Although rents continue to rise in South Florida, landlords are more willing to negotiate with tenants on lease terms, a recent brokerage report states.
According to Lee & Associates’ industrial market overview report, the average asking rent for an industrial space was $15.40 per square in the first quarter of 2023, a 28.23% increase from the prior year.
The vacancy rate for South Florida’s 472.07 million square feet of warehouse, distribution, and manufacturing space in Q1 2023 was 2.3%. In comparison, the vacancy rate in Q1 2022 was 2.8%.
“However, although demand for industrial space remains strong, rising interest rates and a looming recession has offered some prospective tenants more room to negotiate,” said Greg Milopoulos, a principal of Lee & Associates’ South Florida industrial office in Deerfield, and an author of the report. “Uncertainty about the overall economy is making credit even more important to landlords, and tenants with strong credit will have increased negotiating power – within reason.”
Additionally, South Florida industrial rents – which have been climbing since the pandemic – are showing signs of stabilizing while landlord expenses have not.
“The stabilization of industrial rental rates, coupled with significant increases in insurance costs, are also playing a major role in ongoing lease negotiations,” Milopoulos said.
Still, most South Florida industrial property owners aren’t over-leveraged, allowing them to hold firm on what they believe their properties are worth, Milopoulos said. And buyers, in general, are back, he added.
“Buyers today have a better handle on the interest rate increases and cost of capital after the market essentially paused for a few quarters,” Milopoulos said. “They are accepting of stabilized industrial lease rates around $14.50 to $15.50 per square foot triple-net …”