Industrial Deals Taking Longer to Close

Second-quarter vacancies stood at 16.5%, down more than a point from the previous period and creeping under the 17% mark for the first time in more than a year. Overall absorption for the quarter was 845,901 sf.

"Only two quarters during the last four years had greater absorption," says Colliers Arnold research director Bobby Palta. "Like other markets around Florida, deals are taking longer than normal to get done. On average, deals that used to take six months are now taking 10 months to complete." Palta notes that activity during the first part of the quarter "started strong but started to slow down around April."

The 22.5-million-sf Southwest Orange County submarket continues to lead the area with an overall vacancy level of 11.9%, down a point, and net absorption of 262,897 sf. The second largest industrial hub, the 13.7-million-sf Southeast Orange submarket, however, shows an overall vacancy mark of 24.1% and net absorption of 133,489 sf.

"Scarcity of land is limiting the number of build-to-suit opportunities in Southwest Orange County," notes Palta. The only large-scale construction is Atlanta-based McDonald Development Co.'s third building at 176,434-sf in the planned four-building, 669,388-sf Crownpointe business park.

"This submarket, as in the Southeast Orange County market, is seeing a number of smaller condo developments and several are on the drawing board," the researcher says. "This interest in industrial condos is because there are few quality free-standing buildings available for purchase."

The Southwest submarket had 285,964 sf of new deals signed during the quarter, "most of which will be absorbed into the submarket during a future quarter," Palta says. Average asking rents are $4.07 per sf for warehouse and distribution space; $4.16 per sf for manufacturing sites; and $7.49 per sf for flex and service space.

Overall flex space in the entire Central Florida market has come down from an average $8.16 per sf in third quarter 2003 to an average asking rent of $7.70 in the second period of this year. Average warehouse-distribution space is $4.08 per sf; manufacturing, $4.37; and flex/service, $7.70.

In other submarkets, the 11-million-sf Northwest Orange County area posted a 12.6% vacancy and net absorption of 18,388 sf. The 11.5-million-sf Seminole County market continues to struggle with an overall vacancy mark of 22% and net absorption of 389,320 sf.

The 3.4-million-sf Northeast Orange County area is showing a vacancy of 12.4% and a negative net absorption of 25,000 sf. In neighboring Osceola County, that 1.1-million-sf market has an overall vacancy of 25.7% and positive net absorption of 52,003 sf.