Prime location drives Doral commercial realty boom

Doral’s prime location continues to drive the city’s high demand for commercial real estate.

“The demand in Doral has been steady for years,” said Lee & Associates Senior Vice President Conner Milford. “I haven’t seen any sort of real drop, significant drop….”

Doral is a premier location due to its proximity to PortMiami and Miami International Airport, Mr. Milford said. “I would say the majority of Class A products that’s being delivered in the market is either in Doral or just north of there.”

Doral is probably the most in-demand market in South Florida, he said.

Similarly, other professionals in the field have noticed the city’s growth being closely related to its centralized location.

“When it comes to the Doral’s commercial market, it has certainly experienced significant growth and development over the past several years,” Carlos Villanueva, district sales manager for the Coral Gables and Coconut Grove office at the Keyes Company. “The main driver for that has been the access to highways to Miami International Airport, as well as access to Port of Miami. It’s really an ideal hub when it comes to business.”

Local leadership in Doral has also driven a strong economic base, said Mr. Villanueva. It is certainly fueled by industries such as logistics, finance, technology, healthcare, as well as entertainment.

Additionally, in the office market, demand has been active for office space, including corporate headquarters, said Mr. Villanueva. There “continues to be new office buildings, construction, reposition of office buildings in the Doral area, particularly around Downtown Doral, some along the Doral Boulevard corridor.”

On the retail side there has been steady growth, said Mr. Villanueva, as well as an increase in consumer spending “because the population [that] has moved into Doral is actually quite affluent. You do see that shopping centers and mixed-use developments certainly emerged to cater to the diverse needs of the residents and visitors alike.”

This has been strong for some time due to the different waves of population coming from places like Venezuela, Colombia, Brazil, Argentina and Mexico, he said.

Domestic migration from the US from places such as New York, New Jersey, Connecticut, California and other states, have all been a driver, said Mr. Villanueva. “It’s a very diverse population.”

“On the industrial side, because of its access to major transportation, warehousing and distribution facilities continue to be in high demand all through Doral as well as even to the sister cities to the north of Medley. So we’re seeing that demand continues to rise,” said Mr. Villanueva.

“Two of the key drivers have been ecommerce, so last mile delivery, Amazon has a warehouse actually not too far from Top Golf, it’s a smaller warehouse, but it’s one that’s catering to the last mile delivery,” he said, “and then you also had the need for refrigerated and freezer warehousing as well for food distribution, including centralized commissaries as well. The industrial market continues to be absorbed quite well in Doral and it’s been very steady.”

Pricing in the city has also impacted the commercial real estate scene.

“We’ve seen pricing pretty much remain the same for maybe about 12 months,” said Mr. Milford. “I think what happened is when interest rates rose, we saw cap rates also rise; and if it weren’t for rising rents, we probably would have seen pricing decline a bit – like some other markets have – but due to the strong rent growth that South Florida has, mostly due to constrained supply, we’ve seen prices just kind of remain steady.”

“So even though cap rates are rising, we’re still seeing kind of the same level of pricing due to the rent growth that we continue to see,” he said, “although that’s also slowed down a bit, but we’re still seeing some positive rent growth.”

On the industrial side, said Mr. Villanueva, the asking rents are just under $23 a square foot and “rents have actually grown year over year on the asking 6.8% up and we’re seeing vacancy rates under 5%, 4.7% for industrial.”

Others corroborate Doral’s position. CBRE lists the average asking rent per square foot in the broader airport-Doral area at $19.55. Colliers in its latest market report puts the rent for warehouse distribution space at $18.48 per square foot, with the rate for flex space at $25.53.

On the retail side, the average asking rent is $45.73 a foot, said Mr. Villanueva. Rent growth has increased 5.5%, and “we’re seeing out of all the asset classes it actually has the lowest vacancy rate, which is 2.9%.”

The average asking rent in regard to offices is around $41 a square foot, said Mr. Villanueva. These numbers are general, as it depends what types of building someone is looking at.

Some of the hottest markets in the US are seeing rent growth slow and possibly even some decline, said Mr. Milford. However, “we’re not seeing that, mostly due to the fact that we have the Everglades on one side and ocean on the other side and it’s not a lot of land to continue building, so the supply is constrained.”

Doral’s commercial real estate market is allowing users to join the conversation.

“Investors are not as aggressive right now because they just don’t have that delta between their interest rate and the cap rate that they’re buying in, and what that has done is allow users to have a chance to compete to buy properties that they need,” said Mr. Milford. “I think we’ll see more of that, where users are going to continue throughout this year to have a chance to purchase some of these properties, where in the past they probably would have gotten outbid by investors.”

Mr. Milford says this year, there’s an opportunity for users to come in while interest rates are still high. The high interest has cooled off investors and allowed users who need the property for their own use and “not just to make income for themselves passively, they need to use it to operate their business and they’re finally having a chance to compete for these properties without having so many investors trying to outbid them.”

Users have a need; this has an impact when it comes to deciding on purchasing.

The mindset of an end user is different from that of an investor, said Mr. Villanueva. End users need to develop or establish their businesses in a location.

Opportunity remains for end-users, specifically in industrial and office space, said Mr. Villanueva. There is opportunity within retail as well, however there is a “stronger barrier to entry in the retail because vacancy rates are so low, but certainly yes, we see the trend across if… your business is thriving and growing and you need more space, well, you know, it’s not so much subject to interest rates. You have a need, you need to put your employees and your product, and your delivery trucks and everything else somewhere.”

Doral’s market is expected to continue growing and maintain its strong demand.

“South Florida is definitely in a different situation than perhaps other parts of the country because there is such strong demand to be here,” said Mr. Villanueva. “We’re seeing the demographic mix changing. That impacts commercial real estate, not just in Doral but everywhere here in South Florida. And we have the blessing to be in a market where the population is not only growing, we’ve had some negative population growth, but overall, if you compare it from a few years ago, we’re still ahead of the game.”