Q2 Trends South Florida CRE

15 minute 2026 market update from the South Florida Industrial Real Estate Podcast. 

This episode is packed with important data for all our clients. We dive deep on rents, sale prices, tenant trends, and even touch on interest rates! 

Hope you enjoy! 

These posts and statements are my own and do not represent the positions, strategies, or opinions of CBRE, its clients, or partners.

#cre #commercialrealestate #industrialrealestate #floridarealestate #floridabroker #cretrends #LarryG

Transcript

SPEAKER_00 0:00

Hello everyone. Thank you for joining us. This is the South Florida Industrial Real Estate Podcast. I'm joined by my co-hosts, Mike Oretsky and Tom O'Lachlin. Super excited to be here again. We're going to do a Q2 2026 sort of trends episode. We're about a month in or so. We're going to talk about what we're seeing and how we think Q2 is going to sort of wrap up or you know what to look out for from a landlord perspective and maybe some tips for some tenant brokers in there too. So, Mike, why don't you just chat a little bit about what you're seeing in terms of like velocity and deal flow in the call it 10 to 40,000 square foot range?

SPEAKER_01 0:39

Yeah. So I mean April and here in early May. Um, I mean the the velocity is is just crazy. I mean, we we are all yeah, we are all busier than than I can remember. I mean, you know, it's uh we're in the car all day, which which is obviously it's a good thing. Um, you know, I'm sure you talk to any broker in the market, they're they're just gonna say the same. Everyone's busy. Um, a lot of tours, a lot of inquiries, um, which again is great. It what I'm still trying to figure out, it feels like everyone who's up for renewal next 12 to 18 months is in the market.

SPEAKER_00 1:12

Right.

SPEAKER_01 1:12

So a lot of shopping.

SPEAKER_00 1:13

There's a lot of a lot of window shopping, not buyers, window shoppers.

SPEAKER_01 1:16

So we're getting into, you know, we're here in 2026, we're getting into the last of the pre-COVID rates, right? We're getting the last of those three, five, and seven-year deals that were done prior to the COVID, you know, market change that we saw. So everyone who's getting that last 60, 70, 80% increase on the renewal proposal is shopping the market. These, you know, a lot of these customers and tenants, they they don't follow the real estate market. So when they see an 80% increase on paper, they're like, you guys are nuts. And they go shop around and and work all the brokers, and then they they go back to their landlord and say, okay, let's figure it out.

SPEAKER_00 1:49

Right.

SPEAKER_01 1:50

So I can't that that's what we're we're still waiting to see. And and and you know, we have had some again lingering deals that have been out from since Q4 and Q1 start to close, which has been great. But you know, it's still a store to be told if the activity is new deals in the market or if it's like uh, hey, I gotta go make sure my landlord's not out of their mind, and then I'm gonna go go back and figure out a renewal. So we'll see.

SPEAKER_00 2:12

If anybody caught that, Mike calls uh tenants customers, and if you work with Prologis, you know why. So um, Tom, what do you what do you think? Like, I mean, you're doing a lot of the kind of you know 30 to over 200,000 foot tours. Like, what are you seeing in terms of velocity and the bigger, bulkier stuff?

SPEAKER_03 2:31

Yeah, I mean, I I would say for the first time in South Florida, like the bigger companies are out. Like, you know, um, if you who we're seeing, I hate to say it, like take the weird AI companies out or the the mega AI companies, but if you watch CNBC, it's all the companies that have their CEOs on CNBC that are out and about in our marketplace. The e-commerce guys, um, the consumer goods guys, the FAA, anything that private equity is touching. Like, there are some solid growth stories out in the marketplace, which has been you know a while since we've heard that, but there are people who are willing to go down, you know, go lease new space because they want the efficiencies, they want the the newness, they they want the image, and they're willing to pay the freight, and they're out in the market coming through. Some of them are coming through these national networks for the first time. There are a lot of national network deals coming through, and we had like a drought of those for a while, right? But they're back in force. Um, and it's solid brand names that we all hear, yeah, whether it's on CNBC or we talk about in our households. A lot of these um businesses are looking to make their supply chains efficient, you know, and they're not just about wringing cost out of it. Some of them are actually investing in them to make them more, you know, right better.

SPEAKER_00 3:52

Some of these deals you've recently done, they're gonna invest a lot more in the building than they pay in rent. Oh, it's a hell of a lot more. It's crazy. Yeah, the numbers are staggering. Yeah. Um, and if you know anything about brokerage in corporate America, you know we can't use company names. So you're gonna have to read in between the lines on that in terms of like e-commerce and all that fun stuff. Um, so it's it's fascinating to see all these sort of bigger deals getting done, and the velocity has picked up quite a bit. It's a great, it's a great trend to note. And um, what what do you I mean, Tom, you have a lot of like amazing broker relationships. You keep really close tabs on all the brokers and the GCs. What are the tenant rep brokers telling you? And are they are they frustrated that they can't add value? Are they now adding value because things have changed? There was a while where they had like a really tough time adding value to their customers.

