Confidence in Orlando’s office market is growing as firms take over 25,000 square feet of office space this year.
That’s according to a Q2 Orlando Office Market report by Marcus & Millichap, which says those numbers have surpassed the net absorption totals since 2020.
With a 3.9% increase in people using the office since the start of the pandemic, employment is expected to rise in the metro area by 5.3% due mostly to leisure and hospitality hiring. With Orlando’s lower office rents and growing workforce, the report says the area has a good chance of attracting firms returning from the work-from-home model, or who have relocated to Florida.
Eating Recovery Center, a program that helps people with food disorders, Astronics Test Systems, an aerospace company, and Luminar Technologies, an automotive tech company, are all examples of firms having a renewed interest in the city’s office market. Each company has acquired over 50,000 square feet in the past four quarters.
Just as confidence in the market has gone up, so has buyer interest as transaction numbers increased by 75% with the average sale price 8% to 258 per square foot.
According to the report, investors are particularly interested in local medical office properties, with Class B assets less than 50,000 square feet selling the most.
The development of office space is expected to increase this year by 1.3%, with medical office properties taking up a majority of that space. One of the largest projects in the pipeline this year is the AdventHealth Lego Building in Winter Park which will be about 300,000 square feet. The building is expected to be absorbed quickly.
Investors seeking mid-tier offices are active in Orlando’s Central Park and downtown, along with Southwest and Southeast Orange County. Fully-occupied buildings in the $1 million to $10 million price tranche are highly sought after, with first-year returns that can reach the low- to mid-7 percent range.
Compared to other major metros in the state, Orlando is seeing the second-lowest available office space at 12.7%, with the average asking rate at $22.87 per square foot, which is an all-time high for the city.
Investors interested in Class A offices are looking in the Lake Mary and Tourist Corridor areas and buying the properties through portfolio sales.
Luckily for buyers and people looking for opportunities, Orlando’s delivery volume is expected to exceed the city’s 10-year average of 690,000 square feet. The office stock is expected to expand by 1% for the first time in five years. A majority of the projects nearing completion will be in Orange County.