News in Brief – Week of June 15 –
Easton & Associates managed the lease of 152,800 square feet of warehouse space to Foreign Parts Distributors at 3000 N.W. 125th St. in Miami.
News in Brief – Week of June 15 –
Easton & Associates managed the lease of 152,800 square feet of warehouse space to Foreign Parts Distributors at 3000 N.W. 125th St. in Miami.
June 21, 2018 –
Industrial properties may not be the sexiest parcels in commercial real estate, but they’re certainly making buyers salivate these days. Increasingly, investors are willing to go to greater and greater lengths to land these properties, outbidding others even when it means accepting lower returns, commercial brokers said.
As land availability continues to shrink and rents continue to rise, brokers are working with a new kind of normal, where bidding wars are not uncommon for industrial space and owners are generally getting the high rents they’re asking. Vacancy remains low in the sector at 3.6 percent across South Florida, according to a 2018 first-quarter report from CBRE.
And developers can’t seem to build industrial inventory fast enough. Spec development is rampant in a market that has rarely before seen large spaces get preleased, with clothing distributors, auto and aircraft parts suppliers and e-commerce giants like Amazon creating a virtual frenzy.
“The amount of speculative development in South Florida is by far the most [it has ever been],” said Audley Bosch of JLL, who said that despite this, he believes supply is on pace with demand.
Before this cycle, tenants were typically seeking between 20,000 square feet and 40,000 square feet. Now many are looking for spaces exceeding 100,000 square feet. The “unprecedented amount of spec development” has been met with “fantastic” absorption, Bosch claimed.
Nearly 7 million square feet of new industrial space is in the pipeline for South Florida, according to JLL. The bulk of space under construction is in Miami-Dade, which has 4.6 million square feet in the pipeline. Broward has about 1.8 million square feet and Palm Beach County has about 200,000 square feet under development, per JLL.
A year ago, only 2.8 million square feet was under construction in South Florida, with the bulk — 2.5 million square feet — in Miami-Dade and nothing under development in Palm Beach County. That equates to an increase of about 135 percent.
“I don’t think anybody is thinking that this latest construction surge is going to throw the balances of supply and demand off the tracks,” said Tom O’Loughlin of CBRE. “Historically, both Broward and Miami-Dade have not been a prelease market. Now we’re seeing a lot of preleasing.”
At least four 100,000-square-foot deals were signed during the first three months of 2018, according to JLL.
Developers completed 660,000 square feet of new industrial space in Miami-Dade in the first quarter, according to a report from Transwestern. About 57 percent of that new space is preleased, the report found.
In Broward, about 40 to 45 percent of the roughly 1.8 million square feet under construction is preleased, O’Loughlin said.
Much of the new inventory underway is designed with specific needs in mind. O’Loughlin and others say that tenants are increasingly looking for newer features that include more efficient uses of space.
At Beacon Logistics Park, a 72-acre industrial development planned in Hialeah, developer Codina Partners will build Class A distribution warehouses featuring 32-foot clear heights, 54-by-50-foot column spaces and building depths of up to 210 feet — details that maximize storage capacity for tenants, a spokesperson said. While construction on the 1.3 million square feet of space is set to begin in the fall, space has not been preleased yet.
Once at the bargaining table however, the developer could ask for — and get — top dollar, brokers claim. Asking rents in the first quarter averaged $9.14 per square foot, a 3.6 percent year-over-year increase, according to CBRE.
“A lot of these landlords are holding out for higher rents and getting it,” O’Loughlin said. Soaring land costs are contributing to rising rents, he added. When land runs out, development is expected to go vertical, pushing costs and rents higher and higher.
Rents are also still rising due to mounting construction labor and materials costs. “The deal terms have to be adjusted accordingly to what today’s labor costs are and construction materials,” Bosch of JLL said.
Ed Easton, chairman of the Easton Group, agreed that the demand is there for new industrial development, but he’s cautious due to the dwindling land supply. “We have assignments to find space that we can’t find,” he said.
His company plans to deliver more than 400,000 square feet of spec industrial space this year. “I don’t think you’ll see nearly as much built in 2019 as you’ve seen in 2017 and 2018,” he said, citing the rising construction costs and land scarcity.
