ORLANDO-Like metro Orlando’s 39 million-sf office market, the area’s 92 million-sf industrial sector is showing no signs of a slowdown. Third-quarter vacancies of 8.9% are down from 9.1% in the second quarter, even though 657,140 sf of new product was delivered. “The market continues to defy predictions of a slowdown,” Michael Shelton, vice president of Grubb’s Orlando industrial services group, tells GlobeSt.com.

Net absorption is averaging 800,000 sf per quarter with a nine-month absorption tally of 2.55 million sf. What the Orlando industrial market could use, however, are more spec warehouse and distribution projects in the 25,000-sf to 50,000-sf range to accommodate smaller users, according to a third-quarter study by Grubb & Ellis Co. Developers are largely ignoring the little guy to focus on big-box projects for national clients.

“Although we are seeing an extensive amount of new construction (1.4 million sf in the third quarter), the product being built serves the needs of flex space users and large, 150,000-sf-plus warehouse/distribution tenants,” Shelton says. The shortage of smaller product is triggering an active built-to-suit category.

Rents are all over the place. verall warehouse/distribution rents are down while R&D/flex rates are up from second quarter. Average asking warehouse/distribution rent is $4.37 per sf, down nine cents. Average R&D/flex space is $8.01 per sf, up 13 cents. “Look for rental rates to fluctuate as developers use incentives to attract new tenants and retain existing tenants,” predicts Shelton. “While demand remains strong, we do not anticipate a trend of declining rates.”

In Charlotte, like Orlando, industrial vacancies are down but may not stay down for long, some market observers fear. Seven warehouses totaling one million sf are under construction. Still, the vacancy level is at 10%, down from 15% in fourth quarter 1999, according to Karnes Research Co. of Charlotte. Third-quarter net absorption of 486,000 sf was up from 411,000 sf in the second period.

The robust nine-submarket, 335 million-sf Atlanta region, however, is taking its third-quarter, 15.2%-vacancy level in stride, as 10.8 million sf of new product gets ready to surface in 2001. Still, the region absorbed 4.2 million sf in the third quarter, despite net deliveries of 591,178 sf, according to Richard Bowers & Co.’s research division.

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