State of the Industrial Commercial Real Estate Market in South Florida

by Chad Massaker | May 1, 2023 | Commercial Real Estate, Commercial Real Estate Investment, Ft. Lauderdale, Industrial, Miami, Palm Beach, South Florida

The industrial market in South Florida is currently experiencing significant growth and development. As a result of a rapidly expanding population, increased demand for goods and services, and a favorable business environment, the region’s industrial sector is thriving.

One of the primary drivers of the South Florida industrial market is its location. South Florida is strategically located at the crossroads of the Americas, making it an ideal hub for logistics and transportation. The region boasts one of the largest ports in the country, PortMiami, which handles a significant amount of international trade. Additionally, South Florida’s airports, highways, and rail networks provide easy access to both domestic and international markets.

Another factor contributing to the growth of the industrial market in South Florida is the region’s favorable business environment. Florida has no state income tax, making it an attractive location for businesses looking to expand or relocate. Additionally, the state has implemented pro-business policies that have made it easier for companies to operate and do business in the state.

The demand for industrial space in South Florida has also been driven by the growth of e-commerce. As more consumers shop online, there has been an increased demand for warehouses and distribution centers to store and process goods. The COVID-19 pandemic has only accelerated this trend, as more consumers are opting for online shopping due to health and safety concerns.

The industrial market in South Florida has seen a significant increase in new construction and development activity. According to a recent report by CBRE, over 10 million square feet of industrial space was under construction in South Florida in the first quarter of 2021. This marks a 40% increase compared to the previous year. The majority of this new construction is focused on distribution centers and warehouses, reflecting the growing demand for e-commerce facilities.

Despite the strong demand for industrial space in South Florida, there are some challenges that the market is facing. One of the primary challenges is the availability of land. As the region’s population continues to grow, land prices have increased, making it more difficult and expensive for developers to find suitable sites for new construction. Additionally, there is a shortage of skilled labor in the construction industry, which has led to delays and increased construction costs.

In conclusion, the state of the industrial market in South Florida is robust and growing. The region’s favorable business environment, strategic location, and the growing demand for e-commerce have all contributed to the market’s success. While there are some challenges, such as the availability of land and skilled labor, the outlook for the South Florida industrial market remains positive. As the economy continues to recover from the COVID-19 pandemic, the demand for industrial space is expected to remain strong.

5 Main Commercial Lease Types Explained

by Chad Massaker | Mar 29, 2023 | Commercial Real Estate, Flex, Ft. Lauderdale, Industrial, Land, Leasing, Miami, Office, Palm Beach, South Florida

Commercial leases are agreements between a landlord and a tenant that allow the tenant to occupy a space for commercial purposes. There are several types of commercial leases, each with its own unique features and benefits. Here are some of the most common types of commercial leases:

Gross lease: A gross lease is a lease in which the tenant pays a single flat rate for rent, and the landlord is responsible for paying all of the property expenses, including utilities, taxes, and maintenance.
Net lease: A net lease is a lease in which the tenant pays a base rent and also pays for some or all of the property expenses, such as property taxes, insurance, and maintenance. There are three types of net leases: single net lease, double net lease, and triple net lease, each with different levels of responsibility for the tenant. gg
Percentage or Performance lease: A percentage lease is a lease in which the tenant pays a base rent plus a percentage of their sales revenue. This type of lease is often used for retail properties.
Modified gross lease: A modified gross lease is a lease in which the tenant pays a base rent, and the landlord is responsible for paying some property expenses, while the tenant is responsible for paying others. This type of lease is often used for office spaces.
Ground or Land lease: A ground lease is a lease in which the tenant leases only the land and is responsible for constructing any buildings or structures on it. This type of lease is often used for long-term commercial developments, such as shopping centers.

The type of commercial lease that is most appropriate for a particular business depends on a variety of factors, including the nature of the business, the length of the lease, and the financial resources of the tenant.

