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Office developers missing economy's recovery

While commercial, industrial and residential projects have made a sharp comeback from the recession, with ground once again breaking regularly for these developments, one type of building is woefully lagging -- office properties.

It's not that the area lacks for office workers. Just as Orlando's overall job growth is exceeding other parts of the state, the area's office employment exceeds other primary Florida regions and has passed its pre-recession level.

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Miami and Jacksonville have also regained all office employment lost to the recession, but they have done so at a slower pace than Orlando, while Tampa has yet to fully recover, according to the business intelligence group at the Orlando Economic Development Commission.

But while office employment is solid in the Orlando area, the current office vacancy rate is 16.5 percent. The figure is more than twice that of industrial space, at 8.1 percent.

The situation has left office property developers with scant building to do and still at the downside of the cycle because builders do not tend to switch to different types of construction.

"Since builders tend to specialize, the office space developers have turned their focus to largely managing existing buildings," said Bill Moss, senior managing director at CBRE, Orlando. "It's what the opportunity is for them."

Last year, the only office construction in the Orlando area was 220,000 square feet for Verizon in Lake Mary. This year, two buildings totaling 89,500 square feet are scheduled for completion, with one being the 72,000-square-foot Lake Nona Town Center.

Conversely, on the industrial side, last year 1.5 million square feet was built. And so far this year, 143,000 has been completed, with another one million under construction.

"It's unlike anything we've seen in the past," said Elizabeth Ramirez, associate director for business intelligence at the Orlando Economic Development Commission.

Ramirez said part of the decline is due to regional employers following a national trend and moving toward using open spaces for their workers instead of offices that take up more space.

Also, when companies downsized during the recession many had no choice but to hold onto their office space even while letting go staff. Now that they are hiring, the new employees are filling spaces that were occupied by former workers.

Ramirez is not optimistic about hiring equating to new office space building anytime soon.

"Exactly when continued strong growth in employment will spark genuine office absorption remains unclear," Ramirez said. "We might not see construction for some time."

But the excess is likely to be absorbed eventually, with existing space filling in and Orlando's attributes assisting the recovery.

Steve Dorfman, CEO of Health Benefits Center, said he is expanding his Hollywood, FL-based health insurance brokerage into Orlando in September, planning to take up 8,000 to 10,000 square feet.

Orlando "is a booming market," Dorfman said. "And the real estate is still relatively reasonably priced compared to other metro areas."

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Dorfman added that "the intelligence" of the workforce is also a draw and that he plans to hire 150 to 200 staff.

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