Slow recovery has been the recent theme for the local warehouse/distribution market. Thus a very strong first quarter with net absorption at 276,000 square feet was followed by only 2,000 the next quarter even as 76,000 square feet completed construction in the form of Building IX at Southridge Commerce Park. The project is 72.7% leased to Prime Therapeutics, reports Jones Lang LaSalle. In the same business park, this source reports, Eastgroup Properties has broken ground for the 87,814-square-foot Building XI warehouse. Completion this October is expected. The new spec project had not secured any tenants as of mid-year. Without a specified completion date, Reis reports the 80,000-square-foot build-to-suit for Nutrex Research Inc. under construction in Oviedo. Meanwhile, however, the Publix grocery store chain has announced plans for a $188.5 million, 1-million-square-foot refrigerated distribution project in southeast Orlando near the airport, as reported by Jones Lang LaSalle. The company bought the site for this purpose in 2009, according to the Orlando Business Journal. July followed with 81,000 square feet of positive net absorption alongside no new space deliveries.
The warehouse/distribution sector vacancy ended the latest quarter at 15.8%, up 10 basis points from the quarter before, down 70 year-over-year. An additional 20 points were subtracted subsequently as a result of July’s positive net absorption. At $4.49 psf and $4.02 psf, asking and effective average rents for the second quarter were unchanged from the quarter before but were up 0.2% and 0.5% since year-end following respective losses of 2.0% and 0.7% last year. July followed with an essentially flat performance.
Positive net absorption at 105,000 square feet in Orlando’s 23.5-million-square-foot Flex/R&D sector for the first half of the year was accompanied by no new supply deliveries. July added 67,000 square feet of additional space to the Flex/R&D absorption count. Vacancy ended the latest quarter at 11.9%, unchanged for the period, down 60 basis points year-over-year; July subtracted 30 additional points. At $7.26 psf and $6.38 psf, second quarter mean Flex/R&D asking and effective lease rates were up 0.1% and 0.5% for the period and were up 0.6% and 1.3% year-to-date following losses above 5.0% in 2011 all told. The mean effective rate saw a 0.2% increase in July while the asking average held steady.
Reis’ analysis calls for a small negative net absorption total for the warehouse/distribution market over the remainder of the year as the vacancy rate adds back 10 basis points. Rent growth for the year is projected at 1.1% and 1.5%, respectively, for the asking and effective averages. “Expect rental rates to remain flat through 2012 and into 2013 as the market continues to work off excess inventory,” advises Cushman & Wakefield.