That's the newest analysis from the Orlando office of Grubb & Ellis Co., a major player in the area's two million-sf leasing avalanche last year. Still, Grubb's office specialist Andrew E. McCaw Jr. tells GlobeSt.com, "large pockets of new class A space remain readily available in all submarkets."

That scenario is especially evident in the suburbs where 2.5 million sf of new construction was under way at year end 2000. No new office is coming out of the ground in the central business district. Compare that zero to 954,650 sf of new space delivered in three Downtown towers in the last two years.

Vacancies of 10.2% in the suburbs are headed for a 10.5% level this year but will drop to 10% in 2002, McCaw projects. In the CBD, the current 7.9% vacancy mark will dip to 7% by year end 2001 and slip to 6.5% in 2002, due to restrained new construction.

Leasing will have another good year, due in large part to a new tenant segment surfacing. "E-commerce tenants have discovered Orlando and have become major prospects in the leasing arena," McCaw points out.

Net absorption, the true indicator of a market's health, will probably come in at 1.8 million sf in 2001 and 1.5 million sf in 2002, down from a record 1.98 million sf last year. New-space completions this year will reach 2.3 million sf and 1.9 million sf in 2002, versus 2.7 million sf in 2000.

Class A CBD rents are slated to rise by 2.4%; in the suburbs, by 2.1%. Class B product is going up by 2% Downtown; by 1.8% in the suburbs. Current class A rents in the CBD average $24.36 per sf; $21.04 in the suburbs. Class B space goes for an average $19.43 per sf Downtown; $16.88 per sf in the suburbs.

The area's southwest market, noted for its affluent residential neighborhoods, is now seeing commercial catching up. Millenia, GranPark and MetroWest developments will have an aggregate 600,000 sf of new construction under way through 2001. The East Orange County/University submarket will be close behind with 500,000 sf of new product in the pipeline. Siemens is the major tenant in this market, expanding into a new 226,500-sf building by fall.

The 4.24 million-sf Lake Mary/Heathrow submarket will continue to dominate suburban activity. Ohio-based Pizzuti Cos. and North Carolina-based Crescent Resources are the big players here. The new Colonial Town Center will give Primera and Heathrow International Center new competition.

Maitland Center, at 5.92 million sf, is the second largest office sector after Downtown (7.86 million sf), but Maitland is almost built out. The 41,000-sf Park Place building was the only structure completed there in 2000. Still, the area continues to attract tenants and developers because of its name recognition and successful track record in leasing and sales, says McCaw.

The newest hot corridor at Maitland is Keller Road. The street is drawing accounting, architectural, civil engineering, planning and insurance firms to newly-opened class A offices. The big development guns here are St. Joe/Advantis, Taurus and Equity Partners. Gateway Center, a new mixed-use, office and retail venture, will add one million sf to the Maitland market over the next five years.

"The single most significant factor affecting business growth in the Orlando area is the availability of qualified workers," McCaw says. "Labor will continue to drive real estate decisions as companies carefully weigh any impact that a move will have on their existing labor pool."

The region's image as a high-tech destination "will continue to improve as the area matures and recruits a more diverse labor force," the broker says. "Retaining local university graduates will be a key initiative."

Instant Insights /

Grubb & Ellis Sees Strong but Subdued Office Market This Year and Next

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