5 Things to Consider Before Renting Commercial Property

by Chad Massaker | Mar 27, 2023 | Flex, Ft. Lauderdale, Industrial, Land, Leasing, Miami, Palm Beach, Retail, South Florida

Location: One of the most important things to consider is the location of the property. You want to make sure that the property is located in an area that is easily accessible to your customers and employees. Consider factors such as proximity to major transportation routes, public transportation, and amenities like restaurants, shopping centers, and other businesses.
Lease Terms: When renting commercial property, you will be required to sign a lease agreement with the landlord. It’s important to carefully review and understand the terms of the lease, including the length of the lease, rent increases, and any additional fees or expenses that may be required. Consider seeking legal advice to ensure that the lease is fair and favorable to your business.
Condition of the Property: Before signing a lease, it’s important to thoroughly inspect the property to ensure that it meets your business needs. Look for any signs of wear and tear, damage, or potential safety hazards. You may also want to consider hiring a professional inspector to conduct a more thorough evaluation.
Zoning and Permits: Depending on the nature of your business, you may need to obtain permits or zoning approvals before operating in a particular location. It’s important to understand the local zoning laws and regulations before signing a lease, to ensure that your business activities are permitted in that location.
Hidden Costs: In addition to rent and utilities, there may be other hidden costs associated with renting commercial property. For example, you may be responsible for maintenance and repairs, property taxes, or insurance. Make sure you understand all of the costs associated with renting the property before signing a lease agreement.

How to Negotiate a Commercial Lease

by Chad Massaker | Feb 22, 2023 | Commercial Real Estate, Ft. Lauderdale, Industrial, Leasing, Miami, Multifamily, Office, Palm Beach, Retail, South Florida

Negotiating a commercial lease can be a complex and challenging process.

Here are some tips to help you negotiate a favorable commercial lease:

Understand your needs: Before you start negotiating, it’s essential to have a clear understanding of your business needs, including the type of space you need, the location, and the budget. This will help you to identify your priorities and negotiate a lease that works for your business.
Research the market: Do some research on the local commercial real estate market to gain an understanding of the typical lease terms, rental rates, and concessions offered in the area. This information will help you to negotiate from a position of strength and make informed decisions.
Get professional help: Consider working with a commercial real estate broker or lawyer who has experience negotiating commercial leases. They can provide valuable insights and help you navigate complex lease terms and negotiations.
Negotiate lease terms: Negotiate lease terms that are favorable to your business. These may include the length of the lease, rent escalation clauses, renewal options, and the amount of the security deposit.
Negotiate rent: Negotiate a fair rental rate based on the current market conditions, the condition of the space, and your budget. You may also be able to negotiate rent concessions, such as free rent or reduced rent for the first few months of the lease.
Review the lease carefully: Once you have negotiated the terms of the lease, review the lease carefully before signing. Make sure you understand all the terms and conditions, and ask questions if anything is unclear.
Consider future needs: When negotiating a lease, consider your future needs as well as your current needs. Think about how your business may change in the future and negotiate lease terms that provide flexibility to accommodate those changes.

Negotiating a commercial lease can be a complex process, but taking the time to understand your needs, do your research, and work with professionals can help you to negotiate a favorable lease for your business.

Want to Retire from Being a Landlord? Checkout the Delaware Statutory Trust & The Deferred Sales Trust

by Chad Massaker | Feb 20, 2023 | Commercial Real Estate, Commercial Real Estate Investment, Ft. Lauderdale, Industrial, Miami, Multifamily, Office, Palm Beach, Retail, South Florida

A Delaware Statutory Trust (DST) is a legal entity created under the laws of the state of Delaware, USA. It is a type of trust that allows investors to hold an ownership interest in income-producing real estate assets, such as commercial properties, multifamily apartment buildings, and industrial facilities. DSTs are commonly used in real estate investment, especially in 1031 exchanges, which allow property owners to defer capital gains taxes by reinvesting the proceeds from the sale of one property into another.

DSTs are similar to traditional trusts in that they have a trustee who manages the trust and its assets on behalf of the beneficiaries, who are the investors. However, the key difference between a DST and a traditional trust is that a DST is a separate legal entity, which means that it can own and operate property in its own name. This provides the investors with limited liability protection, as they are not personally liable for any debts or obligations of the trust.

One of the advantages of investing in a DST is that it allows investors to own a fractional interest in a large, professionally managed property, without the hassles and responsibilities of direct ownership. Investors receive regular income distributions from the rental income generated by the property, and the trust can also sell the property and distribute the proceeds to the investors upon the termination of the trust.

