Miami-Dade Commercial Real Estate: Industrial Rental Rates Rise Despite Vacancies

The Miami-Dade industrial market surprisingly has continued the healthy pattern of leasing and sales activity in the fourth quarter of 2007, much like how it performed in the previous quarter.

More than 1million square foot of industrial space was leased in the fourth quarter. Availability and vacancy rates remained under 6%, which is still below the national average of about 10%. The fourth quarter of 2007 basically performed the same as the third in activity and pricing,however it lacked the panic that happened during the summer’s credit crunch.

The Miami-Dade commercial real estate market experienced small corrections and the re-pricing of certain assets, however the general effect was not as negative as many had predicted. Despite current economic difficulties, and uncertainty hovering the credit markets as well as the specter of an upcoming recession and the residential fallout, Miami-Dade County continues to remain a viable destination for both local and international traders and investors.

Industrial Vacancy Rates Go Up

The vacancy rates for the commercial and industrial sector have steadily gone up by 1.6 percent from the 4.2% rate recorded in the same period last year. Bulk space saw an 1.8 percent increase while flex space also saw a rise of 2.9 percent from the rate recorded during fourth quarter of 2006. Miami-Dade’s availability levels also went up from 5.6% in the fourth quarter of 2006, to 7.8% in the fourth quarter of 2007.

Some commercial real estate analysts are also forecasting asking rates to stabilize with limited future increases. One of the main reasons why asking rates could stabilize is the adding of more space, which is expected to enter the market this 2008. These factors have attributed to continuing tight market conditions despite the increase in vacancy levels, and the negative absorption levels recorded.

Rental Rates To Stabilize This 2008

Rental rates for the area’s commercial and industrial sector also were noted to have risen in 2007. The industrial sector saw an increase of 11.8 percent the $7.49 psf recorded in the fourth quarter of 2006. The South Central Miami submarket also felt the sharpest increase, rising by $1.85 psf from last year’s rate. Southwest Dade market closely followed with an average asking rate increase of $1.49 psf, while the East Miami submarket saw the largest decrease, quoting $1.86 psf less than 2006’s fourth quarter rate.

Analysts say that the Miami-Dade industrial sector is seeing a continuing transition from industrial gross rates to triple net rates, so that owners could be able to recover from rising operating expenses, due to increasing insurance premiums.

Th volume of trade in the city Miami has continued to increase in 2007, and has reached nearly $65 billion entering the fourth quarter. This city continues to be the gateway to Latin America, with Brazil, Venezuela and Colombia as its three major trading partners.

Trade with Asian countries also saw an increase, with China becoming a top10 trading partner of South Florida, having exchanged more than $3.3 billion with the Miami Customs District in 2007. Some early estimates are also forecasting that South Florida’s ports could triple the amount of cargo handled from Asia in the next 15 years, and while the city continues to build a healthy trade relationship with Asia, it still remains to be the main entry point for Latin American and Caribbean trade.

Vanessa Arellano Doctor


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