Brian Smith of JLL said South Florida’s “frothy and hyperactive” industrial market has been developing over the last five years. “I’m not sure this is a ‘hot market.’ I think it’s a new normal,” he said.
“If you compare Miami to Seattle, northern New Jersey and maybe Oakland, we’re still a minimum of 30 percent cheaper than any of those,” he added.
Industrial real estate is increasingly the favorite investment choice of pension fund advisers and private equity firms like Prologis, which “all have huge pockets of money to buy in South Florida,” according to Steve Wasserman of Colliers International South Florida.
Cap rates are still falling as rents for new investment-grade space continue rising.
Countyline Corporate Park, a multiphase 8 million-square-foot industrial park being developed by Flagler Global Logistics, has attracted multiple buyers, sources said. Flagler assembled the 95-acre site in Hialeah in 2005 for a combined $38.3 million. The first phase of Countyline is expected to trade for nearly $200 million.
Institutional players are betting big on the last mile of delivery, paying top dollar for older warehouses near major highways, airports and ports in order to knock them down and build big new warehouses, Wasserman said.
Investors are also competing with national apartment developers that have run out of land.
Lincoln Property Company, a multifamily developer based in Dallas, paid $27.4 million for the Miami International Logistics Center, a nearly 60-year-old industrial property, in June 2017. Lincoln paid more than double the previous 2013 sale price for the warehouses, which will likely be demolished and replaced with apartments.
South Florida has seen the growth of nearly all kinds of industrial users. In June, the Mandich family’s investment group launched its own brokerage with former Cornerstone International Realty broker George Smith, focusing on cold storage, a growing segment of the market due to South Florida’s abundance of agricultural products and proximity to major ports and airports as well as Latin America.
“There’s always a certain point where [the market] could slow up,” said Walter Byrd of Transwestern. “We just don’t see it over the next couple of years.”
What happens when you run out of storage for your luxury cars? Buy more, of course.
Developer Michael Dezer, whose firm Dezer Development is known for its high luxe high-rise condos, just paid 3.6 million for a warehouse in Fort Lauderdale that will eventually house more of his cars.
The deal, announced by brokerage Cushman & Wakefield, includes a 55,110-square-foot industrial showroom at 5320 North Powerline Road, occupied by the Dirt Cheap store that sells everything from furniture to electronics wholesale.
Dezer already owns the much larger 310,000-square-foot building next door that houses Xtreme Indoor Karting, where his son Gil Dezer recently hosted a Go-Kart race to commemorate the upcoming opening of the family’s Porsche Design Tower.
A representative for Dezer Development told The Real Deal that Michael Dezer needed more space to put his cars, so that’s what the family bought this warehouse for.
For this most recent deal, Dezer paid about $65 per foot for the showroom. The seller was the Easton Group, a Miami-based commercial firm that bought the warehouse for $2.1 million in 2013, according to county records.
Richard F. Etner, Christopher Metzger, Christopher Thompson and Matthew G. McAllister of Cushman & Wakefield brokered the deal on behalf of Easton.
“The Easton Group did a tremendous job positioning this asset for disposition,” Etner said in his firm’s announcement of the sale. “Their efforts provided Dezer with the opportunity to acquire a high-performance asset with a tenant in place in one of South Florida’s strongest industrial submarkets.”
February 17, 2016 – Invesco Advisers just paid $98 million to the Easton Group for the majority interest of a substantial South Florida industrial portfolio.
The deal closed Tuesday, attorneys Danielle Gonzalez and Rick Giusto of Greenberg Traurig told The Real Deal. Included in the sale was more than 675,000 square feet of industrial space spread throughout seven buildings, together totaling about 54 acres of land. Six of the buildings are in Miami-Dade County and one is in Broward County.
An Easton spokesperson disclosed the price to The Real Deal, which breaks down to $145 per square foot.
The Easton Group will remain the properties’ manager and a minority owner with a 10 percent interest under the new joint-venture, according to the Easton spokesperson. Under the new agreement, Easton’s five loans — issued from three different lenders — will be assumed by the joint-venture.
