The Orlando office market has been recovering during the past 90 days in all aspects and classes. The vacancy rate has been improving. During the third quarter of 2011, it was between 16 percent and 18 percent, which is in line with the national average. According to REIS, the Sanford and Maitland submarkets have the lowest vacancy at 12 percent and 14 percent, respectively. Sales have been steady, especially bank-owned office buildings, which are trading around 20 to 30 percent below cost. One of the most noticeable sale transactions was $60.8 million sale of the 476,000-square-foot Bank of America Center in downtown Orlando, which Eola Capital sold to Parkway Properties Office Fund II LP in May of last year. Additionally, in October of 2011, Blackstone purchased Duke Realty’s office portfolio, totaling 10.1 million square feet for $1.08 billion. Included in that portfolio were a few assets in Orlando. There are also a few bank-owned office buildings that are under contract and expected close early next year. The Interstate 4 corridor from Disney to Sanford seems to be a hot spot for development as many companies are looking for more exposure and better access. Duke Realty is building the 133,000-square-foot Kirkman …
Market Reports
I am pleased with this quarter’s findings, not ecstatic, but pleased. After adding more than 200,000 square feet of office space to the market in the last two quarters, I am happy to announce that we have absorbed nearly 60,000 square feet this quarter. This is the first decrease in the amount of office space since the fourth quarter of 2010. This was due in large part to the sale of the CH2M Hill building along Williston Road, which accounted for 31,000 square feet of the 60,000 square feet in this report. Nationally, we saw the largest absorption of office space since third quarter 2007 (12 million square feet). Office fundamentals have improved locally. Vacancies are decreasing, there are fewer concessions, rates are stable, and lease terms are increasing. Regarding concessions, for those being asked for by tenants, landlords are replying with a demand for longer-term leases. The good news is that tenants are agreeing to them, hopefully because they see a brighter future in their own business. In terms of vacancies, there is a notable difference in showing and lease activity, perhaps because there is less uncertainty in the business world. This is further evidenced by the longer-term deals …
Amid the current economic uncertainty, the office market continued to mark positive gains within the third quarter seeing 193,955 sq. ft. of positive absorption. Although well short of pre-recession levels, this quarter’s performance shows a steady increase in leasing velocity as the Orlando market has averaged only 119,881 sq. ft. of quarterly absorption over the past year. The Orlando economy has continued to stabilize. Monthly decreases in unemployment have become somewhat of a trend as the latest local unemployment statistics for August saw a year-over-year decrease from 11.7% to 10.3%. This sustained trend does wonders for local economic sentiment, especially among small business owners whose bottom line is highly dependent on the spending habits of other businesses within the local market. The Orlando CBD saw another quarter of positive absorption with Class B space leading the submarket to a total net gain of 26,352 sq. ft. Maitland Center is also beginning to show improvement with 31,289 sq. ft. of positive absorption. The majority of this quarter’s positive gains were seen in the Southwest submarket which absorbed 93,145 sq. ft. of space amid a mix of expansion and new tenants. Average rental rates rose slightly to $20.68 overall. Also noteworthy this …
The Orlando multifamily market has exhibited noticeable improvement this year, and is gaining momentum toward a very strong recovery. After 3 years of rent and occupancy losses due largely to the global recession, apartment fundamentals in Central Florida have registered gains again in 2010. With more than 207,000 new jobs expected locally through 2015 and a very favorable supply/demand balance during the next few years, investors see strong upside in the Orlando apartment market moving forward. Sales volume in Orlando has increased significantly through mid-year, and is up from the historic lows of 2009. Through June, the local market has seen approximately $188 million in multifamily sales — already approaching last year’s total of $219 million but still largely off the 2005 high of $3.2 billion. Cap rates have compressed considerably during the last several months, and most buyers are securing Freddie Mac debt on new acquisitions. Lenders have been the most active sellers in 2010 thus far, and institutional buyers have returned to the acquisition market. New private equity groups — both national and foreign — have also been drawn to Orlando during the last 12 months. Average rents are projected to increase about 1 percent in the second …
Orlando retail vacancy will rise again in 2010, partly as a result of significant blocks of vacant space in properties built during the past few years. While slumping demand has affected all vintages of assets, the vacancy rate in shopping centers constructed since 2007 topped 20 percent last year, much more than the marketwide rate for all properties. Continuing softness in the job market will reduce store visits and suppress spending, further influencing spacial demand and limiting the number of tenants available to fill new shopping centers. Additions to supply will not be a major factor this year, however, as completions will fall to the lowest annual level in at least 30 years. Housing starts, typically a precursor of retail property development, declined for four consecutive years through the end of 2009. Home building will likely remain depressed in 2010 while the economy continues to stabilize, thereby deterring retail developers. Following a year in which 39,400 jobs were eliminated, employers in Orlando will trim 1,000 positions this year, a 0.1 percent decrease. Completions will drop from 900,000 square feet in 2009 to 300,000 square feet this year. Falling rents and rising vacancy will force the delays of some developments currently …
