The brokerages are Cushman & Wakefield of Florida Inc., CB Richard Ellis Inc., Grubb & Ellis Co. and Trammell Crow Co.

Effective rents, after deep concessions, are much lower than the quoted numbers, brokers say. The overall vacancy level is at 18.9%, up from 12% a year ago and expected to continue rising through the end of the year.

The reason: Five million sf of office is on the market. Of that total, 1.3 million sf is sublease space in the suburbs.

Many tenants are making lateral moves to take advantage of the bargain leasing deals that have surfaced in the past year. Lateral moves don't improve net absorption numbers, area brokers point out.

Downtown vacancies of 12.4% are up from 9.5% a year ago. South Orlando, a commercial/residential hotbed, is drowning at a 25.1% vacancy level, up from 15% last year at this time. The East Orlando-University of Central Florida submarket is the strongest with vacancies of 8% versus 8.1% in the second half of 2001.

Leasing deals to date are puny compared to previous years, with the largest contracts under 35,000 sf.

"It appears that most of the shakeout has already occurred, leaving the market with high unemployment and correspondingly high vacancy rates," Larry D. Richey, senior managing director, Cushman & Wakefield of Florida Inc., says in his firm's second-quarter report.

"In most previous recessions, certain market dynamics typically led the pack in pulling us into healthier conditions," Richey says. "The economy was pulled out of its slow conditions in the early 1990s largely because of the technology boom, but this there is no single sector of the economy showing enough strength to pull us forward."The broker says, "This leaves the economy to improve through time and restructuring."

Brokers familiar with all of the six submarkets monitored by the four brokerages tell GlobeSt.com on condition of anonymity a minimum six months free rent is being offered by desperate building owners and property managers to prospective tenants taking five-leases or more.

Tenant improvement allowance credits from owners are running 25% to 50% of the total rent.

"It's a tenant's market at this time," Dean Fritchen, senior associate, Coldwell Banker Commercial Real Estate Services, Winter Park, FL, tells GlobeSt.com.

George D. Livingston, chairman, Realvest Partners Inc., Maitland, FL, normally an optimist, doesn't see the office picture clearing for another year.

"Long term, I am positive the economy is improving," Livingston tells GlobeSt.com. "That should lead to increased warehouse demand by year end, but the office market is not likely to improve until well into next year."

The 5.5 million-sf Maitland Center submarket, second largest behind Downtown at seven million sf, improved its vacancy picture fractionally, posting 12.7% versus 13% in second half 2001.

Lake Mary, also a vibrant suburban office market, is at a 17% vacancy mark, up from 12.4% last year. North Orlando's 15.8% vacancies compares with 15% a year ago.

Class A and B quoted average rents remained relatively stable. Class A at $24.34 per sf compares with $25.25 per sf in the first quarter. Class B at $17.90 per sf is up pennies from $17.83 per sf.

New space under construction is Majesty Building, Altamonte Springs, 300,000 sf; Colonial Center 600, Lake Mary, 200,000 sf; Hughes Square, Downtown, 195,440 sf; University Corporate Center II, 104,168; Maitland Concourse, 45,000 sf; and Maitland Springs III, 27,000 sf.

Instant Insights /

Office Market Tanks as Owners Offer Six Months Free Rent on Five-Year Leases

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