Annual rent gains for logistics space in the first quarter of 2023 totaled over 19% for both Fort Lauderdale and Miami, the highest across all markets tracked by CoStar. Tight vacancy rates for logistics space of 3.8% and 1.8%, respectively, in Fort Lauderdale and Miami highlight the continued demand and lack of available supply, enabling landlords to aggressively push rents in these markets. Despite an uptick in construction activity, specifically in Miami during 2021 and 2022, industrial supply additions remain largely muted across these two South Florida markets as the area’s land supply constraints limit new development.
The Fort Lauderdale and Miami industrial markets have emerged as critical logistics hubs as they provide access to the densely populated South Florida region, the ninth-largest U.S. metropolitan statistical area in terms of population. South Florida is also a gateway market to the rest of the world, particularly Central and South America and the Caribbean. As a result, Miami International Airport has the highest amount of international shipping in the U.S. and ranks fourth overall in cargo traffic. The port of Miami is the 11th-largest containerized port in the U.S. and is dredged to accommodate the new Super Post-Panamax mega-ships, after the completion of more than $1 billion of capital improvements in the last few years.
Although space availability has risen slightly in 2023 from historical lows seen in the first quarter of 2022, net absorption has remained positive across the two markets. Rising rents, taxes, property maintenance, and insurance costs are squeezing some industrial tenants, forcing them to consolidate space. Landlords with a large amount of available space are also increasingly willing to subdivide and offer concessions to attract tenants.
Industrial leasing activity picked up in March, after a slow start to 2023. The majority of tenants typically look for blocks of space measuring less than 50,000 square feet, as this size segment makes up over 90% of leases signed in these two markets.
More than 70% of the new industrial buildings underway in Miami and Fort Lauderdale are larger than 100,000 square feet.
“So far this year new deliveries have outpaced demand in Miami and Broward counties, but buildings currently under construction are roughly 50% preleased,” said Marc Miller, field research associate director at CBRE.
Despite increasing availability in new supply, industrial buildings in this larger-size segment delivered over the past two years are over 90% occupied.
Additionally, asking rents continue to increase across these two markets. Resilient demand and limited availability have continued to produce double-digit rent growth across much of greater Miami, with asking rents here reaching well over $25 per square foot. While industrial vacancy has expanded across U.S. markets with more significant supply/demand imbalances, Miami and Fort Lauderdale are set to remain well below the U.S. average industrial vacancy, at less than 5% over the forecast period due to the area's supply constraints.
The tight market conditions are expected to continue to deliver outsized logistics rent gains relative to the U.S., averaging over 8%, well above the projected 5% rent gain average for the U.S. from 2023 through 2027.
