Report: Downtown Leads Vibrant Office Market

For example, the 9.89-million-sf central business district's 182 buildings are at the 9.8% direct vacancy level, the best performance in the last five quarters. The overall market's 49 million sf of class A, B and C space is at 14.8% vacancy, an improvement from 15.1% in the previous quarter.

Absorption remains positive at 320,855 sf, but still down from net absorption of 709,247 sf in fourth quarter 2004. Downtown absorption in the first quarter was 77,180 sf, up from 39,884 sf in the last audited quarter. Under construction Downtown and expected to surface in 2006 is 505,000 sf of class A product.

"Downtown office space remains highly sought after," says Stan J. Sarnowski, Colliers Arnold's director of market analytics and geographic information systems. "Vacancies are absorbed relatively fast and [new] construction is evident Downtown as demand remains high."

The average class A rent Downtown is $23.70 per sf, full service. "Central Florida's economy is very much alive and growing," Sarnowski says. "Full service lease rates have been on the rise the past four quarters as vacancies have been declining."

Orlando's Eastside submarket, the largest at 11 million sf, posted a first quarter direct vacancy of 10.6% but showed a negative net absorption of 43,569 sf. The average class A lease rate is stable at 21.25 per sf, full service.

The suburb's highest profile office submarket, the 6.5-million-sf Maitland Center area, is at 15.7% vacancy, an improvement of three points from 17.1% in fourth quarter 2004. Class A absorption went from a negative 11,361 sf in the final period of 2004 to a positive net absorption of 114,342 in first quarter 2005.

The 31,000 sf of new office space nearing completion marks "the first time in over a year that this submarket will see new inventory," Colliers' Sarnowksi notes. Average rents are $19.80 per sf, up slightly from a low period in 2003. "It's a matter of time before they're over the $20 mark once again," the researcher says.