"While the bulk warehouse tenants were in the market, looking for space in the latter part of 2002, most of these were in the 50,000 sf to 150,000 sf range," David Murphy, a vice president in the Orlando office of CB Richard Ellis Inc., tells GlobeSt.com.

"The Orlando market typically attracts smaller regional distribution requirements, so it is likely that a creative marketing effort would be required to maximize the amount of prospects that could be generated for these type of buildings," Murphy says.

CBRE statistics show overall industrial occupancy in the local market is 88.1%, based on fourth-quarter numbers, "but we still faced anemic absorption numbers in 2002," the broker says. "Adding significant blocks of unoccupied industrial space in the market is not a good way for our local industrial market to get healthy."

The Walgreen warehouse, however, could be a good deal for a large user looking for low-rent space, brokers tell GlobeSt.com. Murphy estimates the space could generate $3.50 per sf to $4.50 per sf net, depending on the quality of the interior buildout and the amount of climate-conditioned space.

"We did record positive net absorption in the overall market of 1.23 million sf in the fourth quarter of 2002, so I do not think our market is as weak as some believe," Murphy says. "Barring unforeseen events, the market could stage a moderate recovery in 2003." The broker says he would "rather have a large block of space to lease now than the same block a year ago."

George D. Livingston, president, Realvest Partners Inc., Maitland, FL and a longtime developer of industrial product, says the Walgreen move doesn't surprise him. "All corporations are trying to squeeze costs out of their supply chains because it makes them more competitive and increases profits," Livingston tells GlobeSt.com.

He says there are no known tenant prospects at the moment for the Walgreen property. "Price drives activity sometimes" but the warehouse will have to compete with other vacant properties as well. "Low demand and high supply means lower prices (rents) to move it, if you can," Livingston says. He thinks the Premier Row property could move "at a rate less than $3 per sf" or more if Walgreen wants to wait for a higher-paying tenant.

Deborah Mickler, an industrial specialist in the Orlando office of Colliers Arnold Real Estate Services Co., doesn't think the vacant 552,000 sf will greatly affect other vacant properties.

"Since it is an owner-occupied, single-tenant building, the fact that 552,000 sf is going on the market does not affect competing properties," Mickler tells GlobeSt.com. The Walgreen property is "not easily divisible, so it will likely need to be filled by one user," the broker says.

"Sure, it is going to pull down our statistics, but since there aren't a lot of users of that size in this market, it will not significantly affect other buildings or the condition of the market," Mickler tells GlobeSt.com. She notes another similar-sized building has been sitting vacant near Orlando International Airport for the last five years. That's the 550,000-sf, high-tech-designed Toys R Us distribution center.

Walgreen officials say that although the Jupiter center is only 20% larger than the Orlando property, the Jupiter site can service twice as many stores. Orange County Property Appraiser records show the Orlando warehouse is jointly owned by Walgreen and Walando Associates LP, both based in Deerfield, IL.

Instant Insights /

Walgreen Dumping 552,000 SF on Hard-Hit Industrial Market

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