Metro Orlando has experienced unprecedented growth over the past decade. Central Florida's four-county region (Orange, Osceola, Seminole and Lake) is currently rated as:
- The second fastest growing U.S. employment and population market;
- One of the top five office markets in the country;
- The third most prolific film and television production location in the United States;
- One of the fastest growing high-tech centers in the world;
- And, the strongest regional economy in Florida.

"A great deal of momentum exists in Metro Orlando today," says Ray Gilley, president/CEO of the Metro Orlando Economic Development Commission. "We are well on our way to becoming widely known as a center of excellence in two important industry sectors: tourism and technology. Our community's economic development initiatives will focus on diversifying our region's industry base to provide a full plate of opportunity for our citizens and their children. We firmly believe that Metro Orlando is well-positioned to be the premier business community of the 2't century."

This growth has spurred continued activity in all aspects of the commercial real estate market including office and industrial leasing, investment sales, and retail and hospitality development.

Office

The Metro Orlando office market contains some 30 million square feet in 12 primary submarkets with over 1.75 million square feet of new product coming on the market this year. It is projected that demand for new office product will remain relatively strong in all segments of the market.

Ranked Number 6 as the best market for investor opportunities (Integra Realty Resources Viewpoint 2001), Orlando's central business district continues to thrive as one of the five most active office submarkets in Central Florida. The CBD experienced major growth during 2000 with the addition of three brand new Class A high-rise office buildings. In addition to these new buildings, downtown Orlando is also experiencing growth through the redevelopment of older "troubled" buildings in the CBD. Cameron Kuhn, president of Kuhn Properties, has single handedly acquired some 14 properties in Orlando's CBD, creating a niche for entrepreneurial tenants who want something different from the standard amenities offered by other downtown office buildings. Kuhn's properties offer flair and a more eclectic feel for his tenants. "I believe that as long as Orlando keeps creating, developers will have the opportunity to fill both Class A and B properties," says Kuhn. "There is a current need for some 400,000 square feet of additional space in Orlando with only 200,000 square feet slated for new construction. I predict that the CBD market for both Class A and B tenants will remain strong and continue to grow for the next six years."

Other office submarkets are experiencing similar success. The Maitland Center submarket, which lies approximately seven miles to the north of the CBD, boasts the title of "Orlando's largest suburban office market" due to its approximately 5 million square feet of office product. This submarket faces stiff competition from the lower rental rates in the Lake Mary/Heathrow submarket; however, the 90 to 91 percent occupancy rate in this market has remained steady. Opus South Corporation completed the lease-up of Maitland Promenade I, the company's first Class A project in the Maitland submarket and is now focusing its efforts on the leasing of Maitland Promenade II, a 239,000-square-foot sister building which will deliver this July.

Maitland-based Realvest Partners and Longwood, Florida-based investor Mike Towers are planning a mid-summer construction start for the first commercial building at Springview Commerce Park, located just north of Orlando in DeBary. The first building will be a 50,000-square-foot facility on a 2.5-acre site at Springview. The 24 commercial sites in the park range from one-half acre to five acres, and each is fiber optic wired and broadband ready.

The Lake Mary/Heathrow submarket is one of the nation's fastest growing areas with new development continuing in the office, retail and multifamily sectors. This market has become a hub for many high-tech companies with firms such as First USA, Lucent Technologies and Veritas making Lake Mary their home. There are currently a number of new buildings under construction in this market that will, upon completion, bring the Lake Mary/Heathrow office submarket to approximately 4 million square feet. Developers such as Colonial Properties Trust, Kaufman Realty Group, The Pizzuti Companies and Duke-Weeks Realty Corporation continue to reap the rewards of this active submarket. Pizzuti has been one of the foundational developers in the Lake Mary/Heathrow area since 1995. That year the company purchased Heathrow International Business Center (HIBC), a 370-acre master-planned, mixed-use commerce park in Lake Mary. Since then, Pizzuti has built 1.6 million square feet of Class A office space, completed the park's infrastructure and built a 9-acre park within HIBC for tenant's enjoyment and community festivals. HIBC is home to Veritas, Fiserv, HTE, First USA, Convergys, all high-tech businesses and leading employers in the county.

Pizzuti currently has its 11th office building under construction, the 192,000-square-foot 1001 Heathrow Park Lane Building. The company also recently closed on a land sale in HIBC for a 300-room Marriott hotel, the first full-service business hotel in Seminole County.

Indianapolis-based Duke-Weeks Realty Corporation is also an active player in Lake Mary. The company recently signed Florida Power Corporation to a 10-year, 85,000-square-foot lease at Northpoint III, the third building at Northpoint Park of Commerce. The company plans to begin construction on the fourth building in the park later this year.

In the master-planned community of Celebration, Duke-Weeks recently completed the two-story Celebration Office Center One, and has begun construction on Celebration Office Center Two, an 80,334-square-foot, two-story building.

Industrial

The Orlando industrial market offers unique opportunities for investors. This market is inherently stable and should remain tight barring any catastrophic economic event. Traditional distribution facilities and high-tech industries continue to drive the industrial market. High technology has taken some recent hits on the stock market; however, it is predicted that this industry will continue to play a major roll in the industrial market's overall success.

Big box warehouses are still needed. In fact, developers are finding that in order to attract major players, they must build them bigger and better. Distributors are looking for features such as optimal communications capability, increased trailer storage, increased clear height and cross-dock capabilities. In order to succeed, developers must be flexible when designing warehouse facilities.

