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PriceSmart Finds No Shortage of Tenants for Old Digs in Medley

Company Benefits From Tight Industrial Market
April 23, 2018
When PriceSmart moved most of its operations last year to Flagler Station III in Medley, FL, the warehouse club operator still was on the hook for a large block of industrial space at Flagler Station II.

But two recent deals have made PriceSmart’s commitment a lot less burdensome.

It signed a sublease for 70,424 square feet with Dade Paper & Bag at Flagler Station II at 10800 NW 100th St. PriceSmart also was able to terminate its own lease for 122,000 square feet when two tenants struck longer-term deals directly with the building owner, The Blackstone Group.

PriceSmart originally had 262,895 square feet to sublease at Flagler Station II. Now it just has a pair of 35,000-square-foot boxes to fill.

Broker Walter Byrd, part of a team at Transwestern representing PriceSmart, said finding tenants for subleases can be challenging, but the lack of available industrial space ultimately played to his client’s advantage.

“Some people tend to shy away from subleases, but in a tight market with limited options, they’ll do it,” Byrd said.

Last spring, PriceSmart (Nasdaq: PSMT) moved its corporate office and a dry goods distribution center into 330,000 square feet at Flagler Station III, 11441 NW 107th St. The company bought the building from Flagler Real Estate Services LLC for $45.56 million, or about $141 per square foot, according to CoStar data.

Still, the company kept about 100,000 square feet at Flagler Station II, where it operates a refrigerated and frozen distribution facility.

Medley is one of the hottest industrial markets in South Florida.

The small town in northwestern Miami-Dade County led the tri-county region with 1.8 million square feet in deliveries over the past year, according to a recent analysis by CoStar Market Analytics. Medley also ranked among the busiest submarkets, with more than 556,000 square feet of construction in the pipeline.

Medley’s industrial vacancy rate in the first quarter of 2018 was 6.6 percent. That’s considered low, even though the rate increased from 3.9 percent a year earlier, according to CoStar data.

Pamela Stergios, an analyst for CoStar Market Analytics, said Medley’s rising vacancy rate isn’t worrisome.

She pointed out that the uptick is just a return to its historical average. Also, she said the primary reason for the vacancy increase was all the new deliveries last year.

Those included two buildings in Flagler Station, Building C in the Miami International Tradeport, new buildings in the Miami Industrial Logistics Center and two large buildings in the Airport North Logistics Park.

“The majority of the space was speculative, so vacancy will remain elevated until these buildings work through lease-up,” Stergios said. “However, minimal deliveries in the fourth quarter as well as the first quarter of 2018 have improved the vacancy rate and we expect vacancy to continue to compress over the next year.”

Paul Owers, South Florida Market Reporter  CoStar Group   
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