Metro Orlando Office Market Caught in Limbo Due to COVID-19, Remote Workforce
Contrary to what is often portrayed in the national media, the Orlando office market is not a monolith. It instead comprises multiple submarkets, many of which are recovering quite differently. For example, according to data from CoStar Group, Winter Park had a 4.7 percent availability rate (that’s direct and sublease space combined). The Downtown Orlando market, on the other hand, had a rate of 16.9 percent. The total Orlando MSA office availability rate was 11.5 percent, which compares to the national rate of 16 percent.
All of these numbers just prove that the recovery from the pandemic is uneven, even in areas in close proximity. It’s easy to get lost in analysis, but the basic answer is that the office market in Orlando, just like in the entire country, will recover in time. Not all areas will be on the same timeline, and the office market will never look entirely the same.
Between working from home and companies deciding to relocate their offices or headquarters entirely, there will be some short-term winners and losers. Texas, for instance, is having a relative boom in new tenants. Los Angeles, and indeed California in general, on the other hand, is not. Many companies have re-thought the amount of space they need as many of their employees are working from home and are content to continue to do so.
Here in Orlando, both location and the type of office product are making a difference. Winter Park versus Downtown Orlando is a good example as the office market in Winter Park is more spread out area-wise, meaning that traffic isn’t as congested and it’s easier to access. The buildings tend to be more low and mid-rise, so there’s less exposure for contagions in the elevators and stairwells for tenants. There’s mostly surface parking, which leads to fewer encounters between people.
Downtown, on the other hand, is highly concentrated, leading to traffic congestion. The buildings are usually high-rises, which means a lengthy elevator trip in close quarters or climbing several flights of stairs. Parking garages are another pain point, both for ingress and egress and the close quarters for tenants.
The main driver of the current state of the office market is, of course, the pandemic and recovery. Just as it looked like we as a nation and locally looked like the corner had been turned and we were on an upward trajectory, the Delta variant exploded COVID-19 numbers.
Nationwide, many high-profile companies have paused or postponed bringing employees back to the office. Apple and Google pushed back their date from September to October. Lyft, Amazon and Indeed moved from September to the beginning of 2022.
Working from home (WFH) switched from a minority to a majority of office workers, almost overnight. A year and a half later, the WFH experience has become normal.
Our office is a good microcosm of the general attitude of employees. A few have continued to come into the office, a few never want to come back at all and the majority switch between working from home and coming into the office, changing the percentage of time in the office depending on what’s going on with their team projects that week.
Going forward, it’s unimaginable that working from home isn’t available to employees at least part of the time. Working from home 100 percent of the time may or may not be truly sustainable over the long term, but the time to make that assessment isn’t right now. That determination will have to wait until COVID-19 risks have returned to a more normal status.
In short, the long-term prognosis for the office market in Orlando and the entire country is good. There will continue to be some unknowns as companies push back their reopening dates, which delays their ability to truly assess their needs going forward.
By the end of 2022, most of these decisions should be made and the new normal will likely be in place. I highly doubt that the concept of the office will ever go away, but it will be transformed going forward, and that metamorphosis hasn’t yet completed.
— By Patrick Mahoney, CEO, NAI Realvest. This article was originally published in the August 2021 issue of Southeast Real Estate Business.