As other major U.S. commercial real estate markets struggle with rising inflation and interest rates, South Florida’s industrial, office and retail sectors remain resilient thanks to low vacancy rates, rising average rents and strong sales volume.
Blackstone sold $1.3 billion for industrial properties in Miami-Dade County last year, a sign that the strong performance of South Florida’s commercial sector will continue into 2023, according to a presentation by broker Sebastian Juncadella.
The investment giant will lead all industry buyers in sales volume in 2022, Juncadella told a packed room of brokers and developers at the DoubleTree by Hilton Hotel Miami Airport & Convention Center on Wednesday.
“Overall, the industry is doing very well,” Juncadella said. “[In Miami-Dade], developers have rushed to meet the demand. We’ve built the most in 2022, and we’re going to set a record for the entire United States. [new industrial construction] in 2023.”
Juncadella, with Miami-based Fairchild Partners, joined Rafael Romero with JLL and Kevin Gonzalez with Colliers who gave various presentations on Miami-Dade’s industrial, retail and office markets at the 2023 CRE Outlook Conference. It was hosted by the Miami chapter of the Certified Commercial Investment Member Institute, or CCIM.
New York-based Blackstone is also the biggest spender in West Airport, among the most sought-after industrial markets in Miami-Dade, Juncadella said. In June, Blackstone paid $7.6 billion for PS Business Parks, a non-real estate investment trust based in Glendale, California. Juncadella said.
“Blackstone inherited one of the best business parks in Miami,” he said. “Nobody comes close to the amount of money they spent at Rojava Airport.”
San Francisco-based Prologis was second last year, with a $1.1 billion purchase of Miami-Dade industrial properties. The company has been asking for rents since the start of the pandemic.
“Prologis started raising the rent,” Juncadella said. “They would send us outrageous offers, higher than anyone else. Slowly but surely, they moved the needle, 20 percent rent growth, year after year.”
The migration of out-of-state firms to the South Florida region has created a paradigm shift in the average square footage that office tenants are looking for, Colliers’ Gonzalez told the CCIM crowd.
“In the past, Miami renters averaged 500 square feet,” Gonzalez said. “If you look at the recent turnover, and as we grow, the average size of these tenants [has] 2500 square meters.
Between 2021 and last year, 76 new-to-market companies booked 2.5 million new leased office spaces in Miami-Dade, Broward and Palm Beach counties, Gonzalez said.
The “poster child” of the South Florida office market was the Brickell submarket, led by 830 Brickell, a 55-story office tower under construction, Gonzalez said.
Developed by Vlad Doronin’s OKO Group and Jonathan Goldstein’s Cain International, 830 Brickell is 100 percent pre-printed and fetches more than $100 a square foot rent, Gonzalez said. “It’s great news for Brickell,” he said. “Downtown Miami is finally starting to see some of the benefits of rental proliferation.”
Co-op sites have played a big role in filling tenant demand, Gonzalez noted. “I can’t think of a co-op operator that isn’t 95 percent occupied,” he said. “Going forward, as we adopt a hybrid office model, those collaborative operators will be essential.”
JLL’s Romero said during his presentation that South Florida has one of the strongest retail real estate sectors in the country. Landlords in the tri-county area are commanding asking rents of $34.21 per square foot, compared to $23.47 per square foot nationally, Romero said.
South Florida’s overall retail vacancy rate was 3.4 percent last year, compared to 4.3 percent for the entire U.S. retail market, Romero added. “Last year, we opened more stores than we closed,” he said. “This has not happened since 1995.”