Office vacancy increases in Orlando

ORLANDO - Vacancy in Orlando is expected to push up above 17% this year, while the gains in asking and effective rents recorded since 2006 will be erased, according to a fourth-quarter Office Research Report by Marcus & Millichap. As fundamentals continue to weaken, property owners and prospective investors will increasingly try to determine when the bottom will be reached and a reversal of vacancy rises and rent declines will begin.

"Concerns over property fundamentals and lower loan-to-value ratios on acquisition loans have sidelined many investors in Orlando," says Dan Colachicco, regional manager of the Orlando office of Marcus & Millichap.

Following are some of the most significant aspects of the Orlando Office Research Report:

- In 2009, local employers are forecast to cut 47,000 jobs, a decline of 4.3%. Last year, total employment fell by 39,500 positions. Office-using employment will contract 6.2% this year with the loss of 16,500 workers; 14,800 office jobs were shed in 2008.

- Completions will slow in 2009 to 220,000sf, consisting entirely of the third phase of the Maitland Summit Park. Last year, 525,000sf was delivered.

- Slumping space demand will push up the vacancy rate 440 basis points this year to 17.1% on negative net absorption of 1.5 msf. The vacancy rate rose 180 basis points in 2008.

- Asking rents are projected to reach $20.96 psf at the end of 2009, a decline of 3.8% from last year. Effective rents are forecast to decrease 7% to $16.89 psf. In 2008, asking rents were flat, while effective rents tumbled 1.6%.