Lee & Associates South Florida Q2 Market Report: Industrial Vacancies Jump Year-Over-Year
Industrial
The tri-county area of South Florida closed the second quarter of 2024 with a 4.1% industrial vacancy rate, up from 2.4% a year earlier. The average asking rent climbed year-over-year from $16.18 per square foot triple-net (NNN) to $17.29 per square foot.
"As we head into Q3, our team still continues to see a constant uptick in acquisitions of industrial assets and their valuation even while leasing moment appears to be slowing down. Aside from Broward County's geographical makeup and limited future development opportunities, in my opinion the reason there hasn't been a pull back on valuation is the forthcoming reduction in interest rates per the FED," Lee & Associates Principal Greg Milopoulos said. "With debt and rent costs coming down, purchasing power remains positive as CAP rates won’t regress enough to change asset values. Our team has completed just shy of 100,000 SF of sales this year, each deal slightly exceeding the last. All of them have interesting stories that got us across the finish line, reflecting the current nature of getting deals done in Broward County."
Retail
Retail vacancies inched up year-over-year from 2.9% to 3.1% in the second quarter. Average asking rents also increased year-over-year, from $36.26 per square foot NNN to $36.92.
“As major brands show interest in new South Florida locations, power centers, strip centers, and grocery-anchored neighborhood retail centers continue to see healthy leasing activity due to ongoing consumer spending on services and essentials. This demand has driven the availability rate to historic lows of 3.1%, well below the five-year average of 4.3%,” Lee & Associates South Florida Principal Stephen DeMeo said. “Miami still has the highest retail rents in Florida at $48.00/SF, followed by Palm Beach at $38.00/SF and Fort Lauderdale at $36.00/SF. New supply has not improved space availability, with over 1.8 million SF of retail space delivered since 2023 already 95% leased. Space availability is unlikely to improve significantly, and near-term forecast expectations are for historically tight vacancy rates around 3-4%."
Office
South Florida’s office vacancies declined slightly year-over-year in the first quarter, from 8.3% to 8.2%. The average asking rent jumped from $36.01 per square foot NNN to $37.02 in the same span.
“The South Florida office market in Q2 2024 is outperforming the national average, with notable strength in downtown West Palm Beach, where over 1 million square feet of new Class A office space is under construction out of 2.6 million square feet fully approved,” Lee & Associates South Florida Principal C. Todd Everett, SIOR said. “Class A office rents in West Palm Beach and Miami rank among the highest in the country. While older suburban offices face challenges, the influx of high-end space has created a rising tide effect. Despite some high vacancy rates and increased sublease spaces, demand in key areas remains robust, driven by tech and finance sector interest, and continued robust in-migration trends."
Multifamily
South Florida’s multifamily sector recorded a year-over-year rise in vacancies in the second quarter of 2024, from 5.5% to 5.9%. Asking rents increased year-over-year from $2,141/month to $2,173/month.
The sector “continues to outperform most other asset classes and geographical markets despite showing signs of a slowdown as we enter the third quarter of 2024. Net absorption continues to run almost parallel with net deliveries in the sector, which seems healthier than the prior two years, even though both metrics have slowed year over year. Vacancy rates continue to inch up, but very slowly and are still substantially lower than the national average,” Lee & Associates Principal Todd Cohen said. “Rental rates and growth remain strong, sales numbers are still setting records, and demand for rentals continues to be sky high as costs to purchase new homes remain untenable for most buyers, especially first time buyers to be. Additional affordable housing is needed more than ever in South Florida, and there is a push by municipalities and developers alike to meet that skyrocketing demand. Major new developments are greenlighted every week across all three South Florida counties, a trend that does not seem to be slowing down."
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