Easton Group’s in-house brokerage Easton & Associates represented the firm for this deal, and Invesco was also self-represented. Attorneys Gonzalez and Giusto worked on behalf of Invesco.
“I’m very proud of my son Eddie who handled this transaction from the very beginning and created a win-win situation for all parties,” Edward W. Easton, founder and chairman of the Easton Group, said in a statement.
Here’s a list of the properties and their square footages:
1600 NW 59th Avenue, Miami Lakes
16250 NW 59th Avenue, Miami Lakes
5800 NW 163rd Street, Miami Lakes
5890 NW 163rd Street, Miami Lakes
2200 NW 84th Avenue, Doral
2330 NW 82nd Avenue, Doral
2600 SW 39th Street, Hollywood
Invesco is a global investment manager headquartered in Atlanta, Georgia. Its market focus depends on the city it’s trading in, Giusto said, but Invesco’s Miami activity regularly includes the industrial sector.
Giusto said both firms are long-term clients of Greenberg Traurig.
“We made the introduction a few years ago,” he told TRD, “because we thought it’d be a good match.”
April 24, 2015
Warehouses are the hottest thing in commercial real estate these days.
Sustained growth in jobs, population and consumer confidence are driving expansion for contractors, building supply companies, food distributors and other businesses in need of industrial space across South Florida.
As a result, vacancy are falling, rents are rising and developers are rushing to build more warehouses — in some cases “on spec,” without having tenants lined up.
“Those gorgeous, high-rise condo towers are the projects that everybody is focusing on, but the companies doing all of that construction are users of industrial space,” said Eric Rapkin, managing partner of the Akerman law firm in Fort Lauderdale.
“All those building supplies — carpet, drywall, air conditioners — are trucking through warehouses to get to the end users,” added Tom O’Loughlin, a broker for the CBRE firm in Fort Lauderdale.
While the office and retail markets are bouncing back from the recession, industrial is booming, in part because rents are cheaper than the two other commercial sectors. In fact, some small retailers are saving money by cutting back on storefront space and renting warehouses for storage, said Edward W. Easton, chairman of The Easton Group, an owner and manager of industrial space in Palm Beach and Broward counties.
Palm Beach County’s industrial vacancy rate in the first quarter was 5.2 percent, down from 6.3 percent a year earlier, according to CBRE. Over the same period, Broward County’s warehouse vacancy dropped from 7.7 percent to 6.2 percent — a five-year low.
The average asking rental rate in Broward rose slightly to $7.68 a square foot in the first quarter, while Palm Beach County’s average rental rate jumped 17 percent to $8.52 a square foot, CBRE said.
Within two weeks, McCraney Property Co. is due to complete the 100,000-square-foot Vista Distribution Center in the Vista Business Park off Okeechobee Boulevard in West Palm Beach. McCraney expects to break ground within 90 days on Turnpike Business Center, a 483,000-square-foot project adjacent to Florida’s Turnpike at Belvedere Road. Duke Realty and Liberty Property Trust also have industrial developments planned nearby.
Earlier this month, Butters Construction and Development of Coconut Creek announced plans to build warehouses and offices as part of a 925,000-square-foot business park on the former Deerfield Country Club in Deerfield Beach. The first two industrial buildings — more than 258,000 square feet — will be built on spec.
South Florida has long been viewed as one of the nation’s top industrial markets because of its easy access to major thoroughfares and its proximity to Latin America, said Wayne Schuchts, a principal at the Avison Young firm.
“It’s all about time and money,” he said.
Aside from the economic recovery, a push by Florida Gov. Rick Scott to attract niche manufacturing companies to the state has helped boost demand for warehouses, CBRE’s O’Loughlin said.
Less than two years ago, industrial landlords were wooing tenants, who had their pick of buildings and worry-free rental rates, brokers say. Now tenants are scrambling to find space with landlords firmly in control.
“I wouldn’t say we’re in the catbird seat, but it is nice to see the market turn around,” said Steven McCraney, CEO of McCraney Property. “I would say industrial is the premier product today.”
MIAMI-Easton Group is making big moves in a Miami commercial real estate market that’s heating up. The Doral-based company just launched a new office investment and brokerage division.
