By: Felipe Rivas
2 min read September 2020 — Among the major real estate asset classes, the industrial segment has been a big winner in 2020 as businesses and people operate under the new normal. With the holiday season kicking off, the need for last-mile fulfillment is likely to continue to accelerate the demand for warehouse space well into the new calendar year. For Palm Beach County, the surge in e-commerce, last-mile fulfillment and logistics and distribution means the region can position itself as a leader in industrial real estate in the tri-county area.
The numbers suggest it’s already on its way. Palm Beach County’s industrial segment experienced a healthy Q3 amid “robust leasing and sales activity, and solid interest from developers and users in need of land requirements that Miami-Dade and Broward counties cannot accommodate,” the CBRE wrote in its Palm Beach Industrial MarketView Q3 2020 report. With more than 47 million square feet in inventory, and more than 860,000 square feet in development, the Palm Beach industrial market posted healthy net absorption numbers and low vacancy rates in the quarter.
“Industrial real estate is firing on all cylinders. Industrial land prices are rising and spec developments continue to be absorbed,” CBRE Palm Beach Managing Director David Bateman told Invest: Palm Beach. “We are going to continue to see activity because e-commerce, the main driver for industrial demand, is still going strong. Our research estimates that for every $1 billion in e-commerce activity, you need an additional 1 million to 1.25 million square feet of industrial space to satisfy that demand. If online purchases continue their trajectory, we are going to continue seeing demand for warehousing space increase in Palm Beach County.”
And major players want to continue to expand their presence in the Palm Beach market.
Amazon is considering a major distribution center in the southern part of the county. The global retail giant recently announced plans to build a new 65,000-square-foot distribution center Boynton Beach. The trillion dollar company already has a strong presence in South Florida with this proposed project being one of their most ambitious to date.
The region could also benefit from specialty delivery and storage products, especially in the food industry. “There will be significant demand for refrigerated space and cold storage given the current shortage,” Mattis Advisors, Inc President Charlie Exelbirt told Invest: Palm Beach. “Also, there is a significant demand for small bays of 800-1,200 square feet of flexible-use space. People will have to start working away from the home eventually and many will prefer these types of small offices. People are very creative, which will spur demand for this new product. The distribution segment using 100,000-300,000-square-foot warehouses for last-mile distribution will continue to demand more space in the near future, especially given the explosion in e-commerce. Even for those of us who were accustomed to shopping for groceries in stores, it is surprising how easy it was to get used to online shopping during the shelter in place order,” he said.
This past Black Friday weekend, the busiest shopping weekend of the year, consumers spent over $9 billion on the web, according to CNBC. This further solidifies the need for major metros to have a solid industrial real estate and logistics network to meet the needs of businesses and consumers. As it relates to Palm Beach, “the overall market sentiment going forward looks bright, bolstered by low vacancy rates, interest from large users in the e-commerce, 3PL/Logistics and nutraceutical sectors,” CBRE wrote about the near future of the sector in Palm Beach County. “Although deliveries were slow this quarter, the development pipeline looks bright, with roughly 867,000 sq. ft. of new product to be delivered by the end of 2020.”
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