Despite negative absorption figures and the soaring vacancies in several submarkets, long-term lease deals or major build-to-suit projects are on the fourth-quarter horizon, says Lisa M. DeVore, research director, Advantis Commercial Real Estate Services.
"The industrial market in Orlando as a whole is showing signs of recovery even as statistics indicate that vacancies are escalating," DeVore says. "Those vacancy numbers are somewhat misleading, however, since those increases are largely attributable to a handful of large blocks of newly vacant industrial space."
She cites the 565,000-sf former Recoton Corp. campus in suburban Lake Mary as an example. "Factoring that property alone out of statistics would leave the market with positive absorption," DeVore maintains. "Several subleases also came onto the market during the third quarter, further aggravating the vacancy rate."
The industrial-flex market wound up the third quarter with negative absorption of 456,099 sf. Industrial space alone showed negative absorption of 559,232 sf; flex had positive absorption of 103,133 sf. Total sublease space has grown to 1.3 million sf. Industrial sublease space total one million sf; flex, 217,577 sf.
Leasing activity "improved somewhat during the third quarter but will likely remain relatively flat through the end of the year, provided that low interest rates and current investment lending policies remain more conducive to the acquisition of buildings than the leasing of industrial space," DeVore says.
The fourth quarter could surprise some market monitors, the Advantis analyst predicts. "We expect to see large well-capitalized companies with solid business plans implement their growth strategies," she says. "There are several companies in the market that we anticipate will move forward with either long-term new lease transactions or build-to-suit projects."
DeVore adds, "Coupled with the fact that rental rates are beginning to stabilize and a relative lack of key investment opportunities may soon leave tenants with little choice but to lease space once again, especially if interest rates rise, the picture begins to become a little more clear."
She notes that "while the abundance of cheap capital nationwide has fueled a surge in industrial construction, it has not occurred in Orlando. Diligence has been exercised to a great extent by most developers and as a result, this market does not suffer from the supply/demand imbalance that currently exists in other markets.
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