ORLANDO-New construction totaling 1.7 million sf, up 13% from 1.5 million sf in fourth quarter 2005, could alter an otherwise positive class A, B and C office picture this year, predicts locally based Grubb & Ellis/Commercial Florida. Downtown construction alone accounts for 545,909 sf.

The metro area’s 48.2-million-sf office market has posted its ninth straight quarter of positive net absorption in the first 90 days of 2006. Vacancy has improved to 9.4% from 10.4%. Average quoted rents are stable at $24.47 per sf Downtown and $22.15 per sf in the suburbs.

“Most markets are seeing construction continue despite increased costs,” says Jeffrey Sweeney, managing principal and president of Grubb & Ellis/Commercial Florida. But “major developments in and around the CBD may soon cause the market to soften upon delivery in third quarter of 2006,” he predicts.

Net absorption increased to 719,362 sf in first quarter 2006 from 439,299 at yearend 2005. Downtown’s 7.6-million-sf inventory led the submarkets with 377,224 sf of net absorption. The seven-million-sf Maitland and Maitland Center submarket followed Downtown with 154,118 sf. East University showed 124,996 sf of positive absorption. Lake Mary/Sanford had 102,627 sf.

In the negative column, however, were Altamonte, Longwood and East Seminole County with minus absorption of 56,764 sf; Brevard County, 81,039 sf; Lee Road, 41,616 sf; and Lake County, 200 sf.

Downtown was also strong in the occupancy column, showing 9.5% vacant among its 7.6 million sf of inventory. In the suburbs, Winter Park’s 1.85 million sf is 4.4% vacant; the 8.5-million-sf Southwest/Tourist submarket has 6% vacancy; Lake Mary/Sanford’s 5.46-million-sf is 8.3% vacant; and East University’s 6.4 million sf is 8.4% vacant.

By class in all 12 submarkets monitored by Grubb & Ellis, A space totaling 18.8 million sf has a 10.6% vacancy with two million sf available for lease. The 19.7-million-sf class B markets are 9.5% vacant with 1.87 million sf available. And the 9.5-million-sf class C submarket is 7.2% vacant with 687,648 sf available.

Rents “have remained relatively steady with a 30-cent increased in class B rents,” notes Sweeney. However, “with increased construction costs and a tightening market, less space will be available and rents will rise,” the broker forecasts.

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