Industrial/Flex Market in High Gear

Depending on which statistics are used, first-quarter overall vacancy is at 7.7%, according to Grubb & Ellis. Colliers Arnold has fourth quarter 2004 vacancy at 9.35%; Advantis puts the previous period at 10.9%. That is still an improvement from 10.9% in fourth quarter 2003, according to the three brokerages.

Net absorption year-to-date of 1.2 million sf compares with 2.27 million sf net absorption in fourth quarter 2004 and under 150,000 sf posted in all of 2003. "The leasing market will continue to see the vacancy rate decline throughout the year," predicts Jeffrey Sweeney, managing principal and president of Grubb & Ellis Commercial Florida. "New construction was down from 2003 and 67% of the current projects are scheduled for completion in the first half of 2005, which means we will see an increase in absorption."

But Sweeney says "the amount of overall vacant space will vary, but should remain about the same as 2004." Leasing rates are headed upward, the Grubb & Ellis executive forecasts. "Lease rates for flex [space] increased slightly during 2004, while bulk and distribution were flat," he says. "We expect lease rates to increase in the year ahead."Average warehouse rent is $4.47 per sf; flex space, $8.68 per sf.

Available land for new development continues to shrink as residential homebuilders buy up large tracts for shelter projects, the three brokerages note.

At the 1,200-acre, 23-year-old Airport Industrial Park of Orlando, for example, the remaining 460 undeveloped acres have been taken off the market. Liberty Property Trust of Malvern, PA and park owner Paul Sabga are joint venturing $200 million in new development on the site and renaming the park, Liberty Park at AIPO.

Industrial real estate sources tell GlobeSt.com Liberty and Sabga hope to attract new build-to-suit prospects with their undertaking since comparable large sites are difficult to find near Orlando International Airport. But brokers representing out-of-state companies scouting for regional distribution space in Central Florida tell GlobeSt.com the Liberty-Sabga strategy also could drive potential buyers from metro Orlando locations to outlying markets such as Lakeland in Polk County, Ocala in Marion County and Leesburg in Lake County.

"The land is less expensive the further away you go from Orlando and the hassles with local government red tape are also less harrowing," a Downtown broker involved in finding space for a Midwestern client tells GlobeSt.com.

Metro Orlando land prices for industrial and flex uses near Orlando International Airport run from $100,000 to $200,000 per acre. In Polk County, the price would be half of that amount and in Lake County, top sites at the county's industrial park near Groveland still can be purchased for about $35,000 per acre, brokerage and government sources tell GlobeSt.com.