It's a new trend and one that has convinced developers to accelerate construction in this category, says Lyle N. Nelsen, a corporate and industrial real estate specialist in the Winter Park office of Rebman Properties. About 74%, or 398,639 sf, of the 539,267 sf of new service center and flex product under construction will be condo space, Nelsen says. "The trend toward condo development is very strong in this market."

Leasing activity is equally robust with average asking rates moving up by 50 cents to a $1 per sf for service center and flex space. Average asking rents are $5.75 to $9 per sf triple net, depending on the amount of office space required. "The landlord seems to have the upper hand in the negotiation process," Nelsen says.

The 7.58-million-sf, 82-building service center market in the metro area finished 2005 with the best vacancy mark since 1987. Vacancy is at 10.86%, down from 12.45% in the third quarter, 12.03% in the second quarter and 11.86% in the first period. A total 824,349 sf is vacant. Total available space this year is expected to be 1.36 million sf, counting the existing vacant and new expected space.

Fourth quarter net absorption was 175,953 sf compared to 193,470 sf in the third quarter; 200,370 sf in the second quarter; and 36,200 sf in the first period. Total absorption for the year was 605,993 sf, topping Nelsen's earlier 600,000-sf projected mark. Only 63,335 sf of new product was added to the available space column in the fourth quarter.

Nelsen predicts another 600,000-sf absorption year for 2006. "This is a very healthy market, one that is poised for strong growth," he notes. Nelsen has been tracking the service center and flex space market since 1986.

Instant Insights /

Condo Construction, Sales Dominate Flex Space Market

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