SPEAKER_03 4:41

Yeah, I mean, I think a lot of the tenant reps probably 12 months ago were telling their clients, we can get you the best deal of your lifetime. Like this thing's gonna be crazy. They they've ratcheted back some of those expectations. And I think they're using the market momentum to their advantage, where like 12, 18 months ago, they would show up with their little property survey and it'd be like three pages long. Yeah. Now they're going back to their tenants, and it's like it's only one page. And oh, by the way, six, seven, and eight have XYZ going on at them. So like you need to kind of think about acting. And um, you know, the free rent packages, as we talked about in other episodes and on the street, you know, TIs, free rent rate, you know, people are gonna start cleaning that up and they're gonna be forced to, A, because of what's happening in the capital markets, and B, like this next round of deliveries is on some seriously expensive dirt. Yeah. Where they're not just gonna take it because they have to take it. So um I imagine that um, you know, over these next couple of quarters, we're gonna get some good announcements for some household brand names, um, especially some of the bigger buildings that have been sitting idle for a while. There seems to be some velocity on those, which I think will do more psychological goodness for the marketplace, you know, like when there's not those big buildings hanging out empty over everybody's head, I think uh it'll accelerate down the chain to even smaller deals.

SPEAKER_01 6:05

Yeah. Well, yeah, I mean, and Larry, you mentioned it too about what these uh tenants are investing into their spaces now. And I mean, that's how landlords are winning deals. And Tom mentioned free I uh free rent and TI. But I mean, you know, for these guys, uh obviously they're not not the big brand names that Tom was mentioning, but for a mom and pop business to go from a 30,000 square feet in Pompano to 45,000 in South Broward, it's a big move for them and it's expensive. So the the landlord, you know, putting skin in the game and helping them out on free rent and in TI, that's how they're getting people to move.

SPEAKER_00 6:36

It's going the other way too. It's exactly to your point. If you're going from 35,000 feet to 20,000 feet, you're getting a bunch of TI in that deal, and it's really helping you kind of afford the whole thing.

SPEAKER_01 6:46

Right. So I mean, you know, moving is not easy anymore, especially for these mom and pop local guys, which is a big bulk of our marketplace. Yeah. Um, so I mean the landlords are definitely getting creative on that, but the rents like are holding, which is great. So they're folks there, um, they're offering or more free rent and TIs to to start, you know, wiggling these guys out from their current spaces because on the same token, the landlords are trying to do everything they can to keep their tenants in place.

SPEAKER_03 7:12

So yeah, I mean that there's no, as Mike said, there's no place to run. Like, in like if you were gonna run, you would have already done it.

SPEAKER_00 7:18

Right.

SPEAKER_03 7:19

Like if you were gonna go move to Treasure Coast or the I-4 corridor, like the only reason like we're we're not losing people to like other markets, we're losing them to either MA or just losing them because they go VK or they're just out of Florida altogether. Right. Like, I I I can only think of like one or two cases where they move to like Port St. Lucie or Fort Pierce to try to save money, that type of thing. Super rare. Like super rare. Everybody is like resigned to the fact that like South Florida is such a critical market us to serve that they're like, we gotta bite the bullet, we gotta pay the freight, we gotta be in South Florida. So, to your guys' point, they're making it more efficient, they're moving into new buildings, they're expanding, and they're doing it.

SPEAKER_00 8:02

Or they're trying to buy because a lot of these guys are just sick of paying other people's mortgages, they'd rather pay their own. And they're on they are on the hunt to buy, and they're happy to pay you know high 200s, low to mid 300s for a B, B minus, or even a C building just because they're gonna be there for 10 years. They know it's gonna be worth more in 10 years from now. Like everything's gonna be worth more in 10 years from now.

SPEAKER_01 8:26

Um, the only the only saving grace for our clients and our landlords on that is there are no real quality functional buildings or size that are willing to trade. And you know, we see it all the time. People are trying to put unsolicited to institutional level buildings, which obviously no one's comporting with, but um, you know, the the companies who are well capitalized are definitely trying, but there's just there's no opportunity there.

SPEAKER_00 8:48

Yeah, it's it's very hard to find anything that uh there is nothing for sale, but even if something's available off market, it's just very hard to still pry away from existing owners, whether they're owner users or funds or institutions or whatever. It's it's hard to pry things away from people right now. And uh, I mean, I don't know how much is on the market right now, but I could probably count the decent buildings on one hand, um, which it's doesn't seem to be getting any better. It seems to be getting thinner and thinner as we go forward, which is fascinating. It just means that prices are gonna skyrocket.

