Sellers Line Up for Hard-to-Find Properties

"The dominant theme in Orlando is the lack of available for-sale property, relative to demand," says Steven M. Ekovich, first vice president and regional manager of the firm's Orlando and Tampa offices.

He says strong sales volume will continue throughout 2004, due to the availability of capital, low interest rates and steady demand for local product.

"Sellers are recognizing appreciation that is unlikely to be matched after this cycle is over," Ekovich says. "More than two-thirds of the buyers involved in transactions for properties priced at $4 million or more are from outside the MSA, as national investors realize the low costs of doing business and economic growth potential in the region."

Ekovich projects the city's economy will generate 25,000 new jobs in 2004, a 2.7% gain from 2003. "Orlando ranks among the top MSAs in the country for startups and firms that can sustain annual revenue growth of more than 20%, both of which are important for office tenants," he says.

Additionally, government defense contracting and military research are "becoming more important, as are the increases in business service and financial activities employment," Ekovich says. "This contributes to the anticipated 2.4% growth in office-using employment this year."

On the leasing side, the broker predicts vacancies will decrease by 210 basis points to 15.6% by the end of the year, "marking the first improvement in occupancy since 1997," he says. "Market stabilization is expected in another 12 to 18 months."

Asking rents are forecast to end 2004 at $19.41 per sf, up 2.2% from 2003. Effective rents are also on the rise and expected to register growth of 2.4% this year, pushing the average to $15.96 per sf.

"Concessions soared in 2003, as owners lobbied for tenants with one year free on a five-year lease," Ekovich says. "Rental incentives are gradually dissipating, however, as allowances of 10 months free on a five-year lease are now commonplace."

Possibly helping the vacancy picture this year and next is that developers are forecast to deliver only 600,000 sf of competitive office space in 2004, "the smallest annual amount of construction in nearly a decade," the broker says. But development is scheduled to increase in 2005.

"Notable projects in the planning stage include the addition of new space at the Central Florida Research Park and one million sf of class A space spread across six different buildings located in CenterPointe on the Park in Altamonte Springs," Ekovich notes. Additionally, "citywide redevelopment plans may [also] assist investors in refurbishing existing properties, especially in the CBD and along Orange Avenue."