“As we continue to strengthen our vertically integrated company, this is a strategic move towards diversifying some of our services outside of industrial,” Jose A. Hernandez-Solaun, president of Easton, tells GlobeSt.com. The company recently purchased two office buildings in Miami-Dade County, one in Doral and the other in the Blue Lagoon area, and hired real estate associate Andrew Easton to lead the new group.
“We love both of these areas, especially Doral which is going through a renaissance right now,” said Andrew Easton, who joined the company from Jones Lang LaSalle where he specialized in office tenant representation. “For the moment, there are still some good values on rents, but as the area continues growing, we expect to see solid rent appreciation.”
This is an especially significant move for Easton, given industrial real estate has been its bread and butter business for over 40 years. Hernandez-Solaun vows the company will continue to be major players in industrial, “but we see a lot of new opportunity with office and we have made the financial and human capital commitments to launch this new service.”
Hernandez-Solaun said Easton plans to make additional investments in value add office assets in the tri-county area and add more associates as the portfolio grows. The company will tap its existing management company, Easton Management, to manage the properties.
Easton will be responsible for adding new tenants, handling lease negotiations and doing financial analyses. Easton spent five years in JLL’s Miami office representing several Fortune 500 companies and AmLaw 100 firms that needed office space in Miami for their Latin American Headquarters. During his JLL tenure, he earned Top Achiever Awards, the Rising Star Award and Costar’s Power Broker Award.
March 4, 2015 Commercial real estate company Easton Group has formed a new office investment and brokerage branch.
The Doral-based firm brought on real estate associate Andrew Easton to lead the division. Easton was with the Miami office of commercial real estate firm JLL, where he specialized in representing office tenants, according to a release.
Easton Management will manage the new acquisitions, while Andrew Easton will bring in tenants and negotiate leases.
“While industrial real estate has been our bread and butter business for more than 40 years, this is a strategic move to further diversify and evolve our company to become more vertically integrated,” said Jose Hernandez-Solaun, president of The Easton Group, in a statement. “We will continue to be major players in industrial, but we see a lot of new opportunity with office and we have made the financial and human capital commitments to launch this new service.”
Easton Group recently purchased two office buildings in Doral and the Blue Lagoon area and plans on buying more in the tri-county area, according to the release.
January 8, 2015
Although demand is high, market experts predict high construction costs and low rental rates are likely to stand in the way of large industrial and office construction starts in the year ahead.
“In general, we don’t see a lot of new inventory coming,” said Alex D. Zylberglait, senior director of the Office and Industrial Properties Group at Marcus & Millichap, which specializes in real estate investment services.
“New supply is not a concern,” he said. “Demand is stronger than supply, and we think 2015 will be a strong year.
“Industrial is doing very well, and redevelopment in Wynwood and the Design District has depleted inventory there.”
According to Marcus & Millichap’s fourth-quarter 2014 Industrial Market Outlook, completions last year totaled 1.8 million square feet – roughly the same amount of space as came online during 2013.
With construction costs on the rise and the supply of industrial space decreasing, it makes sense for developers to wait for demand to push rents higher, said Edward W. Easton, founder, chairman & CEO of The Easton Group.
“Right now, the cost to build a warehouse is about $135 a square foot,” he said. “With rents at about $6.50 a foot net and a 4.4% return, not many people are going to assume development risk unless they have land from historical values. So development is going to be relatively small and won’t meet demand.”
Steep hikes in the cost of concrete and steel combined with a labor shortage have pushed the cost of construction up more than 25% over the past year, Mr. Easton said.
On the other hand, he said, given the volatility of the stock market, “we are very optimistic about real estate as an investment. There is plenty of debt and equity; the stars are aligned to own real estate.”
The Panama Canal Expansion Project, currently slated for completion in early 2016, will probably increase demand for warehousing in Miami-Dade County 2% to 5%, Mr. Easton said.
In addition, he said, two wild cards could change the game.
First, the lifting of the embargo on trade with Cuba could result in Cuban importers storing goods here before shipment.
