“The Orlando industrial market is robust with significant demand across all sectors. Tenant, user and investor demand is at an all-time high with limited options available in the market. The Orlando region of Central Florida has positioned itself as a clear distribution hub for the state of Florida. Our population continues to grow exponentially due to the attractive business environment, no state income tax and an exceptional quality of life. — Richard T. Davis Jr. – Executive Managing Director, Central Florida
Located on the eastern side of Florida’s growing I-4 corridor, the Orlando industrial market is one of the fastest growing, and most dynamic, industrial markets in the country. More than 21 million people live within 250 miles of the market’s core, making it an ideal location for retailers, wholesalers and third-party logistics (3PL) to locate. Orlando is also home to a burgeoning millennial population, making the market extremely popular for last mile facilities. While many parts of the country struggle with labor shortages, Orlando, and the entire Central Florida region, have an employment concentration that exceeds the national average. This large available workforce greatly benefits both foreign and domestic logistics companies as well as industry-focused educational programs, including Polk State Corporate College Supply Chain and Logistics Institute and Florida Polytechnic’s concentration in material & supply chain.
Both the Orlando and Tampa industrial markets have the benefit of being located near Polk County, one of the top logistics regions in the state. The region is home to strong ground and rail freight capabilities, including the CSX Integrated Logistics Center (ILC) in Winter Haven. The ILC has also been a major boon to Central Florida’s logistics and distribution industry. This centralized transportation hub features a 318-acre terminal adjacent to 930 acres of industrial and business park space slated for use by light industrial facilities and warehouse distribution centers. The state-of-the-art facility uses cutting-edge technology that is both highly efficient and environmentally conscious.
The Orlando industrial market, which encompasses Orange, Seminole and Osceola counties have experienced continued vacancy rate declines since the end of the recession. The overall 2017 vacancy rate finished at a decade low of 4.5%, 20 basis points lower than 2016, and significantly lower than the recession-high vacancy rate of 13.8% in 2009. The region continued to see significant in-migration of large tenants, despite the market’s limited new construction of large, cross-dock facilities.
The region absorbed just under 1 million square feet in the fourth quarter of 2017 bringing the 2017 total to 2.7 million square feet. While the annual total did not keep up with the 4.1 million square feet absorbed in 2016, it remained significantly higher than the decade average of 1.5 million square feet. The fourth quarter saw increased activity from tenants under 25,000 square feet with very few options above 125,000 square feet. The influx of new tenants to the market, alongside record low vacancy, has benefitted several properties that previously experienced chronic leasing challenges. The southeast, southwest and northeast submarkets were among the most active in the fourth quarter, with the southeast submarket seeing the greatest uptick of activity with more than 500,000 square feet of positive absorption. The corridor along Interstate 4 also saw increased interest from large tenants.
More than 2.5 million square feet of construction was completed in 2017 with most occurring early in the year and only 165,000 square feet completed in the fourth quarter. While 2.5 million square feet was the highest amount of new development in the region since 2008, it is still not at the level to quench occupier demand. Despite robust demand for new industrial development, under construction product finished 2017 at 2.1 million square feet, slightly lower than the 2.3 million square feet under construction at the end of 2016. Most of the new development is located in the western part of Orange County where the markets are closest to logistics hubs in nearby Polk County.
With lower vacancy rates come higher asking rates. The Orlando region finished 2017 with an asking rent of $6.45 per square foot per year for all product types — the highest rate since 2008. Asking rates finished the year at $5.84 per square foot per year for warehouse space and $10.05 per square foot per year for flex space. Investor demand for industrial product is as strong as ever in the region, marked by the steady rise in rental rates and decline in vacant stock. The growing presence of e-commerce occupiers along with easy access to debt, has placed industrial product as the favored asset class among investors and lenders in the region.
|Inventory||Overall Vacancy Rate||Overall Net Absorption||New Supply (Construction)||Under Construction||Asking Rental Rate (PSF/YR)|
|Overall Vacancy Rate 2016||Overall Vacancy Rate 2017||Asking Rental Rate 2016||Asking Rental Rate 2017|
500,000 SF +
Source: Colliers International
For more insights, learn about the top 10 U.S. industrial emerging markets positioned to experience the most robust increases in demand from occupiers and owners. And stay tuned for more Industrial Markets of the Month!
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James Breeze is National Director of Industrial Research for Colliers International in the United States. Based in the Greater Los Angeles area, he prepares quarterly and specialized industrial research reports and interprets trends and data across the country.