WORLD PROPERTY CHANNEL ®

(ORLANDO, FL) -- CB Richard Ellis's first-quarter analysis for the area's office and industrial markets confirms what almost everybody in the industry has been noticing for months - vacancies are up, rents are down.

The good news: opportunities are abundant for tenants in Orlando, the report states. .

"Slowing job growth, high vacancies, and falling lease rates has increased leverage to tenants actively negotiating with landlords, who are eager to fill vacancies for a reasonable rate and term," according to the report.

"The increase in sublease activity over the past year has contributed to the downward pressure on landlords to make it cheaper for tenants entering the market," the report says.
 
This is the third consecutive quarter of declining overall lease rates from its peak of $22.33 per sq. ft. in the second quarter of 2008.

When compared to the previous quarter, the overall lease rate for Metro Orlando decreased by $0.17 to $21.35.

"Lease rates have not been this low since two years ago at $21.26," the report notes.

Class A space in the Downtown submarket continues to command the highest lease rate of $28.39, an increase of $0.18 from the previous quarter. In the suburban market, the East Orlando submarket experienced the highest class A lease rate of $25.31.
 
Compared to the previous quarter, the total vacancy rate for Metro Orlando increased by 207 basis points to 16.2 percent.

The vacancy rate for Metro Orlando has not been this high since the fourth quarter of 1992 when it stood at 16.9 percent.

The Lake Mary and East Orlando submarkets experienced the lowest vacancies of 10.5 percent and 15.3 percent, respectively. South Orlando and North Orlando submarkets experienced the highest vacancies of 18.5 percent and 21.4 percent, respectively.
 
Net absorption decreased from negative 578,321 sq. ft. in the fourth quarter to negative 539,995 sq. ft. The South Orlando submarket experienced positive 29,589 sq. ft. of sublease absorption, the only positive sublease absorption in Orlando.

Maitland Center experienced negative 189,714 sq. ft. or 35.1 percent of net absorption experienced in Orlando. South Orlando experienced the highest net absorption of negative 5,815 sq. ft.

In the industrial market, the vacancy rate was 12.0 percent at the end of first quarter 2009, a slight increase from the 11.5 percent reported in the fourth quarter of 2008. The vacancy rate a year ago was reported as 8.8 percent.

The overall weighted average asking lease rate for all industrial product types was $6.87 NNN per sq. ft. at the end of first quarter of 2009 - a slight decrease from the average rate of $6.93 NNN in the fourth quarter of 2008.

To entice tenants, more rental concessions are being offered, including free rent and unprecedented first year rates.

The first quarter of 2009 industrial absorption was a negative 460,111 sq. ft. That compares to a negative 434,475 sq. ft. in the fourth quarter of 2008.

The report states availability rates for warehouse/distribution buildings continue to rise, largely due to falling retail sales, especially in markets that were most affected by the housing crisis, such as Florida and many coastal California markets.

"Furthermore, the global manufacturing slump has broadened," according to the report. .With the auto industry on the precipice of an historic re-organization, Chrysler and General Motors announced shutdowns in January 2009 to curb production and preserve cash flow.

"This move will affect parts manufacturers and distributors as well," the report states. "With the pervasive economic slowdown, the auto sector is expected to continue adding to the labor market's losses."

The Institute for Supply Management's manufacturing index fell to 32.4 in December 2008 - its lowest level since the early 1980s.

New orders were down and most capital expenditures have been deferred. The industrial availability rate is expected to continue to rise, with rents softening.

Manufacturing job losses continue to mount, totaling close to half a million for the year.

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