Travel Retailer Dufry to Move, Expand Regional HQ West of MIA

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Prologis is ready to build the new 200,000-square-foot regional headquarters for Dufry at the Beacon Lakes industrial park.

By Lidia Dinkova

A travel retailer is moving its office and warehouse to a 200,000-square-foot space west of Miami International Airport in another deal demonstrating industrial growth.

Switzerland-based Dufry AG owns and operates retail shops at airports, cruises and train stations. Its Latin American regional headquarter, including offices and warehouses, is in a 160,000-square-foot space at the International Corporate Park in Doral.

It’s moving about two miles west to Beacon Lakes, an expansive industrial and retail park northwest of the Dolphin Expressway and Florida’s Turnpike near Doral. Construction on the new headquarters is set to start by the end of March.

“Their business had been growing,” said Christopher Harak, senior vice president for Blanca Commercial Real Estate, which brokered the new lease on behalf of Dufry.

Prologis, the owner and developer of Beacon Lakes, will develop the new building for Dufry on the southeast corner of Northwest 137th Avenue and 14th Street.

Under the build-to-suit lease, the building will be designed with an eye toward efficiency with 32-foot warehouse ceilings, allowing for more storage.

“It’s going to allow them to essentially store 60 percent more goods in about 30 percent less space,” Harak said.

He declined to disclose the lease terms or value.

Blanca Commercial’s Juan Ruiz worked along with Harak on the deal. JLL represented Prologis.

The industrial market in Miami-Dade County has been healthy with high occupancy rates, according to a Cushman & Wakefield report. The industrial vacancy rate was 4.7 percent in the end of 2017, and it was even lower in the Airport West submarket at 3.4 percent,

The new and old Dufry buildings are in the same submarket.

The company operates 2,200 duty-free and duty-paid shops worldwide. The Miami-Dade headquarters has operations in Latin America and the Caribbean. Its brands include Hudson, World Duty Free and Colombian Emeralds International.

Duty-free retailer signs 200,000-square-foot deal for new facility in Miami-Dade

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Travel retailer Dufry signed a 200,000-square-foot lease for a built-to-suit warehouse and office facility near Doral.

By Brian Bandell

Travel retailer Dufry signed a 200,000-square-foot lease for a built-to-suit warehouse and office facility near Doral.
Blanca Commercial Real Estate’s Christopher Harak and Juan Ruiz represented the Switzerland-based retailer in the deal. Prologis, the landlord and developer, was represented by Jones Lang LaSalle.

Harak said Dufry has outgrown its 160,000-square-foot facility at International Corporate Park, another Prologis (NYSE: PLD) facility. The company will leave that facility for a new building at Beacon Lakes.

The company has 215 employees now, and the expansion should allow it to hire 50 people in its office over the next two years, he said.
“They were in an older building, and it was becoming inefficient,” Harak said. “They were looking for a space to accommodate them for the next 10 years.”

The 200,000-square-foot facility, which will include 25,000 square feet of office space, will be at the southeast corner of Northwest 137th Avenue and Northwest 14th Street, he said. It should break ground by the end of the first quarter, and be ready by the first quarter of 2019.

Prologis extended the lease at Dufry’s current location until the new building is ready, he added.

Dufry sells its goods at 2,200 duty-free shops in 63 countries, mostly in airports, seaports and cruise ships. This facility mostly ships goods to the Caribbean, Mexico and other parts of Latin America, Harak said.

“This lease is critical for our short-and long-term business needs, as our new space will support our continued growth and accommodate our annual expansion requirements for the foreseeable future,” Dufry CEO Rene Riedi said.

Since the new building will have 32-foot ceilings – six feet taller than the current building – more depth and wider column spacing, it will allow Dufry to be 30 percent more efficient with the flow of goods in its space, Harak said.

Tight Industrial Market Sees Rising Rents With Limited New Builds

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Industrial vacancies were down across all three South Florida counties last year, and in land-tight South Florida, the pressure is on.

Broward County’s industrial market closed 2016 with record net absorption, the real estate sector’s yardstick for measuring industry growth. Tenants took over 2.5 million square feet of industrial space, the strongest figure seen in the past decade, according to Colliers International.

New supply, however, reached a four-year low of 491,000 square feet, while Broward’s average vacancy rate hit a 10-year low of 4.4 percent. In a world of tight supply, landlords have responded by raising rents. The average rental rate jumped $8.83 per square foot last year, a 19.5 percent increase in a year.

Broward is home to a more domestic market than Miami-Dade County. Companies operating in the aviation and pharmaceutical fields, among others, are expanding their South Florida presence in Broward.

