Industrial Warehouse Vacancies Filling Up in South Florida

April 24, 2011

Industrial Warehouse Vacancies Filling Up in South Florida

Sharpe Properties, which manages commercial retail and industrial warehouse properties throughout South Florida, has slowly seen improvement with the vacancy rates in Miami Dade County, specifically the Hialeah industrial area.  Although the rental rates on a per square foot basis have dropped dramatically over the past several years, demand for industrial warehouse space has picked up.

The industrial warehouse market typically lags behind the residential home market.  For example, when the news started reporting that the residential home market was in a downward spiral, the South Florida industrial market was still strong.  However, while the industrial market eventually plummeted, the industrial warehouse market appears to be recovering quicker in time than expected.  There are various reasons for why this has happened.

Lack of Industrial Warehouse Zoning

Homes can be built almost anywhere.  Developers can find and convert swap land into a vibrant residential community seemingly overnight.  However, because industrial warehouses typically need to be near airports, seaports, railroads; and restricted by various environmental concerns, locations are inherently limited.  Consequently, during the big real estate boom several years ago, the industrial market did not increase at the same rate as the residential market.

Industrial Warehouse Supply vs. Demand

While the demand for residential and industrial markets are both slowly recovering, the limited supply of available industrial properties is providing for a faster recovery.   In contrast to the industrial warehouse market that has remained relatively the same size over the recent years, so long as the South Florida residential market is filled with an over-abundance of vacant homes and condos, their recovery will remain prolonged.

Foreclosure Rates: Commercial vs. Residential

When the residential home market in South Florida began to tumble, the banking industry was quick to commence foreclosure proceedings.  Once the banks retook possession of their assets, the foreclosed homes just sat and remained vacant for months…if not years without finding a home buyer.  For commercial investment properties, the banking industry is apparently reluctant to foreclose and take over the properties.  One reason could be due to the added responsibilities banks would take on once they took possession of the commercial properties.  While banks can easily sit on doormat homes and condos, and wait for the residential market to rebound, commercial properties require constant management and attention.  Otherwise, tenants would quickly vacate their premises, and the income producing property’s value would rapidly spiral downward.  Because banks are not set up to properly manage commercial properties, they may have realized that it is best to keep the properties under the management of the property owner, and instead just pretend and extend their mortgages.

Industrial Warehouse Recovery

So long as the demand for industrial warehouse property increases and the supply remains stagnant throughout South Florida, the recovery will continue.  With the recovery of the industrial market, and confidence of business owners to expand, Sharpe Properties expects rental rates on a dollar per square foot to start increasing by the end of this year.

Please visit www.sharpeproperties.com to view the industrial warehouse properties Sharpe Properties currently has available for rent.

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