Sagging Industrial Market at 14.5% Vacancy

ORLANDO-Metro Orlando’s 31.1 million-sf industrial market of 306 buildings is on a roll–downwards. The direct vacancy rate in the third quarter has hit 14.53%, Trammell Crow Co.’s newest analysis shows. Net absorption is a negative 543,390 sf.

The 4.5 million-sf Bee Line submarket, second largest in Central Florida, is showing a direct vacancy rate of 24.12% with one million vacant sf and a third-quarter net absorption of 185,136 sf. But that number is an improvement from a 28.37% vacancy mark at year end 2001.

The largest submarket, the 10-million-sf Orlando Central Park/Sand Lake West market is at a 13.7% vacancy level with a negative net absorption of 377,617 sf.

“Orlando’s industrial real estate market continues to be affected by escalating vacancy rates, negative net absorption and a declining rental rate,” Crow research analyst Lisa M. DeVore says in her report.

“While normal economic volatilities do not typically impact local industrial real estate cycles as drastically as other product types (such as office and retail), that point can easily be overlooked when the local market is faced with the real estate metrics that we are currently witnessing,” DeVore says.

Average asking distribution space rent is $4.46 per sf; flex, $8.57 per sf.By submarket, average asking rents at OCP/Sand Lake West are $4.29 per sf; 33rd Street, $4.96; Altamonte/Longwood (775,787 sf), $4.51; and Silver Star Road (3.1 million sf), $4.60. The Crow report doesn’t show average rents for the Regency submarket (nine buildings, 806,158 sf); Downtown (four buildings, 256,510 sf); and University (one building, 83,375 sf).

The 31-building Silver Star Road submarket had the only positive net absorption, 145,208 sf. New construction is on hold. The only spec project is the 90,000-sf Monroe Commerce Center under way in the Longwood/Sanford submarket. Completion is expected in December.

Big leases were also scarce in the third quarter. Jet Corr’s 110,171-sf warehouse/distribution building at 2222 Diversified Way, was the largest. Next in line were Fidelity Title Insurance Co., 68,000 sf at Cypress Park and Benjamin Moore & Co., 78,295 sf at Park South Distribution Center I.

“Mirroring a trend in the office market, the biggest impediment to a local industrial market recovery is the large amount of sublease space that remains on the market at rental rates that are creating downward pressure on asking rental rates market wide,” DeVore says. She estimates total sublease space at about 1.3 million sf.

New product for all of 2002 totals 276,551 sf.