Office space is filling up

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Metropolitan Orlando's office market entered 2005 on a strong note, with rental activity up and vacant space down in the final months of 2004.

"The Florida office market was phenomenal, and Orlando was right at the top of the activity," said Larry Richey, Central Florida regional manager for Cushman & Wakefield of Florida, a major commercial real estate brokerage that tracks this market.

Brokers are reporting strong demand for office space. And new construction is still at a low ebb, though some new projects have started and many developers are preparing to build.

"There's about a year window that will see supply dwindle, [then] the new space will start coming onto the market," said Steve Coughlin, a Cushman office specialist.

Tenants who want to take advantage of the market before the current recovery accelerates "should move right now," he said.

Cushman's fourth-quarter market survey showed overall vacancy at 16.5 percent, down from 19.7 percent in the year-earlier quarter.

Other brokerages posted even lower vacancy levels. Survey numbers can vary by the market size sampled and such things as a minimum sized building to be counted.

Advantis Real Estate Services Co. in Orlando said its fourth quarter overall vacancy level was 13.8 percent. Grubb & Ellis/Commercial Florida's Orlando office said it found an overall vacancy rate of 12.5 percent in the fourth quarter.

Each of the firms agrees that leasing activity is up and vacant space is shrinking.

Cushman's Richey estimated the amount of sublease space was cut in half by the end of last year. Sublease space is space companies have turned back to a landlord or no longer need and are trying rent themselves.

At one point last year, more than 1.5 million square feet of sublease space was being marketed.

The two strongest submarkets last year were Lake Mary/Heathrow, where inventory was reduced by more than 240,000 square feet, and the Southwest, where inventory fell by 276,707 square feet.

The report by Advantis says landlords are still aggressive in cutting deals -- meaning some concessions such as limited free rent are being offered.

Those concessions are expected to dwindle as the market strengthens. Particularly because relatively few new properties are under construction.

The Cushman & Wakefield survey found just 1.4 million square feet being built in the six major markets it covers.

Downtown Orlando has one major project under way: the office component of Cameron Kuhn's Premiere Trade Plaza, on Orange Avenue between Pine and Church streets.

A second big downtown office project -- the 27-story Dynetech Centre -- is expected to kick off sometime soon on Magnolia Avenue at Washington Street.

Dynetech Corp., a company that develops and sells software products and training services, is expected to occupy most of the building's 150,000 square feet of offices.

Construction at the Plaza

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Hopefully, this will speed up the construction of the Benchmark Tower and encourage a few tall office buildings in the Pizzuti Block.

Cant wait for the Vue and Dynatech to break ground in a few months and race to top out.