Welcome to Normalization: Warehouse Demand Takes a Dip but Remains Strong
South Florida’s Industrial Market is off its peak – but not by much
In the past five years, warehouse rents have climbed by as much as 83%
Not long after the advent of COVID-19, South Florida experienced an unprecedented demand for industrial properties.
Frank Trelles, executive VP of State Street Realty, said his phone didn’t stop ringing for two years.
“We were crazy on fire,’’ he said, adding that his phone still rings- but nowhere near as much.
That clamor for warehouse and distribution space was fueled by an influx of out-of-state companies and high-income households, which sparked a rise in demand for e-commerce and logistics services. International supply chain hiccups only exacerbated the need for storage space.
Today, South Florida’s industrial properties remain a valuable commodity for landlords and real estate investors as vacancies hover near record lows and rents continue to rise, developers and brokers say. However, with more warehouses being built and businesses less desperate for storage space, the wild days of annual double-digit rent hikes are long gone. “We are going back to normal,” said Tom O’Loughlin, an executive VP at CBRE. “Tenant activity is normalized. We’re not at that supercharged [pace].
A slowdown in rent hikes would be a good thing for South Florida warehouse users and consumers, said Jeff Hartsook, managing principal of Cresa South Florida, a brokerage that represents commercial tenants.
“Year-over-year for the past two years, there have been 30% to 40% increases,” he said. “And what is happening is that all those costs get passed on to consumers.”
But with millions of square feet of new industrial space coming online, could a correction on rent be far behind?