Warehouse tenants in South Florida are feeling the pinch as rental rates have doubled over the past 3 years. Vacancy rates have begun to edge upward but remain historically low. With rental rates leveling off, my job is to guide tenants through this shifting tide to negotiate the best deal on the ideal space for their company.
For the past few years, I have focused primarily on representing industrial tenants throughout Miami-Dade Broward and Palm Beach Counties. What challenges will industrial tenants be facing in 2025? I believe two pictures tell the story. Average gross rents were in the $12 range per sf as we headed into 2022. That was fairly consistent across unit sizes and the ages of the property. Today, (according to CoStar), rents are in the low to mid $20s, newer smaller bay properties are surpassing $25 and a few are exceeding the $30 mark.
But we are beginning to see a change. Vacancy rates, which dipped into the 2% range at the peak of the market in 2023 are now back into the 5-6% range. That is still historically low, but it does indicate a shift. What is happening? What does that mean for tenants and how can they best adapt to these market shifts?
Tenants that leased in 2021 and 2022, before rates started taking off, are coming up for renewal. I leased a 20,000 sf space in Miami in 2021 for $9.25 per sf including operating expenses. When the lease rolls over in 2026, my client will be faced with whether to renew his lease at a market rent of around $21 or whether to downsize or relocate to another market. That is what is driving the vacancy rate higher.
While many businesses can’t afford to leave their South South Florida customer base, some just can’t afford to renew. But 1,000 new residents move to Florida every day. So for every tenant looking to leave, there is a new tenant looking to move in. Has the market peaked? Possibly. But is a bubble about to burst? Absolutely not. Some landlords are beginning to reduce their rates, but industrial rents are still double those of 3 to 4 years ago.
For smaller bay tenants from 5,000 to 20,000 square feet, we are seeing very little new construction. Finding the right space is still relatively difficult. But today, I will take on an assignment for a 5,000 square foot tenant in Doral or Pompano Beach when it was an exercise in futility back in 2023.
Back in 2021, when rates were rising, I looked for landlords who were behind the market and slow to raise their rents. That’s how I did what was possibly the last sub $10 deal in Miami Dade County. Today, I am looking for landlords who are ahead of the market and aggressively adjusting their rents downward in anticipation of a market correction. That is what I mean by finding value for my clients.
Tips for Tenants in 2025
- Start Your Search Early to Keep Your Options Open – 6-9 months is reasonable and even longer for larger spaces. I strive to create competiton. More time means more choices and more leverage in negotiations. If you wait for the last minute, you may be forced to take a less efficent more expensive space.
- Think Cubic – Can you go vertical? Older buildings typically have 18 to 24′ ceilings. New buildings are being constructed at 30′ and 36′. Higher square foot prices do not necessarily mean higher cubic foot prices.
- Smaller Aisles – Modern forlklifts can not only reach the ceiling heights of 36′ and over but can also operate in 7-10 foot aisles as opposed to 12-13 feet for older equpment allowing for more storage in smaller footprints.
- Expand Your Market – Tenants getting priced out of Miami’s red-hot Airport/Doral are opting for similar quality, less expensive space in nearby Medley. If they don’t need the modern high-bay spaces, they can save even more in Hialeah or Opa Locka. In Broward, Lauderhill and Lauderdale Lakes are lower priced alternatives to Pompano Beach. If you don’t need the latest and greatest, secondary markets can provide significant savings.
I Can Help!
To find your ideal warehouse space, market knowledge is key. A lot of tenants think they can do it on their own, but it pays to have someone on your team who can help navigate the process. As I always say – “you don’t know what you don’t know and what you don’t know can hurt you.”
I know.
I am a commercial tenant representation specialist. I focus on office and industrial properties. My mission is to find my clients the best value on the ideal space for their business. Market knowledge is key. Fortunately, that is also my superpower. For the first 15 years of my career, I was widely regarded as the top analyst in South Florida’s commercial real estate market. After that, I spent 12 years on the landlord side in acquisitions and leasing. That’s where I learned the games landlords play to extract more and more money from tenants’ pockets. And that’s why I am passionate about helping tenants and buyers. My fee is genrally paid by the landlord, so there is no direct cost for my services.
Do you need help finding the ideal space, negotiating the best deal, and avoiding hidden costs that somehow find their way into your lease? Do you know someone else who does? Do you want to review your current lease situation? Call, text or email me!
