The market for office space is still in the doldrums, but brokers say Orlando is on the cusp of a recovery, with vacancies going to fall and even new office buildings going up.
Brokers cite "chatter" from companies interested in space and say the scuttlebutt is that building announcements are on the way. Construction would be a major step forward, showing confidence that the market is truly rebounding.
Right now, there are only two office projects under way, compared with scores of hotel, commercial and residences being built in the area. The office projects total 72,450 square feet in Lake Nona and 17,124 in Orlando's central business district.
Despite the dearth of projects, brokers that specialize in office properties have a bit of spring in their step. "Office leasing is improving, which will fill up some vacancy rates," said Bill Moss, senior managing director at CBRE in Orlando.
Moss also said not to rule out new office buildings being announced for downtown and in Lake Mary by the end of the year.
To be sure, the Orlando area has a ways to go. The vacancy rate at the end of the first quarter was 16.5 percent. Moss said a normal rate is between 10 percent to 15 percent and he expects it to get there in the next 12 to 18 months. Also, the 16.5 percent is more than 100 basis points better than the 17.3 percent in last year's first quarter.
"Even though the rate of absorption hasn't been robust, you find the number of calls you're receiving and the number of leases we are negotiating have increased," said Jeff Sweeney, senior director of office brokerage services at Cushman & Wakefield in Orlando.
It's not that the area lacks office workers. Just as Orlando's overall job growth is exceeding other parts of the state, the area's office employment exceeds other parts of Florida and has passed its pre-recession level.
Part of the decline in office space use 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.
But now things are loosening up, Sweeney said. "While we are not in an acutely tight market, the tide has changed and now we are starting to absorb office space."
There are four areas in and around Orlando that are seeing a definite pick-up in demand, Sweeney said.
- Downtown Orlando, driven by the millennials wanting to live there and the desire to be away from I-4 construction.
- Lake Mary/Heathrow, driven by the Seminole County public schools and new buildings going up.
- Maitland Center, which is less expensive than other areas.
- And Central Florida Research Park, driven by technology companies expanding.
"We're seeing a lot of companies coming to us and saying we need more space and we haven't seen that in five or six years," Sweeney said.
Among companies that are expanding is an architectural firm that was given a contract with a national retailer that is adding 30 stores.
Cushman & Wakefield is also working with a national hospitality company that is based in Orlando and needs more space and a homebuilder that is in the same boat.
Sychrony Financial, a GE spin-off, just signed a 100,000 square foot, 10-year lease in Altamonte springs.
And in terms of interest from outside the market, Cushman & Wakefield is aiding a corporate relocation firm that that is looking for 100,000 square feet.
Sweeney also points to the prepping for construction of two office buildings at Millenia Lakes next to Millienia Mall.