Small users are scrambling to find 25,000-sf to 50,000-sf buildings. The bulk of the 1.4 million sf in new third-quarter construction in metro Orlando will serve flex-space users and large, 150,000-sf-plus warehouse/distribution tenants.
"The market is in a Catch-22 situation," Michael Shelton, vice president of Grubb's Orlando industrial services group, tells GlobeSt.com. "Despite the continuation of the prosperous economy and a plethora of new construction deliveries, small buildings for lease and for sale are in short supply."
Experiencing the most shortages for this product are the Southwest, 33rd Street and Sanford submarkets. With no alternative, users are taking the build-to-suit route, the report states.
Overall vacancies are down from 9.1% in the second quarter as robust net absorption is totaling 2.55 million sf year-to-date. Even more surprising is that 657,140 sf was delivered in the third quarter. "The market continues to defy predictions of a slowdown," Shelton tells GlobeSt.com.
Rental rates are variable. Overall warehouse/distribution rents are down while R&D/flex rates are up from the second-quarter. Average asking warehouse/distribution rent is $4.37 per sf, down nine cents. Average R&D/flex space is $8.01 per sf, up 13 cents.
"Look for rental rates to fluctuate as developers use incentives to attract new tenants and retain existing tenants," predicts Shelton. "While demand remains strong, we do not anticipate a trend of declining rates."
Grubb & Ellis Orlando and affiliate Phoenix Realty of Jacksonville, FL closed the largest lease of the year to date in metro Orlando--the 261,291-sf warehouse at 1001 Tradeport Dr. in the Southeast submarket. Saddle Creek Corp., a national warehouse/distribution and logistics firm, leased the entire premises.
The top construction submarket was the Southeast/Airport sector with 604,854 sf of new product. The Southwest submarket, however, showed the most absorption activity with 281,134 sf.
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