A Closer Look at Orlando’s Office Market
- Oct 04, 2018
Orlando continues to lead the state in job creation. Fueled by an increasing number of digital media, software and entertainment companies, the professional and business services sector is boosting office demand, especially in the city’s central business district.
With more than 15 years of experience in commercial real estate, Executive Managing Director Todd Davis joined Colliers International Central Florida in 2009. He now oversees an office portfolio in the region and represents several tenants. In an interview with Commercial Property Executive, he evaluates the factors that drive demand for office space in Orlando, as well as the challenges in this industry.
What projects are in the works now, and how will they influence the Orlando market?
Davis: For the first time in this real estate cycle, we’re seeing speculative development, both in southwest Orlando as well as Lake Mary, and both are having success. TPA Group, a private real estate investment, acquisitions and development firm, is nearing completion on a 120,000-square-foot speculative building in Lake Mary and has already preleased approximately half of the space. In southwest Orlando, a private Brazilian investor built a speculative 135,000-square-foot building and it has been fully leased to two tenants, Lockheed Martin and Disney. Disney was a legacy tenant in the first phase of the project, but Lockheed was new to the office park.
In the CBD, the SunTrust Plaza, which is currently under construction, is Orlando’s first transit-oriented development that will have a SunRail station. It’s a mixed-use property with a 180-key hotel and office component of approximately 200,000 square feet. I believe it is already close to 90 percent occupancy and it’s expected to be delivered in the third quarter of 2019. That’s very positive. The Orlando Magic just started preleasing their office building, as part of the new Sports Entertainment District complex that will be located adjacent to the existing arena on the west side of Interstate 4 and the Church Street area.
Which submarkets are seeing the highest demand for office space and what factors are contributing to this?
Davis: The Orlando market has seen a lot of positive absorption over the last few years, with demand drivers differing in each submarket. For example, financial institutions, legal, tech and engineering/architecture firms make up the majority of the tenant mix in the CBD. Demand in east Orlando is driven by the defense and simulation industry, while demand in southwest Orlando is driven by construction, vacation ownership and timeshare companies, as well as the entertainment and attraction affiliated companies.
What are the emerging submarkets investors should keep an eye on?
Davis: The CBD and Lake Mary are the two core office markets in Orlando. However, Lake Nona and Medical City are up-and-coming. Tavistock Development Co. has helped transform the way communities are being designed around the live-work-play lifestyle in this part of the state.
What are the biggest trends in office development?
Davis: Companies, for the most part, want open, efficient space, wellness, walkability and amenities that will help recruit and retain the younger generation and best talent.
What factors are contributing to Orlando’s rise in office space?
Davis: Orlando is one of the top five cities in job growth nationwide. The metro’s strategic location, access to college graduates, no state income tax, affordability, good schools, the beach and weather make it ideal for a thriving business environment.
What kind of building features are potential tenants looking for in the area today?
Davis: Efficiency and access to amenities are most important for office tenants right now. Additionally, wellness has become an important feature. For example, tenants are increasingly looking for space in buildings that have a gym, locker room and some sort of “fun” factor to distract workers from the daily grind, if only for a few minutes.
What do you expect in terms of office investment going forward?
Davis: Orlando is on the map as a relatively affordable market from a national standpoint. The buyer pool for office investment was primarily located in Southeastern United States five years ago. Due to the high growth and positive attention Orlando has received over the last several years, the national investment market has taken notice. I expect this to continue as the Orlando area experiences exponential job and demographic growth.
Image courtesy of Colliers International