Warehouse Vacancy Rates on the Rise in South Florida

News Summary

Warehouse vacancies are increasing in South Florida, notably in Miami-Dade and Palm Beach counties. Miami-Dade’s vacancy rate has reached 5.6%, while Palm Beach County’s is at 6.7%. The rise is attributed to a surge in new warehouse construction, with significant new industrial space completed in both counties. Despite more available space, rental prices continue to rise, although leasing activity has declined substantially. Economic factors are influencing this shift, as smaller spaces are increasingly preferred by tenants. The market is adjusting, with landlords adapting to the changing landscape of industrial real estate.

Warehouse Vacancy Rates on the Rise in South Florida: What You Need to Know

In a surprising turn of events, warehouse vacancies are on the upswing in sunny South Florida, specifically in the vibrant areas of Miami-Dade and Palm Beach counties. With a substantial increase in available industrial space hitting the market, many local businesses are starting to adjust their leasing strategies.

Vacancy Rates Climb Higher

According to recent figures, the vacancy rate in Miami-Dade County stands at 5.6%, marking a notable increase of 3.3 percentage points from last year. Meanwhile, Palm Beach County has also witnessed a leap, with a current vacancy rate of 6.7%, up by 1.9 percentage points year-over-year. These numbers highlight a significant shift in the region’s industrial landscape, primarily driven by a surge in new warehouse construction.

A Surge of New Industrial Space

In Miami-Dade alone, approximately 6.4 million square feet of warehouse and distribution space has been completed since January 2024. To put that into perspective, the total industrial space inventory in Miami-Dade now sits at a whopping 178.62 million square feet. Palm Beach County, not to be left behind, has added 1.94 million square feet of new industrial space this year.

On the other hand, Broward County reports a smaller increase of just 790,006 square feet, leading to a modest rise in vacancy of 0.5 percentage points to 3.8%. Despite the differences in growth, all three counties are definitely feeling the effects of an evolving market.

Leasing Dynamics Shift

Interestingly, despite the increase in available warehouse space, rental prices across the board are still climbing. Statistics reveal that leasing activity has dropped significantly, with Broward County experiencing a 30.6% decrease year-over-year, while Miami-Dade has faced an 11.1% decline. Palm Beach County is not far behind, with a minor drop of 0.3%. This trend is particularly pronounced in Broward, where limited product availability hampers leasing.

Understanding the Shifting Landscape

The industrial sector in Miami-Dade is settling into a new rhythm after the red-hot environment of 2021 and 2022. While demand may not be as explosive as during those years, it still surpasses the levels seen before the pandemic. This spike in demand was intensified by various factors, such as persistent supply chain issues, the resurgence of international trade, and a significant boom in e-commerce and logistics sectors, not to forget the growth in tourism and the influx of high-income households.

Economic Factors Impacting Demand

Fast forward to today, and we see that current economic issues, including rising insurance costs and general uncertainty in the national economy, are playing a major role in reduced demand for industrial space. Tenants are finding greater flexibility in negotiations due to increased availability, although landlords still hold a tactical advantage in many cases.

The Bigger Picture

Typical balanced markets usually hover around a vacancy rate between 6% to 8%, making the current rates in South Florida noteworthy. An additional 4.44 million square feet of industrial space is already under construction in Miami-Dade, with Broward planning for 992,155 square feet and Palm Beach close behind with 776,692 square feet.

What Lies Ahead?

As the region navigates this supply-demand adjustment, it’s clear that the focus is shifting toward smaller spaces, with rentals under 25,000 square feet leasing rapidly while larger areas sit vacant for longer periods. With a staggering 29 million square feet of new industrial space introduced over the last five years, landlords are turning to concessions rather than rent cuts to attract tenants.

As the marketplace continues to transform, both landlords and tenants are adapting. While median asking rents are on the rise, many larger blocks of industrial space are staying vacant, reflecting tenants’ preferences for smaller footprints. The coming months will be critical in shaping the trajectory of South Florida’s industrial real estate landscape.