Leasing activity increased 51% from the final three months of 2008, to 672,000 square feet, as landlords continued offering concessions in the form of free or reduced rent for part of lease terms, Cushman & Wakefield reports. Less than 10% of the 823,000 square feet now under construction is being built on a speculative basis, with Southwest Orlando, Altamonte Springs and Maitland being the biggest locations for new buildings.

Office construction is being limited by both a lack of tenant demand plus difficulty obtaining financing. The largest office project expected this year is the new 470,000-square-foot headquarters of Darden Restaurants Inc.

"Supply-side pressure will be minimal, as the largest project scheduled for completion in 2009 is fully leased and other under-way buildings were about 80% preleased as the year began," Marcus & Millichap states. However, the firm added that office leasing will remain slow this year as job cuts continue among a broader mix of tenants.

From an investment standpoint, declining rents and increasing concessions will combine to realign pricing expectations between buyers and sellers throughout this year, Marcus & Millichap notes. Cap rates for prime class A properties will average from the mid-8% range, while first-year returns on lesser-grade properties will start above 9%, the firm states.

Well-positioned assets in established areas of Orange County will attract investors who want a quick rebound when the economy recovers, Marcus & Millichap predicts. However, Cushman & Wakefield notes that the first quarter was the second-slowest in five years for sales activity and no increase is expected until current credit markets thaw.