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 …
Market Reports
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 …
Alex Zylberglait CCIM, SIOR and Ryan Shaw of Marcus & Millichap answer pressing questions on the state of the Miami office market. • What trends do you see presently in office development in your area? Office development is relatively slow at this time except for the projects that were already in the works prior to the market downturn, specifically projects in Downtown Miami as well as in Coral Gables and Doral. Given the current market conditions, it is unlikely that we will see any significant development for the next few years. In addition, most office assets today could be acquired at below replacement cost therefore stifling the development of new product. There are a few exceptions that include some medical office buildings and some buildings that are being built as “green” buildings, which is a trend likely to be around for a while as long as there is development. In fact, many government tenants are requiring that any space they lease be in a building that complies with the latest “green” standards. • Who are the active office developers in your area? Rilea Group is active in Downtown Miami as is MDM Development Group, which is working on Met2, and …
1. What trends do you see presently in industrial development in your area? There are no new developments breaking ground and few nearing completion. There has recently been drastic increases in industrial product vacancy rates which, inherently, has compressed lease rates. I do not expect to see any new projects breaking ground until the current vacancies are absorbed and lease rates stabilize. 2. What type of industrial product is doing well in your area? Large warehouse/distribution buildings with 24-foot+ clear height continue to outperform the market vacancy rates but are still subject to lease rate compression as business revenues continue to decline. 3. Who are the active industrial developers in your area? Prologis Butters Construction REMS Group 4. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? The 595 Park of Commerce, located directly off I-595 halfway between Downtown Fort Lauderdale and Weston, has recently completed its first of three phases. Upon completion, the 595 Park of Commerce will consist of 18 office, retail and warehouse buildings. The developers, REMS Group, have been able to adapt to the challenging conditions of today’s market by offering tenants an array of …