South Florida Developer Pulls Back on Industrial Construction

Industrial developers in South Florida are putting down their shovels as costs rise.

Adding to inflationary headaches is an inability to push rents and a labor shortage that slows down time and frustrates tenants, all of which make it difficult to justify building new industrial projects in South Florida, developers said Tuesday in BisnowFlorida Industry and Manufacturing Conference.

“I think the only way that’s going to change is if rents get higher, or interest rates get lower, or construction costs get lower,” Easton Group CEO Ed Easton said on stage at the West Palm Beach Marriott. “I don’t see that happening anytime soon.”

The industrial pipeline for Palm Beach, Broward and Miami-Dade counties has fallen to 3M SF at the end of the third quarter from 5.2M SF the previous year – a 42% drop in construction, according to a third party report Colliers.

Most of the new development is focused in Miami-Dade County, with 18 buildings concentrated in the Northeast Dade and Miami Airport West submarkets, according to the Colliers report.

The county’s pipeline shrank from 3M SF to 1.8M SF year over year after 1.4M SF in deliveries in the third quarter. Broward County’s pipeline fell from 1.4M SF to 994K SF, and Palm Beach County fell from 735K SF to 277K SF, according to Colliers.

These dynamics are in stark contrast to other countries, where construction is on the rise. There was 314M SF under construction nationwide in the first six months of 2026, up from 271M SF under construction by the end of 2025, according to an October Colliers report.

That’s a far cry from the historic supply surge during the pandemic — the construction pipeline rose from 347M SF in 2020 to a record 711M SF in 2022, according to Colliers.

Construction costs have hit many commercial projects in every real estate sector amid rising tariffs, higher fuel prices and higher interest rates. Prices for construction-related materials rose 13.3% year over year in the US, according to a September report by Cushman & Wakefield.

It costs approximately $ 350 per SF to build a new warehouse today, and the cost of debt is on the rise, limiting the possibility of sufficient returns, said Easton, who founded Miami-based The Easton Group more than 50 years ago.

“We haven’t built anything since 2023, and we really don’t want to build anything because the economics just don’t work,” Easton said. “Nobody is going to make a speculative venture to make a 3% return.”

To make new construction work, rents should be around $23 net per SF, Easton said, well above the tri-county area average, which sits between $16 and $18 net triple per SF, according to Colliers.

Rents are starting to rise as tenants hit their limits after years of increases, prompting some companies to pack up and move north to cheaper markets like Orlando, reduce their footprint or close Florida operations, said Cushman & Wakefield Vice Chairman Christopher Metzger.

“I think some developers are out there saying, ‘Hey, I think we’ve slowed down the asking rent growth,’ and they’re offering free rent and starting to offer discounted rates,” Metzger said.

“We’re seeing that plateau as we speak, so I think you’re going to see some rental growth next year.”

Although they have achieved limits on rental costs, tenants are increasingly asking for expensive extras to traditional warehouses, such as energy capacity and air conditioning.

The types of companies requesting more power include aerospace, pharmaceuticals, defense, data centers and general manufacturing, Metzger said.

“We are looking at really increasing the amount of power available to our tenants because automation is obviously a little dirty secret,” said Mark Levy, chief investment officer of FRP Holdings Inc., which is planning a handful of projects, including a 300K SF logistics center in Broward County.

“They want to have a physical plant that supports it,” he said. “That’s very important.”

The increased demand comes at a time of intense competition for access to power amid the data center boom. Securing it is an expensive and lengthy process that is very important to attract and retain tenants, industrial developers, operators and brokers, Tuesday.

Some electrical equipment takes at least a year to deliver but can take up to two in today’s market — and it’s not often tenants are willing to wait that long, said MLCO Construction Director Jordan Cater.

“The move date is set by the slowest lead-time item, which is almost no building,” Cater said. “It’s mostly power.”

Despite rising costs and tenant demand, the market has improved.

All three counties experienced positive absorption in the third quarter, none more so than Miami-Dade County, where tenants like Pepsi and Ryder absorbed 1.4M SF in the third quarter, according to Colliers. Leasing activity in the district exceeds 3.1M SF.

Vacancies remained relatively flat from the previous quarter in Miami-Dade and Broward counties at 7.7% and 7.5% respectively. Palm Beach County increased 1% to 8.5%, according to the report.

“I don’t see a lot of new construction over the next 12 months, but I do see a very strong improvement,” Easton said. “The leasing market is very strong, occupancy is very strong, and it’s a very solid market. But I don’t think it’s a solid market for new construction at this time.”