Second, “I am not in favor of this, but if legalization of marijuana passes, that will have an impact. In the Colorado warehouse market, it has resulted in the lease of about 4.5 million square feet at north of $15 a foot.”
In this environment, Mr. Easton said, his company is holding back on development for now. “We’re buying existing properties,” he said, “because we can get a small return under the assumption that rents are going to have to go higher and make new construction happen.”
On the office side, Mr. Zylberglait said, fundamentals have been lagging, but “everyone. was surprised at how quickly new inventory downtown was absorbed. Rents are firming up and vacancies arc decreasing.
“There’s some hesitancy from investors, though, because the office market was battered pretty hard in the recession.”
CBRE’s third quarter Florida office MarketView reported 330,103 square feet of office space under construction in Miami, or 62% of the total being built statewide.
Construction costs are not a major concern for the office market, said Thomas R. Roth, principal of Grass River Property, a real estate investment and development firm.
“Some contractors will be interested in diversifying their product type and not being so beholden to the condo market,” he said, “and that may help a little with getting an office scheme off the ground.”
When new office construction does get under way, though, Mr. Roth said cost pressures suggest it’s likely to be in secondary locations.
“Land economics is based on a formula of highest and best use,” he said, “which is dictated by what use can pay for the land in a certain location. Today’s rental rates for offices do not support the land value in locations where we once found office buildings, such as in the centers of cities. Seller expectations for their properties create a need to make the land very productive, and that would today mean condos, not office buildings.”
The only way office construction now makes sense in prime locations, Mr. Roth said, is as part of a mixed-use project, and “that type of construction has its own inherent complications.”
Even in Brickell, he said, where class A rents in some cases have climbed above $50 a square foot, offices still can’t command the prices that condos can.
“So I believe that in the future we will see them going up in secondary locations such as the Edgewater area, West Brickell, the Third Avenue corridor or Coral Way.”
VooDoo BBQ & Grill is the house that foreign capital built.
The owners of the chain’s Florida franchises say they’ve raised $40 million from investors in 12 countries through the EB-5 visa program, sprouting new locations in Miami, Pembroke Pines, Hollywood, Fort Lauderdale, Boca Raton and Pensacola.
Faced with a credit desert and stringent lending criteria as nearly 70 banks failed in Florida in the aftermath of the Great Recession, the New Orleans-style barbecue franchise had to look elsewhere.
The company found international lenders and cash-rich private equity firms to be the big-money lenders and backers of South Florida’s most lucrative commercial deals.
“We’re not where we were in ’04 or ’05 when anybody could get a loan, but the appetite from financial institutions is increasing,” said Israel Alfonso, a Miami partner in Akerman, whose annual real estate survey measures economic conditions and investor confidence.
For VooDoo, the new wave of investment followed a tedious and futile fundraising drive in the U.S.
Jafrejo Holdings LLC, the chain’s Florida franchisee, said its startup businesses faced multiple roadblocks from traditional lenders.
“We couldn’t meet underwriting requirements,” Jafrejo partner Joe Sloboda said. “We were starting new restaurant locations, but all the banks we talked to wanted to see existing operations, P&L reports and cash flows.”
Jafrejo took its business elsewhere, creating a subsidiary, Florida Restaurant Franchise Group, to court foreign investors for new VooDoo and Twin Peaks restaurants.
For about 18 months, the partners made several trips abroad, spending about $150,000 on travel. At first, they met attorneys, financial services providers, agents and immigration advisers with clients looking to invest in U.S. businesses. Then they created a network of licensed professionals in each country to work on their behalf.
“The big misconception is people think this is easy to get. It’s cheap money, but it’s not easy to get. It’s challenging, and you have to make sure you connect to people who qualify and can show the U.S. government that the money they’re investing came from legal sources,” Sloboda said. “The biggest part is making sure you’re working with people who fully understand the EB-5 rules and can package your deals in a way that will be approved by the U.S. government and still be accessible to investors. There’s a delicate balance.”
An EB-5 visa from U.S. Citizenship and Immigration Services offers foreign lenders a path to permanent U.S. residency through investments that create or save at least 10 full-time jobs and stimulate the U.S. economy. Candidates must be willing to invest $1 million or $500,000 if their ventures are in rural areas or areas with high unemployment.
