Industrial Research

2018 INVESTMENT FORECAST

West Palm Beach Metro Area
Low Vacancy and Elevated Pre-Leasing Limiting Employment vs. Retail Sales Trends
Near-Term Risk in Local Industrial Assets Employment Growth Retail Sales Growth
12%

Year-over-Year Change
Population-serving industrial setting standard in West Palm Beach. The relatively
6%
small industrial inventory garners attention from local tenants. One of the benefits of
having such a compact ecosystem is the lack of speculative construction that occurs 0%
in the area. New supply is largely driven by specific space needs, which prevents sub-
stantial swings in operations. This year, for example, 200,000 square feet of the 250,000 -6%
square feet scheduled for delivery is leased prior to completion. Personal care firms and
-12%
distribution centers account for most of the leasing activity. Walmart inked two of the six
08 09 10 11 12 13 14 15 16 17 18*
largest deals last year, while Oxygen Development penned the largest lease at 97,000
square feet. Outside of these industries, tourism utilizes some of the local inventory. The
county set a record in the first half of last year in terms of tourism, equating to an 8.7
Industrial Completions
percent increase year over year. Some of the $2.1 billion in personal income generated
Completions Absorption
for local residents will be used to purchase the consumer goods in local warehouses.
2,000

Square Feet (thousands)

Higher yields available in West Palm Beach. Investors seeking to reposition their
1,000
portfolios are targeting higher returns in Palm Beach County. Although elevated risk
provides higher cap rates, extremely low vacancy should alleviate concerns about lease 0
rollovers in the near term. Both flex and warehouse space entered the year with sub-3
percent vacancy, and no submarkets with substantial inventory reported elevated rates. -1,000
Acquisitions by tenants could escalate this year as interest rates remain relatively low
compared with historical standards. First-year returns for smaller properties, which ac- -2,000
08 09 10 11 12 13 14 15 16 17 18*
count for nearly two-thirds of transactions, were close to 8 percent at the beginning of
the year. Large, Class A buildings, meanwhile, trade at cap rates below 6 percent.
Asking Rent and Vacancy Trends
Vacancy Y-O-Y Rent Growth
16% 18%
2018 Market Forecast

Year-over-Year Rent Change

12% 9%
Employment Employment projected to expand by 1.6 percent this year as
Vacancy Rate

up 1.6% 10,000 spots are added. Last year, 11,200 jobs were gener- 8% 0%
ated.
4% -9%
Construction Only 250,000 square feet of space is scheduled for completion
250,000 sq. ft. this year. The sixth building of Turnpike Crossing accounts for 0% -18%

nearly 170,000 square feet. 08 09 10 11 12 13 14 15 16 17 18*

* Forecast
Vacancy Industrial vacancy will drop to 1.4 percent this year, one of the Sources: Marcus & Millichap Research Services; CoStar Group, Inc.;
Price Per Square Foot Trends
Real Capital Analytics
down 140 bps lowest rates in the nation. In 2017, vacancy declined 120 basis
points. West Palm Beach Office
40%
Year-over-Year Appreciation

Ryan Nee First Vice President/Regional Manager

Rent Operators have significant negotiating power, which will result a 590020%
North Andrews Ave., Suite 100
up 3.6% rise in asking rents to $10.30 per square foot. Fort Lauderdale, FL 33309
(954) 245-3400 | ryan.nee@marcusmillichap.com
0%
Investment Thousands of homes are scheduled to come online in north For information on national industrial trends, contact:
Palm Beach County, which will create tenant and investor de- -20%
John Chang First Vice President | National Director
mand for local industrial properties. Research Services
-40%
Tel: (602) 707-9700 | john.chang@marcusmillichap.com
07 08 09 10 11 12 13 14 15 16 17

Metro-level employment, vacancy and asking rents are year-end figures and are based on the most up-to-date information available as of January 2018. Asking rent is based on the full service marketed rental rate.
Average prices and cap rates are a function of the age, class and geographic area of the properties trading and therefore may not be representative of the market as a whole. Sales data includes transactions valued at
$1,000,000 and greater unless otherwise noted. Forecasts for employment and office data are made during the fourth quarter and represent estimates of future performance. No representation, warranty or guarantee,
express or implied may be made as to the accuracy or reliability of the information contained herein. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not
intended to provide specific investment advice and should not be considered as investment advice.

© Marcus & Millichap 2018 | www.marcusmillichap.com