SOUTHEAST SNAPSHOT, APRIL 2006

Orlando Office Market

Richard Solik, Senior Director, Office Brokerage Services, Cushman & Wakefield

Orlando has planned commercial growth in every direction. All of its major submarkets – Southwest Orlando, Downtown, Lake Mary, Maitland, University/Research Park – have developments underway or planned for the near future. An increase in job creation is the major driving force and has resulted in more office needs.

Originally, major planned developments were owned and committed by institutional companies. The recent shift to REIT and merchant-owned developers has created a short-term individual project approach to real estate. Under this scenario, the 10- to 15-year long-term projects are limited in every market throughout the United States. Fortunately for Orlando, the city has recognized the importance of long-term planning and has committed to undertaking major projects like Innovation Way.

Innovation Way is a 90,000-acre corridor that will link the University of Central Florida to the Orlando International Airport. The northern portion of the corridor already contains high-quality residential and commercial developments as well as the University of Central Florida Research Park. The southern portion remains largely undeveloped. Innovation Way is a collaboration between government and private developers, which sets it apart from most developments taking place in Orlando.

Some new developers to the area include Lauth Property Group and Panattoni Development Company. Colonial Properties Trust, Flagler Development Company, Liberty Property Trust and Eastgroup Properties are familiar with the area and have expanded their portfolios. As these developers expand their portfolios, Orlando has not witnessed a major office tenant absorb a majority of the space, but three significant leases were recently signed.

Lennar/U.S. Homes has signed an 81,416-square-foot lease in Southhall Center located at 101 Southhall Lane. KB Homes has signed a 56,414-square-foot lease in Gran Park at SouthPark 1200 located at 9102 South Park Center Loop. Centex Homes has signed a 52,142-square-foot lease in Maitland Colonnades located at 2301 Lucien Way. Depending on the submarket, the rental rates for leases like these range from $22 to $28 per square foot. Orlando’s central business district (CBD) and the Winter Park submarket have the highest asking rates, while the Southwest submarket is not far behind. Direct vacancy rates range from 5.8 percent in Winter Park to 13.4 percent in University/Research Park, while overall vacancy rates range from 5.8 percent in Winter Park to 19.7 percent in University/Research Park.

While Winter Park has some of the highest rental rates and the lowest vacancy rates in the area, submarkets to watch in the future include the CBD, South Orlando and Lake Mary. Like many CBDs throughout the country, Orlando is undergoing a major transformation from the traditional high-rise office buildings to mixed-use buildings with residential, retail and office components combined, making it more of a 24-hour live, work and play environment. Meanwhile, South Orlando and Lake Mary will each see development due to limited expansion capabilities in competing markets as well as the continued growth of Orlando’s job market. By year’s end, Orlando should be experiencing the expansion of existing businesses as well as the addition of new companies relocating to the Central Florida area. National tenants are expanding and Orlando is on everyone’s list as an alternative.

— Richard Solik is senior director of office brokerage services for Cushman & Wakefield in Orlando, Florida.

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