Jafrejo’s deals are expected to create 1,600 jobs. Investors are passive participants in a limited partnership funding restaurant development at an undisclosed interest rate.
“It’s more favorable than traditional commercial financing,” Sloboda said. “And it’s more favorable by enough of a margin to make it worth our while to spend the time, money and energy to do this over a two-year period.”
At first, it took months for underwriting and a year to raise $5 million, but the lead time shrunk with each deal and growing network. In about five years, Florida Restaurant Franchise Group raised $40 million in Brazil, China, Russia, Britain, Mexico, Nigeria and other countries. They’ll use part of the capital to fund 10 Twin Peaks restaurants in Florida by 2015.
“In some ways it’s a good thing for local developers because competition makes the capital less expensive,” said Greg Matus, Franklin Street Real Estate Services’ regional managing partner for Broward and Palm Beach counties. “We’re very quickly back up to where we were, especially on the commercial side. Rents are up, cap rates are down, and the competition is as fierce as it’s ever been.”
The EB-5 program is the latest resource for South Florida real estate developers, who’ve long enjoyed a flood of international money that’s buoyed the sector and funded its rebound.
“With all the turmoil that’s taking place internationally, we’re seen as the cleanest shirt in the dirty laundry pile,” said Ed Easton, CEO of the Easton Group, a commercial real estate investment, brokerage, property management and development firm in Miami. “People want to put their money in the U.S. They look at South Florida as a safe place.”
Other financiers have started to notice.
In areas like Sunny Isles Beach and Miami Beach, which were once fueled largely by foreign money, a rising class of domestic power brokers is outspending their international counterparts by pumping in hundreds of millions of dollars.
U.S. private equity firms, the new giants of South Florida lending, are changing the dynamics for local developers and competing lenders.
“If you have money and were able to buy in 2008, 2009, it was hard to make a mistake,” said Brinkley Morgan partner Bill Kramer, a 30-year attorney who specializes in real estate. “Vulture funds and real estate investment trusts bought up the bad capital when the market crashed, and now these funds are flush with cash.”
And they’re not afraid to spend it.
One high roller, New York-based Blackstone Group, created a fund in 2008 to respond to the dislocation of global real estate and credit markets.
Positioning itself as less conservative than traditional lenders, the Blackstone Real Estate Debt Strategies fund is among the latest big-money backers of some of the region’s largest projects. This year alone, it provided a $290 million construction loan for the Surf Club Four Seasons Private Residences and Hotel in Surfside and $120 million to fund the Biscayne Beach condominium in Miami’s Edgewater neighborhood.
Other funds, meanwhile, have been aggressive buyers, closing multimillion-dollar deals for their own portfolio.
Boston-based investment adviser TA Associates Realty LLC completed a $66.4 million transaction in August, paying about $122 per square foot for two Fort Lauderdale office towers at 200 E. Broward Blvd. and 203 SE First St.
That same month, Memphis-based Education Realty Trust Inc. paid $43.5 million for 109 Tower, a student housing complex in Sweetwater, while Phoenix-based Cole REIT Advisors III Inc. spent more than $7 million to acquire Red Lobster franchises across South Florida. The buying sprees continued with Denver-based DCT Industrial Trust Inc. scooping up industrial properties in Medley and Boca Raton for more than $10 million.
And in July, RLJ Lodging Trust acquired Miami Beach’s Hilton Cabana for $71.6 million in the second of two major hotel deals in the region. Days earlier, New York-based Carey Watermark Investors Inc., a hospitality real estate investment trust, paid a 79 percent premium on a nearly $58 million deal for a Boca Raton Marriott.
“Everything’s now shifting to U.S. private equity funds,” Kramer said. “Traditional institutional lenders are very hamstrung by regulations, but private equity and vulture funds are able to take risks. The whole reason for the overhaul of the banking regulations was to try to prevent the over-exuberance we had before. The problem with that is the pendulum has swung too far, and the banks are now too conservative. To get the deals done, you need private financing.”
That’s what McCraney Property Co. has found.
