Office Vacancy Dips as New Construction Rolls On

The 18-million-sf class A category alone showed almost a 5% decline in vacancy, year to year. First-quarter 2005 vacancy of 13.4% compared to 14.6% in fourth quarter 2004; 15.7%, third quarter; 17.8%, second quarter; and 18.2% in first quarter 2004.

The 1.3-million-sf Southeast/Airport submarket also saw a sharp improvement, dropping more than four percentage points to 6.9%. Net absorption was 54,661 sf. The weakest area was the 7.3-million-sf Lee Road-Maitland submarket, posting a vacancy of 19% with net absorption of 115,247 sf.

Overall net absorption came in at 396,232 sf compared to 688,383 sf in the fourth period, but still better than the 308,639 sf chalked up in first quarter 2004, the G&E analysis shows. The Southwest/Tourist submarket saw the most activity with 139,515 sf of space absorbed. The East University market posted 44,923 sf of negative absorption, the weakest link in the 11 submarkets monitored by Grubb & Ellis.

"The Orlando office market is off to a healthy start with no indications of any negative changes in the near future," says Carole Sealock, research and marketing director at Grubb & Ellis. She bases her confidence on annualized employment growth that "surpassed 6% four times during the latter half of 2004 and local economists anticipating more than a 6% increase currently." Additionally, Sealock notes the local tourism industry has posted 14 contiguous months of double-digit growth.

New construction totals 1.62 million sf versus 1.69 million sf in fourth quarter 2004. Several class A projects are slated for completion this year. They include the 265,000-sf CNL Center II, 400 S. Orange Ave. in the central business district by September; the 162,780-sf Baldwin Point building on Baldwin Drive, South Orange submarket, by July; the 137,000-sf SouthPark Center, 9102 San Marco Court by September; and the 60,000-sf Veranda Park Building 7000, 2300 Hiawassee Rd. by August, both in the Southwest/Tourist corridor.

Lease rates for class A space remained flat, increasing by only 76 cents to an average asking rent of $21.86 per sf. Average asking rent Downtown is $23.70 per sf; in the suburbs, $20.02 per sf. Class A sublease space available Downtown totals 15,696 sf; in the suburbs, 176,303 sf.