Second-quarter vacancies are up from 10.9% in the first period to 12.4% overall, the highest in five years. The 6.32 million-sf Downtown submarket is at 10.6% vacancy, but the 22.57 million sf in the 10 suburban pockets is at 12.9%.

Sublease space has doubled from 274,182 sf in the first quarter to 484,148 sf. Still, rents are holding up as more property owners dangle concessions in the form of free rent and increased tenant improvement allowances. Compared to second quarter 2000, asking rents are up by 12 cents for class A and seven cents for class B.

"Overall, the market downturn appears to be a demand-side rather than a supply-side problem," Grubb & Ellis broker Andrew E. McCaw Jr. tells GlobeSt.com. "Demand has slowed significantly but it is not non-existent."

Net absorption is down by 50% to 485,584 sf from the second half of last year. Two million sf was absorbed in all of 2000, a goal McCaw doesn't expect to see reached this year.

"The CBD is feeling the pinch" with negative 71,741 sf of absorption in the first six months, McCaw notes. The suburbs, however, are showing a positive absorption of 281,491 sf for the second quarter and 557,325 sf year-to-date.

"Flight to quality is in full swing as tenants move into class A and B properties," the broker says. The bulk of new tenants are headed for two suburban submarkets--East/University, with net absorption of 305,028 sf and Heathrow/Lake Mary, 212,529 sf.

But the 2.85 million-sf East/University is also among the highest vacancy leaders at 12.9%. The 3.58 million-sf Heathrow/Lake Mary market is at 12.3% vacancy. Other double-digit suburban markets are Altamonte/Longwood/East Seminole (2.55 million sf inventory), 16.1% vacancy; and Maitland, the second largest submarket after Downtown (5.4 million sf), 10.8% vacancy.

The most troubling submarket is the 3.09 million-sf Southwest/Tourist corridor at 22.7% vacancy with 703,457 sf of available space; a second-quarter net absorption of negative 6,553 sf and negative 53,799 sf year to date.

"Southwest Orlando could see its vacancy rate increase to 30% upon the completion of the 200,000 sf Millenia Lakes office building in the third quarter," McCaw says. "Leasing has remained very slow in this submarket." Yet rents remain the highest among Central Florida suburbs--$18.38 per sf.

Although most rents are up from last year, second-quarter class A rents were down four cents while class B was up 14 cents. Average asking rent for class A Downtown is $24.39 per sf; class B, 19.84 per sf.

In the suburbs, Maitland is asking $18.26 per sf for class A; Winter Park, $17.61 per sf; Heathrow/Lake Mary/Sanford, $17.07 per sf; East University, $16.17 per sf; Southeast/Airport, $16 per sf; West Ocoee/Winter Garden, $15.53 per sf; Altamonte/Longwood/East Seminole, $15.51 per sf; and Osceola/Kissimmee/Celebration, $11.43 per sf.

If there is a silver lining above, it may come in the form of a slowing construction pace. Product under construction at the end of the second quarter totaled 1.6 million sf, a drop of 500,000 sf compared to the three previous quarters. A total 28% of new product under construction is preleased.

"Many developers have extended startup times on development projects, while others are continuing their current development schedule in spite of slackening demand, " McCaw tells GlobeSt.com.