The vacancy mark may go even higher by year end as another 1.82 million sf of new product makes its way to market, projects Grubb & Ellis Co. The last time vacancies hit the 9.1% mark was in second quarter 1998.
But Michael R. Shelton, vice president of Grubb & Ellis' industrial services group, isn't overly concerned because the absorption numbers remain strong. Second-quarter net absorption totaled 712,230 sf; year-to-date, 1.86 million sf. A total 8.3 million sf is vacant.
The 75.6 million-sf warehouse/distribution segment has 8.36% of its inventory, or 6.27 million sf without tenants. The 15.8-million sf research and development/flex sector has 12.9% or 2 million sf of its inventory vacant.
Rental rates dropped 24 cents in the second quarter, "due, in part to developer incentives which entice prospective tenats to fill their future and existing product," Shelton tells GlobeSt.com. Rates are expected to remain flat for the short term even though the market is in sound shape.
Metro Orlando's largest submarket, the 28 million-sf Southwest/Beeline/Turnpike axis, has 2.97 million sf or 10.6% of its total inventory without tenants. Second-quarter net absorption in this market was 268,932 sf; year-to-date, 431,117 sf. Under construction is another 817,604 sf. Asking rents for warehouse/distribution are $4.67 psf; $7.58 psf for R&D/flex.
Telecom/carrier hotels that surfaced in first-tier markets two years ago are now spreading across metro Orlando. About a half million sf of of telecom hotels are under way or have recently opened here.
Among them: the four-story, 154,000 sf former JCPenney department store building in Downtown Orlando; the 113,000 sf, former Cosco building in Maitland; and a 75,000-sf, former bakery building being converted by US TechCenters at 2424 Orlando Central Parkway in Orlando Central Park.
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