Downtown Preferred Over Suburbs, Experts Say

ORLANDO-Downtown is where the office leasing action will be in 2005 and beyond, two professional metro area market observers tell GlobeSt.com. A growing residential population in the central business district and the pending rebirth of Church Street are factors in the steady flow of lease renewals and expansions Downtown.

“There’s plenty of vacant office space in Downtown,” says Mark Stratman, Staubach Co.’s senior vice president and managing principal of corporate services in Central Florida. “And no doubt, more is on the way, as overall vacancy continues to hover around 17%. However, the accelerating pace of residential-related developments will draw more potential tenants to Downtown office space.”

That’s also the opinion of Bobby Palta, executive director of market analytics and geographic information systems in the local office of Colliers Arnold Real Estate Co. “The rebirth of Church Street in December 2005, along with the addition of 1,500 to 3,000 luxury condo units, should help strengthen the Orlando CBD,” Palta tells GlobeSt.com.

One factor that is firming up Downtown’s office leasing scenario is the slowdown in new construction. “The CBD has been able to temper negative absorption and increased vacancy by refraining from adding new product during the last few years,” the Colliers Arnold analyst says.

Staubach’s Stratman is confident “the projected increase in the Downtown residential population will help attract service companies to Downtown Orlando.” But he cautions, “This process will take some time, as the local work force slowly migrates to the new Downtown living options.”

Stratman, who heads Staubach’s three-year-old local office, is seeing “a lot of tenants, including banks and attorneys, who have renewed and expanded at their Downtown locations.” At the same time, he also finds that “other tenants, which are currently Downtown and have explored the suburban options, have elected to stay Downtown.” He says “this trend reflects the fact that there is a lot of strength in Orlando’s Downtown market.”

Stratman says Downtown’s average rents “continue to remain the strongest in Central Florida, second only to South Orlando which remains the hot spot of Florida.” About 80 miles west of Orlando, in Tampa, the Downtown office picture is not as bright.

“Tampa’s CBD continues to slump, as rental rates continue to slip and vacancy rises,” the Staubach executive tells GlobeSt.com. “Some tenants are looking at options in the CBD. However, the parking limitations and associated costs make it difficult for the CBD to compete with the suburbs.”

Stratman notes Tampa Bay’s Westshore submarket is “consistently seeing more [leasing] activity than the CBD.” Many tenants, including banks and attorneys, have decided to locate themselves in the Westshore market. “Right now, Westshore average rental rates are the strongest in the Tampa Bay area,” the broker says.