Outside investors typically form strategic alliances with market insiders, and for McCraney it’s meant the ability to accelerate its projects.
To quickly multiply its holdings, the West Palm Beach-based industrial developer formed a joint venture with New York-based Clarion Partners LLC.
When it teams with a lender, McCraney typically purchases land for cash, then forms a 50-50 partnership to fund construction and development. Its arrangement with Clarion will create about $60 million in new projects throughout Florida, including a 150,000-square-foot Dade Paper Co. distribution center and a 250,000-square-foot project in Orlando.
“What we’re seeing is by virtue of the lack of product built during the downturn, there’s a pent-up demand that’s lowering cap rates and increasing the prices of assets,” president and CEO Steven McCraney said.
That’s good news for developers like the Easton Group, which have seen their property values escalate in the new climate.
“For people like us, it’s never been better,” Easton said. “The availability of equity for those of us who have survived the storm is very high. We’re not sellers, but it’s always comforting to know our properties are worth more than we thought they were.”
Trucks often back up to the edge of a 49-acre lake in the middle of an industrial pocket in Pembroke Park to dispose of construction and demolition debris.
But they’re not just dumping. They’re laying the groundwork for a $55 million commerce park by DCT Industrial Trust Inc. of Denver and the Easton Group of Miami.
The developers say land is so scarce in South Florida that they’re forced to create their own site for a 606,000-square-foot project they envision. They’re filling in about 35 acres of the lake to construct three Class A buildings on submerged land at 3450 W. Hallandale Beach Blvd. in the Seneca Commerce Park.
“There’s such a need for land and such a lack of it that companies are having to get creative,” said Easton Group president Jose Antonio Hernandez-Solaun.
Broward County records describe the lake as a rock pit, and an expensive one at that, selling for about $3.5 million, or more than $71,400 per acre last year, according to a deed recorded Dec. 16. The deal with Easton and DCT Industrial hinges on the condition that the lake’s former owner, a general contractor, complete the reclamation before the sale closes.
But time is also a factor.
The infill depends on the availability of construction debris, plus it could take up to 18 months to plat the site and apply for zoning. It means Easton isn’t likely to deliver the first phase, a 225,000-square-foot office and warehouse building, until the end of 2015.
“It’s a lengthy process, and it takes more time, but it’s worth it,” said Paul Douglas, president of Easton’s development division.
Economic indicators point to opportunities for investors, if they can find the land. In Miami, for instance, asking rental rates for industrial properties increased by 43 cents per square foot to about $8.27 in the last year, while vacancy declined 70 basis points, according to the latest data from CBRE Inc.
But in South Florida, where vacancy hovers between 4.6 percent in Miami-Dade County and 6.1 percent in Palm Beach County, industrial developers are hard-pressed to find enough acreage for sprawling distribution centers and warehouse complexes.
“We contacted the owners of the lake because we’re running out of land in South Florida for new projects,” Douglas said. “We have to get very creative to find new sites that have adjacency to ports, roadways and places where our tenants want to locate their businesses.”
Easton’s reclamation is the latest example of developers taking extraordinary steps to acquire land for projects in a market so tight that prices are on the rise for once-overlooked parcels now considered prime redevelopment sites, and not just for industrial projects.
The trend is so prevalent that Easton executives say the company is at work on a white paper due by the end of the year outlining recent acquisition and land use strategies by South Florida developers.
Investors like New York-based Property Markets Group, the developer of Echo Aventura, Echo Brickell and Sage Beach, report paying premiums on individual units to persuade condominium owners to sell in bulk to make way for new projects.
Others in Miami’s historic districts purchase air space and transfer development rights to create higher density projects in areas with restrictive zoning. And in emerging neighborhoods like Miami’s Edgewater, developers like mckafka Development Group are paying for public parks, street lights and other improvements as they transform old neighborhoods into trendy suburban corners.
“It’s well worth our time and effort to find land like this,” Douglas said. “It’s close to Port Everglades and international airports and adjacent to an existing industrial park. So far, we’re ahead of schedule and in very good shape.”
THE EASTON GROUP
10165 N.W. 19th Street, Miami, Florida 33172