The Tampa market has passed through the most severe phase of the recession, a period during which the apartment vacancy rate climbed 360 basis points. In some Pinellas County submarkets, vacancy will surpass 11 percent this year as the local unemployment rate exceeds metro and state levels, while subdued population growth will reduce housing demand. Hillsborough County submarkets, meanwhile, will fare somewhat better as completions slow. Still, sluggish demand will be behind apartment performance, forcing owners to continue to offer concessions to maintain sufficient occupancy levels. The metro area’s vacancy rate is expected to be among the highest in the country this year, and revenues will contract sharply. In 2010, employers will cut 4,000 jobs, a 0.3 percent reduction, but an improvement from last year, when 51,000 positions were eliminated. Developers are forecast to complete 1,000 units this year, down from 1,400 new rentals in 2009. Planned projects total about 5,100 units, or 3 percent of existing stock. Although supply growth will ease in 2010, demand will remain weak, resulting in a 30 basis point rise in vacancy to 10.8 percent. Last year, vacancy climbed 180 basis points. This year, asking rents should fall 3.8 percent to $767 per month, …
Multifamily brokers in Orlando are breathing a little easier this quarter. Officials certainly aren’t carefree, but the market is starting to gain traction and generate some forward momentum, which is a positive leap toward a recovery. Property occupancy levels have risen, and brokers have witnessed concessions getting smaller. Subtle rent growth is a present factor in the current market, which is more than anyone could say 6 months ago. “We feel a little better telling our story these days than we did at the beginning of the year,” says Shelton Granade of CB Richard Ellis’ Orlando office. “Over the last 90 to 120 days … we’ve been seeing and feeling some modest improvement.” During the summer, properties Granade took to market started getting attention from multiple buyers, a stark contrast to the lack of enthusiasm felt during the depths of the downturn. Most of the minimal sale activity is fueled by the private equity investment market because these firms have cash to pony up in a tight financial landscape. There has also been a bit of foreign investment, especially from Canadian and South American companies. “More people are entering the game,” he says. Tenants are looking to lease space and …
It’s been one long, uncomfortable summer for the Orlando hospitality industry. Unfortunately, there seems to be no relief in sight for hoteliers anytime soon. At the beginning of 2009, the Orlando market had 438 hotels totaling approximately 111,700 rooms, a number that is second only to Las Vegas. Orlando will have added another 3,775 hotel rooms by the end of this year; during 2010, the area will introduce another 1,000 rooms. While some existing hotels are being closed permanently and others are just shut temporarily for renovation, it is hard not to believe that the Orlando market will be playing catch-up for many months in an effort to absorb this new supply. The slide started late last year when occupancies stopped advancing after a 5-year climb. For year-end 2008, the Orlando market overall was down 3 percent in occupancy but up 3 percent in average daily rate (ADR), leaving revenue per available room (RevPAR) essentially unchanged during 2007. However, by the end of the first quarter of 2009, both occupancy and RevPAR dropped to their lowest levels since 2002. Occupancy was actually 2.8 percent below 2002 levels, and ADR was off almost 7 percent from the same period, making the …
Demosthenes G. Mekras of Marcus & Millichap gives his take on the multifamily market in Miami-Dade County. • What trends do you see presently in multifamily development in your area? Multifamily development for rental projects has been limited to non-existent. Builders are expected to complete 380 units in 2009. This is a drop in the bucket in terms of supply, so one would expect for the fundamentals to be advancing on that metric alone. Unfortunately, continued local job loss and the shadow market have depressed rents and increased vacancies across the board. No class of building or size of project has escaped this downturn, and that is true for every submarket in Miami-Dade County. • Who are the active multifamily developers in your area? Affordable housing developers, such as Pinnacle Housing Group, have clearly been the most active, but they are not entirely sheltered from the turn in the market. In the market-rate arena, the most notable developer has been J. Milton & Associates, a local multifamily developer, owner and operator that is arguably the largest private owner in Miami-Dade County. They have a 97-unit tower under construction in the Fontainebleau submarket west of Miami International Airport, which is slated …
Barry Wolfe and Michael Zimmerman of Marcus & Millichap sit down with REBusinessOnline.com to give their take on the South Florida retail sector. • What trends do you see presently in retail development in your area? While a recovery in the retail property sector may not start for several more quarters, the slowing in construction will help to set the stage for an eventual rebound in occupancy and rent growth. There is little to no construction currently beginning in South Florida; therefore, completions in 2009 will fall considerably less than the average posted over the past 5 years. • What type of retail product is doing well in your area? Retailers holding up well during the on-going recession are necessity-based retailers such as grocery, drug stores and gas stations. Retailers offering lower price points on their goods and services, such as Dollar General and Family Dollar, are also doing well. • What retailers are new to your area? Kohl’s continues to open stores throughout South Florida. Anthony’s Coal Fire Pizza is also expanding. Otherwise, we are seeing minimal retail expansion and development in the current market environment. • Please name one or two significant retail developments in your area. What …