Lee & Associates South Florida Q3 Report: Industrial Rents Keep Rising Despite Vacancy Uptick
Industrial
The tri-county area of South Florida closed the third quarter of 2023 with a 2.7% industrial vacancy rate, up from 2.4% a year earlier. The average asking rent surged year-over-year from $13.35 per square foot triple-net (NNN) to $16.83.
“We are still seeing companies right-size their warehouse space, which has resulted in more sublease and second-generation spaces hitting the market,” Lee & Associates Vice President Conner Milford said. “This activity, along with the new inventory being delivered, has allowed the vacancy rate to rise above 3% again [in certain submarkets], yet still well below the national average. To entice tenants, landlords will look more towards offering concessions on almost any deal point other than rent."
Office
The tri-county office sector is expected to see some softening in lockstep with the rest of the nation, but office vacancies stayed flat year-over-year at 8.6% in the third quarter. The average asking rent rose from $35.63 per square foot NNN to $36.64 in the same span.
“South Florida Class A and B office rental rates have peaked and are holding, and the vacancy rate has remained steady for the last few quarters despite absorption of new space showing a trending decline,” Lee & Associates South Florida Principal Bert Checa. “Landlords and asset managers are starting to shift their strategies from pushing office rates to concessions on a case-by-case basis to retain current tenants."
Multifamily
The local multifamily sector saw a notable year-over-year rise in vacancies in the third quarter of 2023, from 4.6% to 5.4%. Asking rents inched up year-over-year from $2,099/month to $2,121/month, which was a slight decline from the previous quarter.
"South Florida’s white-hot multifamily sector finally showed signs of cooling off in the third quarter,” Lee & Associates South Florida Principal Todd Cohen said. “Demographic trends bolstered by favorable taxes and overall lifestyle factors should continue to allay any fears in terms of net absorption, however. Rental rates remain strong, buoyed by higher interest rates and a lack of for-sale housing inventory making homeownership less tenable."
Retail
Retail vacancies declined from 3.2% in the third quarter of 2022 to 3.0% in the third quarter of 2023. Average asking rents jumped year-over-year from $34.63 per square foot NNN to $36.12.
"South Florida’s retail market showcased promising trends in the third quarter,” Lee & Associates Associate Nicolas Moreno said. “A steady vacancy rate and solid net absorption over the last year indicates a stable demand, consistent occupancy and interest. Significant lease transactions exemplify a continued appetite from major retailers, and sale transactions spotlight premium dealings with prices per square foot reaching as high as $382.70."
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