submarket’s average vacancy rate held steady at 3.3% during June, which is 2.3 percentage points lower than the long-term average, but 0.9 percentage points higher than the current metro average.

Outlook

Reis’s new construction specialists report that no more competitive warehouse/distribution stock will be introduced to the submarket this year, and net total absorption will be positive 40,000 square feet. Consequently, the vacancy rate will drift downward by 0.1 percentage points to 3.2%. During 2024 and 2025, developers are expected to deliver a total of 98,000 square feet of warehouse/distribution space to the submarket amounting to 3.0% of the new construction introduced to Miami. Industrial employment growth at the metro level during 2024 and 2025 is expected to average 0.6% annually, enough to facilitate an absorption rate averaging 1.5 million square feet per year. The Miami Airport submarket will claim a small fraction of this demand, posting absorption averaging 72,000 square feet per year, 4.8% of the projected metro total. The submarket vacancy rate will finish both years at 3.0%. Between now and year-end 2023 asking rents are expected to increase 3.8% to a level of $11.72, while effective rents will climb by 3.9% to $11.33. On an annualized basis through 2024 and 2025, asking and
effective rents are projected to rise by 5.0% and 5.1%, respectively, to finish 2025 at $12.93 and $12.51.