Examples include Graybar Electric, which took 161,443 square feet at the Bridge Point Marina Mile in Dania Beach. Pet Supermarket signed for 97,000 square feet at Bridge Point Davie, and Floor & Decor inked a deal for 82,755 square feet at Bridge Point I-95 in Fort Lauderdale.

“Those are domestic firms that grew their footprint locally,” said Steve Wasserman, executive vice president with Colliers International in Fort Lauderdale.

Graybar, an industrial and electrical supply distributor, and flooring company Floor & Decor are both tied to commercial and residential development, Wasserman noted. Their growth signals confidence in Broward’s homebuilding sector.

Watery Site

While companies remain hungry for space, new supply has been scarce. It’s become increasingly difficult for industrial developers to build, Wasserman said. It’s difficult to secure entitled land, and the permitting process is time- consuming.

Denver-based DCT Industrial Trust joined forces with Miami’s Easton Group to build the Seneca Commerce Center in Pembroke Park. But the developers can’t break ground. A lake sits where the park will rise. The development team plans to fill about 37 acres of a lake formed by limestone mining.

“It’s indicative of how challenging it is to find land and entitlement to build,” Wasserman said of the proposed development.

The Seneca Commerce Center plans to add three buildings totaling 603,000 square feet. Two warehouses are nearby.

The lake would be filled in three phases, and the development team plans to start vertical construction on the first 222,000-square- foot facility at the end of the second quarter. The team has used the time before filling in the lake to secure county approval, said Todd Watson, senior vice president of DCT Industrial.

“I don’t think any developer goes out and says, ‘I want to fill in a lake,’ ” Watson said. “It is because we believe this is an absolute prime infill location.”

Rather than move west or further north, where the market has pushed developers looking for cheaper land, DCT chose to get creative.

“All of South Florida Is very much land-constrained,” he said, adding that the Seneca location near Interstate 95, Florida’s Turnpike and Interstate 75 appeals to regional and e-commerce users looking for warehousing space in the final leg of the distribution chain.

Some relief is on the way. About 1 million square feet of industrial property is under construction in Broward.

Big Leases

Miami-Dade also closed out 2016 with positive absorption. The average vacancy rate across the market was 4 percent, the same as the third quarter, according to Colliers.

Industrial users filled 2.54 million square feet of space last year. Vacancies will remain low for the next year because most of the new product is already spoken for, said Christopher Harak, a senior vice president with Blanca Commercial Real Estate in Miami.

NBCUniversal’s Telemundo inked a 550,000-square- foot lease deal with Prologis at Beacon Lakes Industrial Park, marking one of the most valuable commercial leases ever signed in Miami-Dade. Telemundo’s headquarters is under construction. KLX Aerospace Solutions signed the second largest industrial lease at Flagler Global Logistics’ Countyline Corporate Park in west Miami-Dade. Construction of the 500,000-square- foot built-to- suit facility will start this year.

The return is the thing for developers aiming to build in Miami-Dade, said Edward W. Easton, founder and CEO of the Easton Group. Pricey land coupled with high construction costs lead to a 5 percent return for a developer building and leasing a new building.

“There’s a lot of risk for that little bit of return, in my opinion,” Easton said.

Yet another 3.4 million square feet is under construction. A slight normalization is expected toward the second half of the year as new buildings are delivered, Colliers has found.

Right now rental rates stand at about $9.52 per square feet in Miami-Dade, a 7 percent annual increase.

Capital Inflows

While there’s quite a bit of supply in the pipeline, Easton pointed to a few factors that may further fuel demand over the next year. PortMiami is welcoming larger ships from the expanded Panama Canal, which carries the potential to bring in a lot more cargo in need of warehouse space.

The potential for lifting the U.S.-Cuba trade embargo is another. Further, medical marijuana may open new lines of business for the industry.

When Miami delivers its ambitious supply of condominium and apartment units this year, that will create additional demand. Easton said every new household in Miami generates demand for about 74 square feet of industrial space.

The market is solid and will remain so until too much inventory comes on the market — which he said won’t happen in the next year.

In the eyes of investors, South Florida’s industrial market is hot.

The recap from the 10th annual Industrial Owners Forum hosted by Colliers in February was, “Everybody wants to buy industrial assets in South Florida.”

Whether it’s a publicly traded real estate investment trust, an insurance company or foreign fund, the pressure to place money in South Florida is immense, Watson said.

“We are seeing at this moment a record amount of capital coming to the market looking to buy assets,” he said. “What does that do? [It’s] driving cap rates down further and further on existing assets with cash flow in place.”

But the pressures on the market stemming from the region’s land constraints makes it challenging to find a good deal.

“Miami is the most competitive market we see,” Watson said. “It’s not that large of a market and has so many constraints, yet the money coming there is absolutely ravenous.”