South Florida To Learn About Industrial Sector Investment Opportunities At Bisnow’s Nov. 19 Event

With South Florida’s industrial market heading toward greater stability after its pandemic-induced boom, investors may wonder what is on the horizon for the market. A Lee & Associates third-quarter report said that while sales have increased, the market reached a 4.5% vacancy rate, up from 4.1% the previous quarter, and leasing has been decelerating.

Investors attending Bisnow’s South Florida Industrial Summit on Nov. 19 can stay on top of the latest trends and gain new information about what to expect in the coming months. Attendees will dive into the best approaches for financing properties, the aspects that will propel demand and how investors can take advantage of opportunities.

Click here to register and purchase tickets.

Anthony Scavo, president and managing partner of South Florida-based Basis Industrial, will speak on the Current Trends and Future Outlook for South Florida’s Industrial Market panel. Basis Industrial is based in Boca Raton and has a 4M SF portfolio across the industrial and self-storage sectors, expected to grow to north of 5M SF by the end of February 2025.

Scavo spoke with Bisnow about investors’ considerations for getting involved in the South Florida industrial market and shared his predictions for the market’s performance for the rest of this year.

Bisnow: What are some of the notable trends you're seeing in South Florida's industrial sector?

Scavo: In South Florida, the pricing cap rates that properties are trading at is pretty impressive and keeps getting more impressive.

There are a lot of investors who want to get into South Florida, and they'll overpay to do it. I hope it doesn’t happen where people overprice the market, and so far it doesn’t seem to be the case. Rental rates are growing in South Florida, but so are the common area maintenance charges. 

With these transactions increasing in value, that common area maintenance, or CAM, is going to go up. That's going to impact the amount that landlords can charge for and raise rents. Most of these tenants look at the common area maintenance and the rent as one total expense. People are looking at both the taxes going up from the purchase price increase and the general property tax increase in Florida, and they are going to wonder if this is sustainable. This might actually help stabilize the market from growing so rapidly. That being said, we are still seeing a significant demand for industrial warehouses even with the increase in rent and CAM.

Bisnow: What should investors keep in mind as they explore opportunities in South Florida?

Scavo: A lot of the investors who are trying to come into South Florida now should consider what they're buying, the upside that's there and the price they're paying — a total basis of the property.

For example, if you buy something that’s $200 to $300 per foot, you have to make sure you're going to be able to sell it for more than that. Like I mentioned before, a lot of people are overpaying a little bit in Florida. It makes sense because it's a hot area. There's limited land in South Florida, and it's more constrained than other areas of the state. Also, Florida’s population and wealth is continuing to grow, so the demand is there to stay.

People should be mindful about what they want to buy. If you like the asset and you think there's growth, you should invest in it.

Bisnow: How do you predict the industrial sector will perform for the rest of 2024 and going into 2025?

Scavo: As long as the interest rate environment stays relatively stable, with some cuts on the horizon and a stable economic policy from the Fed, I think the sector is going to remain strong. If rates drop, it will get even stronger because then people will pay lower cap rates for these assets. There is a chance, if rates stay the same, that there may be some stabilization in South Florida. When I say stabilization, I mean that assets are trading at more reasonable prices. There will still be growth and people will want to deploy money there, which will help.

For Basis Industrial, in particular, the fact that a lot of people have been overpaying means we’ve been very selective. We have tried to buy five assets in South Florida and only succeeded in buying two over the last three years, since it’s a very tight market. Since we’d have to pay a premium for a lot of these assets, it oftentimes doesn't really make sense for our investors and the way we underwrite.

Bisnow: How does Basis Industrial work with its South Florida-based clients to deliver industrial and self-storage facilities?

Scavo: For our self-storage clients, we look for where there's a need. Self-storage is a very demand-driven business. If there's a hole in the market where we see that the national demand is underserved, that's where we try to build a facility. We use Public Storage and Extra Space as our third-party managers.

For the industrial tenants, we try to make the suites ready for them early. When they come in to first view the suite on a tour, it's basically 80% completed and built out in the way a tenant would want. We make sure to build out an office and have a well-lit, open warehouse space. It's about 20% to 30% office and 70% to 80% warehouse. That way, when tenants come in, it's an easy transition for any minor changes they want to make.

We have a self-storage facility in Miami that's going to break ground in about six months. Our industrial base is spread out — we have one asset in Deerfield Beach, one in Medley and one self-storage building in Miami — so we're pretty diversified in South Florida. 

This article was produced in collaboration between Studio B and Basis Industrial. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.