ORLANDO-A growing shortage of developable land in Metro Orlando and the rapid sales of small industrial condo buildings could eat up 600,000 sf of rentable space in the 7.73-million-sf, 84-building service center and flex markets this year. That would bring the product pipeline down to a one-year supply of space by the end of this year, according to a new analysis by Lyle N. Nelsen, the corporate and industrial specialist at Winter Park-based Rebman Properties Inc.

"Crunch time could be coming as more and more of this popular product is absorbed," says Nelsen who has been tracking the local market as a broker and analyst for the past 26 years. "If we absorb another 600,000 sf this year, as we did last year, we'll be down to a one year supply of space." He says "this is especially significant with the critical shortage of industrial land within the Beltway on which to build more space."

Nelsen notes about 1.1 million sf of space for current needs will be available this year from the existing 751,623 sf of vacant space plus new construction this year of 359,357 sf.

"With the dwindling supply and higher construction costs, landlords are opting to increase rental rates and condo prices, offering no free rent and trying to push up the escalation fee to 4%," the broker says. "Credit is king in this market with heavy emphasis on selecting tenants with good credit."

Nelsen points out that condominium flex space is "a growing and expanding product, [and] with interest rates remaining relatively low, the small business segment of this market is taking advantage of ownership." He calls the Orlando economy "strong, providing great real estate opportunities, particularly in the service center/flex space market."

Supporting the strong status of the service center/flex market was the first quarter vacancy of 9.71%, the lowest number since 1997. Net absorption totaled 84,182 sf as 97,567 sf of new space was added to the inventory. Nelsen projects a total 500,000 sf will be absorbed this year. New service centers added in the first quarter were Drew Tina Commerce Center condos at Crownpointe, 75,510 sf; Ipenema II condos at Crownpointe, 53,000 sf' Commerce Point at 7648 Southland Blvd., 16,104 sf; and Commerce Point at 7632 Southland Blvd, 5,953 sf.