Miami’s in Demand
- Mar 13, 2015
The stable construction tempo of the first three quarters of 2014 and a significant increase in demand for industrial space translated into a positive Q4 for the Miami-Dade area. According to recent market data issued by Marcus & Millichap, space absorption, sales figures and the employment rate are on the rise thanks to the strengthening influx of investors. Vacancy rates continued to fall and the average rent is recovering as well, following a somewhat disappointing 4.6-percent drop in ’13.
The elevated investor interest was more visible among small businesses, especially construction firms that reacted to the vibes of a revived housing market, Marcus & Millichap data shows. These occupied a large portion of the outdated distribution and warehouse assets vacated earlier by growing firms, along with some smaller multi-bay facilities of less than 50,000 square feet. The favorable climate also lured a large number of foreign investors to the area. These factors substantially contributed to an estimated 60-basis point year-over-year decrease in vacancy rate that should now reach 5.9 percent. To put it in context, a 30-basis point drop was recorded during 2013.
Vacancy has been on a downward spiral since the 2010 peak and this persisted in 2014, despite the fact that roughly the same amount of new space came online as the year before–about 1.8 million in total. The escalating absorption (estimated at over 2.8 million square feet) has been motivating developers to take risks and set to work on new projects even without lease agreements in place. The growing demand coupled with the momentarily low rents may, however, turn prospective buyers’ attention toward other Florida markets as cap rates get less favorable. In 2014, private investors have been aiming for stabilized properties with mid-6 to mid-7 percent returns, whilst REITs and institutions had best-in-class assets offering yields of little over 6 percent in their crosshairs.
Chart courtesy of Marcus & Millichap