Florida began preparing for the industrial boom over a decade ago with infrastructure growth projects at the ports and with rail transportation in preparation for the expansion of the Panama Canal. That, coupled with the unforeseen and expedited rise of e-commerce as a result of the global pandemic starting in 2020, pushed industrial into “the golden child” spotlight of the commercial real estate industry. Since then, Florida’s robust population growth and pro-business and low tax policies have catapulted record demand growth, booming development, and limited supply of available industrial space in key markets.
Industrial developers have taken advantage of the quick stabilization period to capitalize on the strong economic benefits of the industrial market. Statewide the leaders in this category include Prologis, McCraney Properties, and Flagler Real Estate. Since 2015, Prologis has delivered 36 buildings totaling 7.9 million square feet (msf)—the most in the state. Primarily focused on South Florida, they have achieved 24 deliveries totaling 4.5 msf in the region.
When looking at the acquisition of industrial properties in the major markets of Florida, Prologis also leads the way, along with newly-acquired Duke Realty. Across Florida since 2015, Prologis has the most purchases of industrial properties with Blackstone and McCraney Properties trailing closely behind. Foundry Commercial has been active in their purchases of properties as well with a major focus on the Orlando market. With more 2023 deliveries arriving in the coming months, these buyers will continue scoop properties off the market to add to their investment portfolios.
Florida construction activity also remained strong at the close of 2022, with more than 23.1 msf of industrial assets underway throughout the key markets of which approximately 31.0% is already pre-leased. The Miami market leads the charge with 49.7% of its 4.2 msf under construction already pre-leased.
At the end of the fourth quarter of 2022, all Florida markets maintained their high occupancy rates with an average of only 3.0% vacancy across the state. The high level of leasing demand
positions Florida as a top contender amongst the Southeast region. Remaining available space under construction continues to be a necessity as limited supply persists and magnifies the need for a large quantity of industrial space to enter the construction pipeline.
Outlook
Following the historic records set during the industrial boom, we are entering a more leveled off market starting in 2023. These slowdowns are no cause for concern and are a natural correction to the abnormal market activity we have experienced over the past few years. Looking ahead, we can expect more leveled off activity across the state of Florida with slight growth happening in markets such as Miami and Jacksonville.
Gian Rodriguez, Managing Principal, South Florida: Scarcity of well-located developable industrial land, strong lease absorption and rent growth statistics, along with the continued influx of new residents to the state and region, will help ensure the further stabilization and healthy growth of the South Florida industrial market. Trey Carswell, Managing Director, Tampa: Despite economic headwinds, tenant demand throughout central Florida remains robust. We are tracking over 14 msf of tenant requirements, which far exceeds supply. For that reason rental rates will continue to increase. Tyler Newman, Executive Director, Jacksonville: Jacksonville has been on an upward trend for many years and the start of 2023 indicates it should continue. The market will deliver more than 8 msf this year and current tenant demand indicates the majority of new space will be full by the end of the year. Rental rates will most likely increase but still be the cheapest option in Florida, making NE Florida an attractive option.
