Surge in new big-space supply triggers industrial vacancies

Written by Abraham Galvan on August 27, 2025

After several years of unprecedented growth and record-low vacancies, Miami-Dade’s industrial real estate market is experiencing less of a downturn and more of a recalibration, driven by a mix of new supplies, shifting demand patterns, and broader economic forces.

This transition reflects the market moving toward balance rather than decline, with fundamentals that continue to support long-term strength. Vacancy rates have climbed to around 6% to 6.5% this past second quarter, up from historic lows of 2.6% in 2022, said Anthony Scavo, the president and managing partner at Basis Industrial.

“This increase is largely due to a surge in new supply. Over 8 million square feet of industrial space have been added in the past 18 months. This supply is mostly made up of large, over 100,000-square-foot buildings,” he said. “After several quarters of negative net absorption, the market saw a modest rebound in early 2025, with about 300,000 square feet absorbed. However, leasing activity has slowed, and deals are taking longer to close. Again, this is mostly focused on larger industrial buildings and tenants.”

External factors such as tariffs and a higher-for-longer interest rate environment are expected to create short-term challenges but may also open opportunities for strategic repositioning of tenants that have the capital available for repositioning, Mr. Scavo said.

Despite the cooling, Miami-Dade remains a key logistics hub due to its strategic location and international trade connections. Experts from Colliers and JLL emphasize the market’s adaptability and long-term potential.

“The slowdown is not uniform across all industrial asset types. Certain segments are bearing the brunt of the shift more than others,” Mr. Scavo added. “In particular, the largest warehouse and distribution centers, as well as big-box tenant spaces, are where the pressure is most visible. These categories have absorbed the bulk of recent development and tenant movement, creating the highest levels of vacancy and the sharpest leasing challenges.”

These have seen the largest influx of new warehouse developments, especially in submarkets including Southwest Miami, which accounted for 42% of new industrial space deliveries over the past five years, he continued. This overbuilding of extremely large warehouse space led to an oversupply, allowing tenants to have more choices.

“Vacancy rates are highest in areas with concentrated new supply, such as Airport/Doral, Medley, and North Miami Beach, where rates range from 6% to 7.7%. This vacancy is a factor only for these large, big-box type assets,” Mr. Scavo said.

In the long run, these vacancy rates are projected to level out, added Beatriz Azcuy, co-managing partner at Sidley’s Miami office.

“It’s not indicative of the fact that fewer companies are coming to Miami, but not the spike that we have seen in the last couple of years,” she said. “Whenever you have oversupply, there’s the opportunity to be able to negotiate a more favorable term. We are still seeing a strong demand for logistics, distributions, and anything that supports logistics and distribution companies in South Florida, because our infrastructure tends to be very attractive, and that will continue to be the case when it comes to the industrial market.”

From a short-term perspective, we’re probably going to see a rise in vacancies, but in the long run, Miami will always continue to be a global logistics hub with demand, given its relationships with trade in Latin America, she said.

While large-format industrial assets are absorbing most of the current cooling, Miami-Dade’s small bay segment remains exceptionally resilient, Mr. Scavo added.

“These smaller units serve a different tenant base, are insulated from many macro pressures, and continue to demonstrate strong fundamentals,” he explained. “Small bay units, typically ranging from 1,000 to 10,000 square feet, cater to a wide range of local, service-oriented businesses, including HVAC contractors, auto repair shops, e-commerce distributors, and light manufacturers.”

These tenants are less sensitive to macroeconomic shifts and more tied to local consumer needs, which remain strong in Miami-Dade due to population growth and homeownership rates, Mr. Scavo said. While larger industrial formats are seeing rising vacancies, small bay buildings in Miami-Dade have vacancies below 3%, even with new inventory entering the market. This tight supply supports rent stability and investor confidence.

“In Miami-Dade, zoning and land constraints further limit new development, preserving scarcity, which increases demand. Small bay leases are often short-term and triple-net, allowing landlords to mark rents to market more frequently. This flexibility is especially valuable in inflationary or volatile environments,” he said. “Unlike big-box tenants, small bay spaces host diverse, ‘sticky’ tenants who rely on proximity to customers and cannot easily relocate or automate. This reduces turnover risk and enhances portfolio stability.”