SPEAKER_03 9:20

Yeah, I would I would say we continue to see the user aspect like in it's not just like local users, it's big corporations too that want purchase options, first rights of offer, different things like that on these buildings. But you know, down here it's unique because yeah, um we've got a huge capital markets you know opportunity as well. So like, you know, a lot of these landlords in other markets where they'd give them freely, like a purchase option or something, they think twice about it in South Florida just because of the dynamic capital markets aspect we have down here where they don't want the collar around a potential building sale because they got to go to the user and wait 30 days or it's part of a portfolio. And and a lot of times, you know, I don't want to get out of my swim lane, but a lot of times they'll sprinkle in that South Florida building in a portfolio that's average, uh-huh, and people just dive in on an average portfolio because they're looking for that crown jewel in South Florida. So, like, you know, it's even people are more reluctant in South Florida, which even bodes to your point about the availability of these types of options.

SPEAKER_00 10:27

Right.

SPEAKER_03 10:27

I got a question. Since there's no buildings, what uh have user sale numbers done?

SPEAKER_00 10:34

I mean, we just sold a building that was 27,000 feet on three acres that needed a roof, a facade, all new offices, new asphalt, new paint, everything. Uh it basically needed everything. We sold every 330 a foot in Deerfield, which is a very strong number, especially when you think about how much money needs to be invested. It's it's at least $40 a foot. Um and then we sold an institutional quality building uh to an to an end user, $100,000 feet for $387 a foot. Um with you know one, you know, kind of spec office, nothing, nothing special inside. Beautiful building, great location, um, incredible asset. But so uh the numbers are uh astronomically high and they're definitely going higher. Um how fast they go higher, you know, who knows, but they're gonna go higher just because there's no supply and there's so much wealth down here and so many successful businesses. Um, and especially with all the incentives with the tax structure um and the accelerated depreciation, uh, it's you've got to be insane not to want to buy a building if you have a successful business.

SPEAKER_01 11:41

You know, it's funny too. Uh we have this conversation all the time when those traded and you know the institutional owners are seeing that, and they're like, oh, yeah, I'll like I'd consider a $400 a foot offer for for our building, but you know, users who can swallow you mentioned the hundred thousand footer, you know, that's not a that's not a mom and pop every user can swallow something like that at a you know hundred plus thousand square foot building. So, but I mean, you know, the capital markets trades on on the bulk stuff is I mean, they're in the 280 plus rent, 260 to 300 range. So I mean I think everyone's really taking a hard look at like Tom said earlier about their South Florida assets and what they can sprinkle in if they had to, you know, we're thinking about offloading somewhere else.

SPEAKER_03 12:22

You know what's interesting about not to go too far down the user route, but you know what's interesting that we don't hear about anymore? Interest rates. Yeah, they I mean honestly, these are I don't know if they're not borrowing, if they're paying cash, but like that was like the big thing like 12, 18 months ago, interest rates. And interest rates really haven't moved that much. They've come up, they've come down a little bit, but they're pretty much flat. Yeah like not even in the discussion. Like you don't even like they just go to their banks, they go to whoever they go to, they just borrow at whatever the cost is. Like people are like, hey, like short-term memory on interest rates, like hey, the rates are the rates. Yeah.

SPEAKER_01 12:57

When you go from two to six, it's a big jump. And now when you realize like, oh, six is gonna be pretty normal on average for us going forward, like, well, we're still gonna do business.

SPEAKER_00 13:04

So the last three sales we've done have all been cash. And I would say out of the last like six or seven sales, I think probably 75% of them have been cash. So just super successful businesses that are really well positioned, that that are uh run themselves correctly and have large cash reserves, and owners are been doing it for 20 years and have amazing products and and uh and distribution channels. Those those guys are buying buildings because uh it doesn't cost much more to own it, and you get all the benefits of being your own master. So um it's been really interesting and the market seems to be going the right direction, you know. Uh hopefully we're on track to start raising rents here in Q3, Q4 end of the year. Um and if you're a tenant rep broker, you better hurry up and start securing some space because uh things are getting tight, especially in Broward. And uh we're really excited about the trajectory and and how things are going.

SPEAKER_03 13:59

So yeah, I would think I would think we're gonna see it run May, June. We'll take our traditional this 4th of July, I'll be quiet because it's a big one for the country. It's the 250th anniversary. But I imagine like it'll be it'll be good for the next 60 days as we run into summer. It definitely feels that way with the amount of tours, RFPs, and just inquiries. It's it's active. Awesome.

SPEAKER_00 14:24

Well, thanks for joining us. Don't forget to comment, like, and subscribe. Share it with anyone that you think might find some value in this podcast. Take a look at our other podcasts from Q1 Roundup and from last year. Um, there's a lot of interesting trends that we called that will trail into this year. So check it out and uh be ahead of the market. Thanks for joining.