Miami’s industrial market to suffer short-term from COVID-19 pandemic
Warehouse developers and property managers see a storm brewing for the South Florida industrial market in the weeks ahead.
The coronavirus pandemic shriveled business for warehouse tenants that serviced restaurants, hotels and the cruise industry. Those companies are scaling back, including their warehouse space, said Malcolm Butters, president of the Coconut Creekbased Butters Construction and Development.
But there’s a silver lining with e-commerce and grocery stores, said Jose HernandezSolaun, president of the Doral-based Easton Group, and Michael Mandich, managing partner at Mandich Real Estate Advisors in North Miami Beach.
E-commerce and businesses that provide goods to grocery stores may turn the current steady demand for space into a growing one by late 2020.
The amount of challenges outweigh any slim chance of demand for more warehouse space in the coming weeks, Butters said. “And depending on what happens with behavioral patterns with cruises and flying,” he said, “the negative impact could last longer. Some businesses, such as restaurants, may not come back because of continued social distancing.”
Demand on warehouse space remains the same prior to March — steady, said Mandich. “We are getting more affected because our tenants rely more on tourism.”
Developers and property managers saw several industries shrinking, including aviation, fruit, restaurant, wedding, convention and cruise suppliers, Butters said. Small businesses are affected worse than large companies.
Some warehouse tenants are asking for rent relief as business shrinks.
Rent abatement is handled on a case-by-case basis with government aid and federal programs, including by the U.S. Small Business Administration, highlighted as first steps a tenant could take to pay a lease, Butters said.
Some tenants are offered a blend-and-extend plan, with lease deferred for a month or two, added onto rent later on in the year and a lease extension agreement of one to two years, Butters said.
A few warehouse users are seeing a boom in business, including e-commerce companies, grocery store and medical suppliers.
Companies estimated their orders of goods on previous years, and didn’t have enough to fill empty shelves now, Hernandez-Solaun said.
Food suppliers in particular, Mandich said, saw demand nearly double. One user who has a six billion egg surplus had no surplus overnight, Mandich said, and one client who would average selling 12,000 cases of bagels per week to a grocery, sold about 20,000 cases of bagels per week in late March.
But no tenants, the developers said, have asked for more warehouse space.
“There’s two challenges with warehouse expansion at the moment: Some people are taking a wait-and-see approach because there’s uncertainty of how long this pandemic will last,” Mandich said. “And although banks are well capitalized, they are making cautious moves.
When a company can’t access credit, it stifles demand.”
Some industrial developers are concerned about the longterm impact of the pandemic. Rates remain the same. Warehouse space in Miami ranged between $150 to $160 per square foot for dry space and $200 per square foot, according to the CBRE 2020 Southeast U.S. Outlook report published in February.
“It’s too early to see a change in rates,” Butters said. “But if the demand goes down, rates go down.”
Warehouses will see an increase in demand sometime this year, Hernandez-Solaun said, driven by some industries. “Some will close their doors. Others will expand. I see the number of businesses expanding outpacing those closing their doors.”
And with food suppliers servicing grocery stores seeing an uptick in sales, industry leaders said, demand for cold storage will grow in the industrial sector.
“There’s greater demand for cold storage today,” Mandich said. “And there was little supply to begin with.”