SOUTHEAST SNAPSHOT, FEBRUARY 2006

Miami Industrial Market

South Florida is generally considered the main gateway for commerce to South and Central America. Most of the larger industrial users are large distribution hubs for goods heading down to Latin American markets. While there is some manufacturing, most of it is light manufacturing and assembly. Most of the new industrial developments are targeting the large distribution users.

Lincoln Property Company (LPC), Flagler Development Company and Codina Development remain some of the dominant industrial developers in the area. Presently, industrial development in Miami-Dade County is focused on warehouse/flex condominiums. Several factors have caused this trend — land costs have skyrocketed; construction costs have increased 30 to 40 percent during the past 18 months; general preference in Miami submarket to owning vs. leasing; intense investor demand for all classes of commercial real estate creating a frothy market; overall lack of developable land parcels due to a long period of development taking up a majority of land zoned for industrial development; and extensive rezoning of former industrial land parcels to residential use in response to development trends.

Miami-Dade County has recently seen two large commercial real estate transactions. First, Lincoln Property Company (LPC) purchased 39 acres in the Medley submarket of Miami-Dade County. LPC plans to build a new 650,000-square-foot speculative industrial park geared toward larger users that need a distribution hub in South Florida. Also, Flagler Development Company is developing Flagler Station, a mixed-use office and industrial park located at the Florida Turnpike and 106th Street in west Miami-Dade. Flagler Station, when completed, will consist of approximately 9 million square feet of office and industrial space. At present, a 200,000-square-foot warehouse building was completed at Flagler Station this year and another 160,000 square feet is currently under construction. About 3.4 million square feet of the park will be available for lease.

Two large leases have recently occurred as well. Empire Seafood leased 162,500 square feet for 10 years at 3595 N.W. 125th St. in the Gratigny Seaboard Park for an estimated $4.85 per square foot NNN rate. National Performance Warehouse leased 120,000 square feet at Seaboard Industrial Park located at 11150 N.W. 32nd Ave. The average rental range for industrial in the Miami-Dade County is in the $5.75 to $7 NNN for new product with average operating expenses in the $1.75 to $2.50 range. Older properties with lower clear heights located in less than desirable areas lease for less per square foot.

The market vacancy rate is approximately 7 percent and the West Miami-Dade/Turnpike area contains most of the remaining large tracts of developable industrial land.

As Miami-Dade and South Florida remain the primary gateway to the Latin American consumer base, the demand for more products is inevitable. More products mean a higher demand for distribution space and the ancillary services that serve those industrial users.

— Kenneth Morris is president of Miami-based Morris Southeast Group/CORFAC International.

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