DSTs have specific requirements to meet the legal definition, including having a trustee, a beneficial interest, and being managed by a business trust entity. They are regulated by the Delaware Statutory Trust Act, and investors should consult with an experienced attorney or financial advisor before investing in a DST to ensure that they understand the risks and benefits of such an investment.

What is the Difference Between a Deleware Statutory Trust vs a Deferred Sales Trust?

A Delaware Statutory Trust (DST) and a Deferred Sales Trust (DST) are both types of legal structures used in real estate investing, but they are distinct from each other in several ways.

A Deferred Sales Trust (DST) is a strategy used to defer taxes on the sale of a business or investment property. It involves setting up a trust and transferring the property to the trust in exchange for a promissory note. The note is then sold to a third-party buyer, and the proceeds are held in the trust. The property owner can receive payments from the trust over a period of time, and the taxes on the sale of the property are deferred until the payments are received.

While both DSTs and Deferred Sales Trusts use the structure of a trust, the main difference between them is the purpose for which they are used. DSTs are typically used for real estate investing and can provide investors with regular income and potential appreciation, while Deferred Sales Trusts are used to defer taxes on the sale of a business or investment property.

Why You Should Get an ESG Score for Your South Florida Commercial Property?

by Chad Massaker | Oct 13, 2022 | Commercial Real Estate Investment, Environmental, ESG, ESG Building Score, Ft. Lauderdale, Governance, Green Lending, Miami, Palm Beach, Social, South Florida

If your property has a high ESG Score, it will Be 7-10% more valuable and be more attractive to lenders, tenants & purchasers

What is ESG?

… And Why Should You Care as a South Florida Commercial Building Owner?

ESG is a relatively new decision & management framework of for a variety of business topics that have become much more mainstream since COVID-19. ESG stands for

Environmental
Social
Governance

You can see a breakdown of the topics for each of the major components in the figure below:

First, a few facts:

Now, let’s dig into each of those three letters:

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The Environment

Buildings Generate Almost 50% of Annual CO2 Emissions

Both commercial and residential buildings have a massive impact on the environment in a variety of ways including reduction of biodiversity and sharply increased carbon emissions (pollution). Here are specific examples of what I am talking about:

Commercial Buildings with Poor Energy Efficiency (usually to outdated equipment: HVAC, furnaces, etc.)
Constructions Logistics & Materials, & Materials Transport (Semis, Dump Trucks, Cement Trucks, Crane Operation, Unsustainable Building Materials, etc.)
Improper Waste Management
Over-Reliance on Plastics

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Social Impact

The Number of WELL & FitWel Certified Buildings Has Doubled Since 2021

The Social component of ESG is most concerned with providing for and/or the enhancement of Wellness initiatives in three ways:

Physical: Nourishing a healthy body through exercise, nutrition, sleep, etc.
Mental: Engaging the world through learning, problem-solving, creativity, etc.
Social: Connecting and engaging with others and our communities in meaningful ways.

This informs architects and builders on how to design spaces that encourage physical fitness & outdoor activities as well as thoughtfully designed interior production spaces that can be both private (when needed) and collaborative/inclusive.

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Governance (Management) of Your Tenants Matter

Since March 2020 (Start of COVID), ESG-Related Discussions & Reporting at Board Meetings Has More Than Doubled.

The G in ESG stands for Governance. ESG has become a main board agenda item in nearly 1/2 of the Fortune 500 companies. Governance topics include:

Board Composition
Shareholder Rights
Accounting Transparency
Separation of Chairman & CEO Roles

So what does Governance have to do with Commercial Real Estate?”.

Good Question.

ESG, first and foremost, is a decision and management framework. A prospective tenant may want to know that the Landlord’s company adheres to ESG if it is a larger corporation. Conversely, Landlords may use elements of the Governance framework to assess the quality and risk level of prospective tenants beyond their financials.

Getting An ESG Score for Your Building

To get an ESG Score for your South Florida Commercial Building we will have to come onsite to inspect your building and collect some information from you. Once all of that is done, we provide you with an ESG score and remediation plan to increase the score if necessary. If those remediations are made, we will rescore the property at no additional charge. Our evaluation will primarily focus on the Environmental & Social elements of ESG as it relates to your South Florida Commercial Building.