A just-released third-quarter office report by G&E's Orlando division emphatically challenges a recent FDIC conclusion that about three million sf delivered here in 1999 remains largely unused.
The G&E study shows average vacancies in the area's 11 submarkets are at 9.9%, down from 10.2% in the second quarter. Net absorption was an unprecedented 623,804 sf versus 147,237 sf last quarter.
And Downtown, which recently added one million sf of new class A product, experienced its largest single quarter net absorption in the last decade, 252,021 sf.
The FDIC report placed Orlando on a Glut List of 13 cities where overbuilding of commercial space could lower property values and hurt lenders that financed the projects. The agency found Orlando's vacancy rate rose to 12.5% at year end 1999 from 6.5% the previous year.
"I'm not sure where the FDIC is obtaining its data, but it appears to be inaccurate," Grubb & Ellis Research Analyst Bryan Burns tells GlobeSt.com. In Orlando, "all of the different industry sections are showing strong performance with no significant signs of slowing," Burns says.
Burns concedes, however, "the only industries which may be on a decline are the hospitality and multifamily markets" because "they are nearing a saturation point." But demand for new Downtown apartment ventures remains strong, the analyst says.
He adds, "All my brokers have responded negatively" to the FDIC findings for Orlando.
Grubb & Ellis managing director Jeffrey Sweeney projects the Orlando office market "will end the year on a high note by reaching a record-breaking two million sf of net absorption."
After 10 years of no new construction of multi-tenant buildings, "this strong absorption activity proves that pentup demand for space in the CBD is high," Sweeney says.
He tells GlobeSt.com, "the local economy shows no signs of slowing and Grubb & Ellis predicts this trend will continue well into 2001."
To support his point, Sweeney gives GlobeSt.com a headsup: "Look for an announcement in the near future for another 250,000 sf to 425,000 sf tower ground-breaking" Downtown.
The Grubb & Ellis executive notes, "developers are building projects in equilibrium with market demand, which has kept the market from seeing an oversupply of space."
The southwest/tourist Orlando submarket saw the highest quarterly net absorption with 263,142 sf. The area also experienced the highest vacancy level of 20.1%.
Class A asking rental rates are going up in most of the 11 submarkets. But new properties are offering some concessions to entice tenants from class B to newer, class A buildings.
For example, average class A rents are $22.38 per sf, up 24 cents from the second quarter. Average class B rents are $17.27 per sf, down 13 cents.
New construction totaled 2.1 million sf compared to 1.53 million sf in the second period. The top construction market is the east University of Central Florida area with 675,000 sf of new office product.
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