Pent up demand for industrial space in West Palm Beach is driving plans for more than 1 million square feet of new development, experts say.
“Nothing has been built in quite some time. On the demand side, the economy is good, companies are growing, and banks have eased up on lending. People see more opportunity and less risk,” Bill Reichel, president of Reichel Realty & Investments, told The Real Deal.
Robert Smith, senior vice president at CBRE, said vacancy rates are less than 4 percent and quality product is nearly nonexistent. “Palm Beach County is the only market in the South Florida area that has large tracts of land still available for single family residential developments,” he said.
The housing expansion and the population growth that is causing it create a need for building materials, food service, medical products, aerospace and more, Smith said, sparking a need for more industrial space.
Among the projects planned:
- Indianapolis-based Duke Realty‘s 822,850 square feet at Belvedere and Jog roads
- West Palm Beach-based McCraney Property Co.’s 388,000 square feet east of the Florida Turnpike on Belvedere Road
- FedEx’s 225,000 square feet on Pike Road along the Turnpike
- Malvern, Penn.-based Liberty Property Trust’s 218,160 square feet on Southern Boulevard about two miles east of the Turnpike
Industrial construction in 2015 is equal to that between 2000 and 2008, Smith said. “The fact that almost no industrial buildings were built between 2009 and 2014 has created a very large amount of pent up demand for space,” he said. “Newer generation buildings with higher clear heights, wider column spacing, better fire safety features and impact glass are much more desirable than most of the older, low-ceiling buildings, many of which are now functionally obsolete.”
But Reichel injects a note of caution. “It will be interesting to see how all the space is absorbed,” he said. Reichel notes that industrial real estate has gone through cycles that start with moderate growth, turn into go-go growth, then overbuilding, then the market slides, then distressed investors jump in, and the cycle begins all over again.
Meanwhile, Smith expect the go-go growth phase to continue. “Rental rates are only now hitting levels that were achieved in 2004 and are still substantially lower than they were at the peak in 2007,” he said. West Palm Beach industrial rents averaged $8.68 per square foot in the third quarter, according to CBRE.
“I believe that this run in new construction will last longer and reach higher rental rates than 2007,” as the same factors supporting the market now remain in play, Smith said.