The direct vacancy level among 427 buildings monitored by C&W in 12 submarkets is 17.3%, up from 16.6% in the first quarter. Additional sublease space continues to enter the market, increasing by over 100,000 sf from the first quarter. The Maitland submarket continues to hold the greatest concentration of sublease space with 344,272 sf.
"Although the office market continued to experience a surplus of sublease availabilities and an oversupply of first-generation space, demand for office space appears to have increased slightly," says Larry D. Richey, senior vice president and managing broker for C&W's Central Florida operations in Orlando and Tampa.
The demand factor showed up in the direct net absorption numbers which have "rebounded significantly," Richey says. Net absorption increased 116,670 sf from the first quarter to a net gain of 282,914 sf. A year ago, the market registered a negative 101,149 sf of net absorption.
A positive sign on the office market scene is the stabilization of the speculative construction pipeline, Richey says, noting that 60% of the remaining 613,164 sf under construction is already pre-leased.
Among the submarkets, the 4.67-million-sf Southwest hub showed the best gains, trimming 7.9 percentage points from a 27.1% vacancy rate a year ago to 19.2%.
The University of Central Florida submarket in east Orange County had 665,620 sf of new construction completed but couldn't fill it all, the report notes. "Leasing activity (in the 3.16-million-sf University submarket) has not kept pace with the supply," says Richey. Direct vacancies increased 6.2% to 15% from 8.8%.
Another once-hot submarket, Lake Mary, "continues to experience lethargic activity and an overabundance of first-generation office space," the broker says. Lake Mary's 3.8-million-sf inventory had second-quarter direct net absorption of only 44,048 sf, giving the sector a 24.2% vacancy level, second-highest next to the Longwood submarket.
Longwood's 914,653-sf inventory had negative net absorption of 21,020 sf and a direct vacancy market of 25.6%. The average asking class A rent is $20.69 per sf. By submarket, rents are $23.83 in the central business district; $20.25 in Maitland; $18.98 in Altamonte; $17.47 in Longwood; $20.06 in University; $25.16 in Winter Park; $19.99 at Orlando International Airport; $19.17 in Colonial Drive; $21.65 in Southwest; and $19.40 in Lake Mary.
"Rental rates remain low and concessions abound, which should be an incentive for tenants to proactively re-evaluate their current lease options as these market conditions will not last," Richey says.
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