The Central Florida office space market remained relatively steady in the third quarter of 2022. With several major metropolitan areas nearby, such as Orlando, Tampa, and Jacksonville, businesses are attracted to the area’s robust transportation system and strong labor pool.
The region is projected to experience a continued trend of growth and expansion. This outlook is partly due to the area’s ongoing development of new and innovative infrastructure and favorable business environment.
Compared to other major metropolitan areas, office space rents are relatively affordable, and a lot of recent development activity is taking place.
Central Florida is a populous area in the southeastern United States, making it home to more than 8 million people. Most of its residents are Florida natives, but significant populations are also from other states and countries. In addition to Florida natives, there is a considerable number of Hispanics (31%), African Americans (17%), and Asian Americans (7%).
The area is geographically diverse, including coastline beaches, lakes and rivers, and forests in some northern regions. This diversity of terrain makes Central Florida an attractive destination for tourists and businesses looking to establish operations in the area.
Major industries driving Central Florida’s economy include tourism, manufacturing, business services, healthcare, real estate development, technology, and defense spending. Central Florida has several major cities, such as Orlando, Tampa Bay Area, Daytona Beach, and Jacksonville, which are hubs for these industries.
Central Florida is also home to several universities that provide robust talent pipelines for local employers.
The University of Central Florida tops the list with almost 70 thousand students enrolled annually; other universities, such as Florida State University-Orlando campus and the University of South Florida-Tampa, offer specialized courses related to technology and innovation, respectively help develop a future-ready talent pool for businesses in Central Florida.
In Q3 of 2022, vacancy rates in Central Florida have been on a modest upward trend, going from mid-to-low 11% in the prior quarter to over 12%.
Despite the uncertain economic climate, there are areas in Central Florida that provide indications of the market starting to heat up. Downtown Orlando’s submarket enjoyed consecutive years of improvement, with vacancy rates falling from nearly 13% to under 11%.
Several deals have recently been closed, with numerous investors closely monitoring Central Florida real estate conditions for future investment opportunities as office utilization trends develop and interest rates evolve.
While vacancy rates have seen a slight upward trend quarter-over-quarter, asking rental rates have remained steady year-over-year.
The average rental rate for Central Florida office space was $25.80 per square foot in Q3 2021 compared to $26.50 per square foot in Q3 2022.
In Orlando, the office market is back on track thanks to a surge of long-term leasing activity.
Driven by smaller local entities and corporate moves from other markets, Orlando had a positive 122,430 square feet absorbed in Q2 2022, totaling 156,778 for the first half of 2022.
Businesses are making decisions about their future presence in this vital region.
There were several deals for office space in Florida this quarter, including:
These are select examples among other sales and lease activities.
While approximately 280,000 square feet are currently under construction for Central Florida office space, no new activity has transpired in Q3 2022.
With Central Florida’s employment on a downward trend greater than the US, a steady population growth that’s creating office demand, and the market for office space in Florida overall holding steady throughout 2022, there’s good reason to be cautiously optimistic about Central Florida going into 2023.
With companies like Amazon continuing to invest in this market, there’s good reason to believe this area holds promise.
Central Florida’s office space market looks encouraging for Q3 2022 and beyond.
With new developments coming online regularly, a constantly revolving talent pool, and Florida’s overall healthy economy, it is becoming increasingly easier for businesses across all industries to find suitable office spaces and warehousing that meet their needs at a reasonable cost.
While nothing can be said for sure, and each investor will have to do their research, there are indicators that investing in office space in Florida for 2023 is well worth considering.
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