Among the submarkets where demand picked up during this period were downtown Orlando, Maitland and East Orange. While overall absorption was negative during the first quarter, tenant interest seems to have increased, which means that in the quarters ahead, positive absorption may be expected, according to the report.
There was one significant sale which took place in Orlando during first quarter 2010, that of Lincoln Plaza for $52 million or $212.31 per square foot. The Class A building was purchased by GLL Partners Gmb H's, a Munich, Germany-based investment firm. The seller was a joint venture between Dallas-based Lincoln Property Co. and Parsippany, New Jersey-based Prudential Real Estate Investors.
Unemployment continues to be high in Central Florida, which impacts the office market. With the local unemployment rate at 12.5% in first quarter 2010, it is not likely that the average office vacancy rate will move from the current 17% for the rest of the year, according to the Colliers report. Although unemployment is beginning to stabilize in Central Florida, without significant employment growth, the office market won't see a lot of new tenants or existing ones expanding.
Given the current conditions in the office market in Central Florida, tenants who renew their leases can expect to get lower rents in the new lease, a reversal from years past, according to the Collier Arnold report. Meanwhile, medical office buildings are the only sector in which there are new leases.
The overall average direct asking rate for the Central Florida market was $20.25, and the average direct asking rate for Class A space was $23.23 in first quarter 2010, down from $20.94 and $23.51 respectively in the last quarter of 2009.
There were some bright spots in the Central Florida market, other than in the medical office building sub-sector in first quarter 2010. Downtown Orlando registered nearly 77,000 square feet of positive absorption. As a result, the vacancy rate went from 16% in fourth quarter 2009 to 15.3% in first quarter 2010.
The East Orange submarket was just behind downtown Orlando with 58,835 square feet of positive absorption. This caused the average vacancy rate in East Orange to drop to 15.4% in first quarter 2010, down from 15.8% in the previous quarter.
The Maitland submarket also had positive absorption with 36,752 square feet newly occupied. This caused the average vacancy rate to decline slightly to 18.4% from 18.9% in the previous quarter. One building is still under construction in this submarket, with a total square footage of 55,346 square feet.
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