Industrial Landlords More Willing to Negotiate Lease Terms, Report Says
Industrial Landlords More Willing to Negotiate Lease Terms, Report Says
Although rents continue to rise in South Florida, landlords are more willing to negotiate with tenants on lease terms, a recent brokerage report states.
According to Lee & Associates' industrial market overview report, the average asking rent for an industrial space was $15.40 per square in the first quarter of 2023, a 28.23% increase from the prior year.
The vacancy rate for South Florida's 472.07 million square feet of warehouse, distribution, and manufacturing space in Q1 2023 was 2.3%. In comparison, the vacancy rate in Q1 2022 was 2.8%.
However, although demand for industrial space remains strong, rising interest rates and a looming recession has offered some prospective tenants more room to negotiate, said Greg Milopoulos, a principal of Lee & Associates' South Florida industrial office in Deerfield, and an author of the report.
"Uncertainty about the overall economy is making credit even more important to landlords, and tenants with strong credit will have increased negotiating power – within reason," Milopoulos said.
Additionally, South Florida industrial rents – which have been climbing since the pandemic – are showing signs of stabilizing while landlord expenses have not.
"The stabilization of industrial rental rates, coupled with significant increases in insurance costs, are also playing a major role in ongoing lease negotiations," he said.
Still, most South Florida industrial property owners aren't over-leveraged, allowing them to hold firm on what they believe their properties are worth, Milopoulos said. And buyers, in general, are back, he added.
"Buyers today have a better handle on the interest rate increases and cost of capital after the market essentially paused for a few quarters," he said. "They are accepting of stabilized industrial lease rates around $14.50 to $15.50 per square foot triple-net ..."
Triple-net means the listed rental rates exclude insurance costs, maintenance and real estate taxes.
It's important to note that South Florida's industrial market has prospered since the pandemic as companies and people migrated from other parts of the U.S.
About Lee & Associates South Florida
Lee & Associates South Florida is a fully vertical commercial real estate brokerage firm focused on industrial, office, retail, multifamily, investment and land sectors. Our dedicated team of professionals is led by Matthew Rotolante, CCIM, SIOR a 4th generation South Florida native in a family that has owned and operated commercial property here since 1928. Lee & Associates is the largest agent owned brokerage in the nation with Senior Agent’s ability to earn profit share resulting in the highest splits while still receiving full resources, support and leads from our national network. Our collaborative and cheerful culture allows for open communications throughout the company, fostering the sharing of information and best practices to better enable client decision making. The Lee & Associates’ robust national network that sold and leased over $32 Billion in 2022 offers clients a cross-market platform of expertise and deal opportunities across all asset specialties and representation roles. For the latest news from Lee & Associates South Florida, visit leesouthflorida.com or follow us on Facebook, LinkedIn, Twitter and Instagram, our company local news.
About Lee & Associates
Lee & Associates is a commercial real estate brokerage sales, leasing and management firm. Established in 1979, Lee & Associates has grown its service platform to include over 75 offices in the United States and Canada. Lee & Associates is the largest agent owned commercial real estate brokerage where agents get the greatest return for their efforts and hence are more committed and better enabled to provide superior results for their customers. For the latest news from Lee & Associates, visit lee-associates.com or follow us on Facebook, LinkedIn, Twitter and Link, our company blog.
