Downtown Office Leasing Activity Picks Up

Although the research numbers by each brokerage differ somewhat, they both agree the office market here is improving. "While it is still too early to predict a full recovery, there are some signs that the market is starting to turn," says Michael Sweeney, a Grubb & Ellis vice president.

"There was a rise in absorption due to the signing of some large leases; average rental rates have risen slightly; and there is an increase in new construction," Sweeney says.

"The effects of reduced lease rates, broker incentives and landlord concessions have made a significant impact on the market this quarter," Bobby Palta, executive director of market analytics and geographic information systems at Colliers Arnold, tells GlobeSt.com. The CBD is showing remarkable signs of improvement this quarter, outperforming most other Downtowns in the nation."

Grubb & Ellis puts the 7.4-million-sf Downtown inventory at a 12.2% vacancy level and the overall market at 14.1% vacancy, down from 14.6% in the second quarter. Colliers Arnold, however, has the total vacancy mark at 16.8%, below 17% for the first time since 2002, Palta says.

Grubb & Ellis shows third-quarter net absorption at 401,888 sf compared to 205,146 sf in the second period. Colliers Arnold has net absorption at 519,518 sf, "the best number seen since 2000," Palta says.

Average asking class A rents are $21.24 per sf, up from $21.19 in the second quarter and $20.48 in third quarter of 2003. Downtown class A rents are the highest in the market at an average $23.92 per sf. Class B is at $21.56 per sf. The 6.8-million-sf East Orange County/University of Central Florida submarket is next highest in rents with an average $21.03 for class A and $20.10 for class B.

New construction, however, could cloud some of the numbers in 2005. Grubb & Ellis notes 1.8 million sf of new product is in the pipeline versus 675,647 sf in the second quarter. New Downtown office construction year to date totals 265,000 sf. Total new product for the CBD and suburban submarkets is 1.8 million sf. In the suburbs alone, 1.6 million sf of new office space is under construction.