Industrial Market Turning Around With 11.5% Overall Vacancy

Nine of the 13 markets monitored by C&W showed positive direct net absorption. The overall vacancy level among 1,697 buildings checked by the brokerage was 11.5%, down from 14%-range rankings earlier last year.

"Second-quarter numbers suggest the market appears to have bottomed and is now turning toward a trend of positive growth," says Larry D. Richey, Cushman & Wakefield's senior vice president and managing broker for the Central Florida region. "Unlike the Orlando office market, the industrial market never encountered a supply and demand imbalance that has negatively impacted the office sector."

There is 1.8 million sf under construction marketwide. Build-to-suit space accounts for 1.3 million sf of that total.

The brokerage anticipates a new niche corridor for the development of new industrial parks in metro Orlando in the coming years will be along the existing Eastern Beltway (State Road 417) and the developing Western Beltway (State Road 429).

"Developers are positioning themselves for the next upswing in industrial development," Richey says. "However, they are finding little entitled land remaining in the in-town industrial parks." The broker adds the few remaining sites in LeeVista, CrownPointe Commerce Park and Airport International Park at Orlando will be sold within a year.

"The million-dollar question both brokers and developers are asking is where will the next Orlando Central Park (4,000 acres, 25 years old) surface in the region," adds Richey.

Besides the Lowe's project, two other developments surfaced in the second quarter that "will have both positive and negative impacts" on the region's industrial sector, the C&W report says. Recoton Corp. of Lake Mary is liquidating its holdings and has already placed its two industrial buildings totaling 750,000 sf on the market. Opus South of Minneapolis has started construction on a 203,125-sf speculative cross-dock distribution warehouse facility on 11.5 acres in CrownPointe Commerce Park.

Still another indication metro Orlando's industrial market is recovering is the shrinking of available sublease space, the C&W analysis notes. That space category accounts for 1.3%, or 1.1 million sf, of the overall vacant space. The market has absorbed 264,961 sf of sublease space since second quarter 2002.

"Whether this trend continues remains to be seen, as failed companies and downsizing are still probable in this turbulent economy," says Bryan Burns, the C&W analyst who prepared the report.

Rents in the industrial sector average $7.95 per sf for high-tech space; $4.29 per sf for manufacturing; $4.61 per sf for wholesale and distribution space; and $8.55 per sf for office and showroom.

The best-performing submarkets were the 15.3 million-sf Northwest/Silver Star Road corridor with an overall vacancy mark of 7.5% among 318 buildings, which leased 281,442 sf in the second quarter, and the 17.7-million-sf Orlando Central Park with a vacancy of 10.8% among 198 buildings which leased 666,997 sf.

The poorest-performing submarkets were the 8.2-million-sf Southeast/Airport area with a 25.1% vacancy level among 110 buildings, which leased 79,357 sf and the 759,633-sf Northeast/Oviedo submarket with a vacancy level of 25.4% among 23 buildings, which leased 28,080 sf.