ORLANDO-Industrial building owners in Central Florida are enticing tenants by offering concessions such as free rent and unprecedented first-year lease rates, according to a midyear report by CB Richard Ellis. The incentives may already be working, with several large leases signed during the second quarter.
Average asking rents in the Orlando industrial market fell slightly in the second quarter, to $6.49 per square foot triple net, although vacancy rose at least two percentage points to 14.3%. Space absorption for the quarter totaled negative 1.5 million square feet, adding to a first-quarter loss of 460,000 square feet.
Part of the problem is that Orlando’s metropolitan unemployment rate topped 10% in May, doubling what it was a year earlier. Manufacturing jobs have taken a huge hit, though distribution space accounts for the vast majority of the area’s negative absorption, CBRE figures show.
Vacancy within the local market ranges from 6.3% in northeast Orange County to 17.7% in the county’s southeast quadrant. Asking rents in the second quarter ranged from $5.16 per square foot for manufacturing space to $11.25 per square foot for showroom space, CBRE says.
Construction has slowed by half over the past year, to 487,000 square feet, with 4.3 million square feet in the planning stages. Through the first half of this year, 984,000 square feet of new industrial space has been completed.
However, leasing activity has by no means ground to a halt, with LG Electronics taking up 96,000 square feet at Crownpointe Commerce Park in southwest Orange County. Southern Commercial Real Estate Advisors LLC says it signed that lease plus three others, totaling 185,000 square feet, over the past six weeks.
Although Orlando’s unemployment picture appears weak lately, there is a good chance that the numbers will return to normal levels over the next three years as the national economy rebounds. “It’s all about population growth and that’s going to come again,” Moses Salcido, a Southern Commercial principal, tells GlobeSt.com.
The University of Central Florida Institute for Economic Competitiveness forecasts that the number of manufacturing jobs in Orange, Seminole, Osceola and Lake Counties will drop from 39,900 to 36,300 over the coming year. However, several hundred jobs are expected to be added in subsequent quarters, reaching 38,600 by mid-2012.