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ORLANDO-The area’s seven million-sf service center and flex space market, along with the 13.5 million-sf bulk warehouse sector, are recovering slowly but leasing activity remains flat, according to a new study by Maitland, FL-based Rebman Properties Inc.

In the 69-building service center category, the vacancy level has dropped to 16.4% from 18 % in the second quarter. But with projected annual net absorption of only 200,000 sf, it will take six years to absorb the 1.1 million sf available in this south Orlando market, says Lyle N. Nelsen, Rebman’s corporate and industrial specialist.

“That’s a big challenge,” Nelsen says, especially since third-quarter net absorption totaled only 41,434 sf. Only seven out of the 69 centers monitored quarterly by Rebman reported negative absorption.

“Twenty centers reported a gain, leaving 42 centers remaining the same as last quarter,” the broker says. “This, again, reflects a slow-moving market.”

Still, Nelsen says, “there were pockets of good activity throughout the southern region with the airport area showing the most action.” He says demand for Orlando International Airport–related space, such as freight forwarding, “picked up considerably this past quarter.”

However, the trend among larger companies to consolidate and shrink staff continues, Nelsen notes. And another trend of companies beginning to build or buy their own headquarters buildings rather than leasing the space is also increasing. As an example, Nelsen cites Florida Metropolitan University which vacated 34,280 sf in Sand Lake Center and moved into a build-to-suit property.

“Moves like that have a big impact on this market,” the broker says. Only one new flex building is under construction and scheduled for completion in first quarter 2004. That is the 35,000-sf Global Business Center on Hoffner Road where Fred Beasley of ComTech Properties is the leasing agent.

Another new 85,000-sf building at Orange Avenue and Pinelock Street is scheduled for completion in second quarter 2004. Mary Hurley of Pinelock Management is the leasing agent.

The competition for credit-worthy tenants remains strong with rates “under siege and incentives always a negotiating issue,” Nelsen says. “It’s a tenant-driven market with tenants now demanding cancellation options, which haven’t been on the table for years.”

The broker is spotting still another developing trend in the service center and flex space market in the metro area. “While large users are downsizing and leaving the service center market, small companies remain active,” Nelsen says. “The demand for small spaces seems to be increasing with rental rates on those small spaces increasing slightly.”

In the 13.4 million-sf bulk distribution warehouse market, the same slow leasing scenario continues, reports Greg Rebman, a senior broker at Rebman Properties. Although the vacancy rate dropped slightly to 16% from 16.6% in the second quarter, there was only 74,755 sf of absorption during “a very slow quarter of industrial leasing,” Rebman says.

A total 2.1 million sf remains available for lease. Net absorption through the third quarter was a negative 113,193 sf. Rebman had earlier projected 500,000 sf in positive net absorption for 2003.

“While the market seems to be picking up somewhat in building sales, there are few leases being signed,” he adds. The largest leases of the quarter were Magnetix’s contract for 89,658 sf at Center of Commerce Building 915 and Parcel Direct’s 71,000-sf contract at Beeline 1 in Orlando Central Park South.

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