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Port of Miami
industrial real estate construction
Demand for warehouse space in the US hit its second highest level since 1993 according to a report from commercial real estate company Cassidy Turner. According to the firm net demand for warehouse space was 40.8 million square feet in the last quarter of last year, the second strongest quarter the firm has ever recorded in its 20 years of keeping score.
This new flurry of demand is bringing down vacancy rates in the sector, which at 8.9% in Q4 was not only down 20 basis points compared to Q3, but the lowest level in 3 years. And the vacancy rate for certain types of industrial properties such as big box distribution centres was a lot lower, as low as 4% according to the firm.
The Midwest and South regions accounted for 75% of stock absorption according to the report. This is unsurprising given the resurgence of the Indianapolis industrial sector, which experienced its vacancy rate falling to 3.3% according to Jason Tolliver, vice president of research at Cassidy Turley in Indianapolis. About 3.2 million square feet of spec building is going on right now in the Indianapolis metro, says Tolliver, "a positive harbinger for the market, especially compared to four or five years ago." The area is centrally located and has a vast network of interstate highways, so lots of shipping is done by truck and through Indianapolis' international airport, says Tolliver. Indianapolis has the second largest FedEx hub, after Memphis, in the country, he says. In general, the Midwest is doing well, says Tolliver, partially because of the resurrection of manufacturing, and the rebound of the housing market. The south is also benefiting from the recovery in the economy. "There is no question that the industrial market is active, especially in the Airport West and Medley markets," which are the most desirable sub-markets in Miami and are the closest to Miami International Airport, says Michael Silver, first vice president at CBRE in Miami. "The vacancy factor dropped from 8% to 6% in the second half of last year and rental rates have climbed, depending on location and the size of the building, by 10% to 20% and sales prices have climbed as well," he says, noting that he is only talking about the more modern sub-markets, like Airport West.
Silver goes on to explain that the average gross rental rate in Airport West as of Q4 is $8.50 to $9 per square foot, compared to average rates of $7.50 - $8 per square foot in the first half of the year. Sales prices in the area are also up from $80 per square foot range in 2011 and the first half of 2012, to $90 to $110 per square foot according to Silver. Silver also talks about spec-building in Miami, "this is the first time we are seeing spec building in Miami since mid-2007," he says. Silver explains that there is about 1.2 million square feet of industrial real estate construction in Miami-Dade County at present, all in the Airport West and Medley markets.
Silver also talked about the trend as Miami becomes a global city. He says that growing labour costs in countries like China and India are bringing jobs back to the US. In this respect Miami benefits massively from the Port of Miami and Miami International Airport. The completion of the Panama Canal expansion will also benefit Miami according to Silver, because the current dredging works in the Port of Miami will link the two in being able to accommodate the largest of global super-tankers.
The big question, says Silver, is how much of the merchandise that comes in on Post-Panamax ships (larger ships that will be able to pass through the Panama Canal only after the expansion is complete) will stay in the area and how much will be shipped north. "But enough product will stay here, that there will be a need for several million square feet of new industrial space," he says.
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