The Orlando industrial market currently boasts approximately 79 million square feet of product in seven primary submarkets in Orange, Seminole and Osceola counties. Demand in the South Orlando market remains strong with developers such as McDonald Development Company, Duke-Weeks Realty Corporation, ProLogis, Corporex and East Group Properties competing for business. "We continue to see the market confirm that the larger, first quality buildings with features such as cross-dock design, high parking ratios for cars and trailers and flexible configurations for tenant spaces will out-perform the market averages for achieved rate and market share," states Carl Fowler, vice president of McDonald Development. "We have seen a healthy balanced level of net absorption and deliveries of new space over the last year and expect that balance to continue through year-end 2001."

Duke-Weeks recently completed two buildings in Parksouth Distribution Center, a 60-acre, master-planned park. The company completed a 450,000-square-foot build-to-suit for Chase Treasury Technologies Corporation. Duke-Weeks also completed a 134,600-square-foot speculative building in the park.

The most active industrial submarkets include Southwest Orange County, the Airport Corridor and Polk County on the western edge of Orlando.

Looking forward into the remaining months of 2001, Orlando's industrial market is predicted to have another good year. Spec construction is in check and the threat of an overbuilt market is not looming in the shadows. Market activity may not be as fierce as in 1999 or 2000, but it is anticipated that the market will remain steady.

Multifamily "The Orlando multifamily market is awesome," boasts Cole Whitaker, senior director of The Apartment Group of Florida, a Cushman & Wakefield company. According to Whitaker, in 1999, Orlando was number one in new construction starts when compared to the entire United States. The year 2000 saw 12,000 new units, keeping Orlando near the top of the list.

"The net effect of the high number in starts is that there are certain submarkets that are experiencing some softness, resulting in concessions," says Whitaker. The Lake Mary and MetroWest areas are examples of such submarkets.

Absorption hit an all time high last year with over 9,400 units absorbed. Previous years saw an average of 7,000 units absorbed. Downtown Orlando is one area that's receiving a lot of attention from developers and renters-by-choice. Four properties are currently under construction, and a fifth has been completed. "The new urban development is going very strong," says Whitaker. "Rents downtown are in the $1.15 to $1.20 per square foot range. The highest rents recorded in Orlando are the downtown properties." The new high-end product in the suburbs is also geared toward attracting renters-by-choice.

Retail

New retail development in Central Florida has been happening at a frenzied pace for the past few years. As we continue into 2001, the retail market is still doing well, although the development cycle seems to have slowed significantly. Current projects are nearing completion and there are few major projects waiting in the wings.

The retail cycle is an interesting one. Now that construction has slowed, investors will sit back and wait as rents and occupancy levels rise. As these two factors increase, it is predicted that investor interest will also rise later this year.

The development of retail projects designed to attract the Orlando "locals" may be slowing, although the area's tourist corridor continues to grow in healthy spurts. The question arise: "Will International Drive ever be over built?" With the recent expansion of International Drive and the addition of more hotel rooms, it is predicted that retail development in this area will continue to grow at a steady pace.

Upscale retailers continue to come to Orlando, banking upon the "tourist corridor" for sales. Foreign tourists, particularly those from Great Britain, Brazil and other Latin American countries, are attracted by the variety offered by retailers and the attractive currency exchange rates. Florida Mall is currently home to Saks Fifth Avenue with Lord & Taylor and Nordstrom scheduled to open in February 2002 and October 2002, respectively. Mall at Millenia, Florida Mall's closest competitor, will be home to Bloomingdale's, Macy's and Neiman Marcus. These high-end retailers, known for their service and impeccable taste, should transform Orlando into one of the South's "high-end" fashion areas.

Tourism/Hospitality

The Orlando market continues to remain on the list of top accomplishments for the lodging industry. Orlando's ability to sustain high occupancy levels with room rates well above the national average while boasting one of the largest hotel inventories in the United States clearly illustrates the success of the lodging market.

There are a number of projects currently either under development or on the drawing board in the Orlando "tourist corridor." It is estimated that between 2000 and 2003, approximately 26,600 rooms will be added to the market, bringing Orlando's supply to 125,400 rooms. Given the number of projects underway, experts estimate that supply will start to modestly outpace demand growth, resulting in a slight downward trend in overall occupancy levels. The new upscale hotels won't need to worry though; it's the older, poorly located hotels that are in disrepair that have the most to lose.

Susan Lawrence, vice president of Marketing for Xentury City Development, located near Disney, says, "The 1400-room Opryland Hotel, located at our project and scheduled to open first quarter 2002, already has over 800,000 room nights booked. This indicates to us a near term need for another hotel that could benefit from its overflow bookings."

The year 2000 saw an overall increase in visitors to the market, due in part to Walt Disney World's Millennium Celebration. As the City Beautiful approaches the 45 million annual visitor mark, several new attractions are making their impact on the market and enhancing the overall draw to Orlando. Orlando hoteliers are betting on the enticement of the new attractions to boost attendance in 2001. According to Earnst & Young's hospitality group, the country's increasingly shaky economy could be cause for some concern.

The $700 million expansion of the Orange County Convention Center, which broke ground in March 2000, is anticipated to add approximately one million square feet of exhibit space by late 2003. When this expansion is complete, the Orlando Convention and Visitor's Bureau anticipates that group occupied room nights will increase by 30 percent over the current levels.

Although experts are predicting a decrease in occupancy with levels estimated to be in the 70 percent range, this will still be well above the 55 percent occupancy mark at which most hotels break even. Investors are still confident and remain willing to support projects in prime tourist locations. Given this, the Orlando tourist corridor should continue to flourish for some time.

These are exciting times in Central Florida. All areas of the commercial real estate market seem to be experiencing slight changes, forcing brokers, developers and investors to reevaluate their business plans and capitalize on new and innovative opportunities within our ever-changing marketplace.

Heidi C. Carter is director of marketing & operations for NAI Welsh in Orlando, Florida.


©2001 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.