Orlando’s Industrial Market Finally Reaches Maturity As Demand Outstrips Supply

Foundry Commercial recently completed Phase I at the new Crews Industrial Center, with three warehouse buildings totaling roughly 500,000 square feet. Phase II will add another three buildings, totaling roughly 400,000 square feet. The 350,000-square-foot Phase I of Foundry’s Princeton Oaks development, situated on 123 acres and capable of supporting up to 1 million square feet of industrial development, is slated to break ground by the end of the year in Orlando’s northern Silver Star submarket. With the 700,000-square-foot Phase I of Bent Oak Industrial Park nearly leased up, McCraney Property Co. is nearing delivery of a second phase spanning 1.3 million square feet. Since all of these projects were speculative ventures, it initially prompted fear of oversupply. Developers, eager to grab the growth, seem to be operating on the principle that if you build it, they will come. But with total vacancy in the market at 5.7 percent, according to JLL’s first quarter 2017 Industrial Insight, and demand continuing to exceed availability –– both existing and under construction –– the market remains robust. In the past 12 months, rental rates on Class A product have increased about 40 cents per square foot, averaging $5.75 per square foot, heading to a level we haven’t seen since 2007. New Class A developments are bringing to market more innovative building designs to meet the requirements of e-commerce’s employee-intensive operations, such as increased parking counts for both employees and trailers, along with staging areas for trucks. The airport submarket, where Amazon has announced plans to open its newest distribution facility in Florida, is the hottest, with the adjacent Southwest sector in close pursuit. Not coincidentally, these submarkets also give tenants immediate access to Central Florida’s primary distribution arteries: Interstate 4, the Florida Turnpike, Highway 441, the Beachline Expressway and John Young Parkway. Nearby Davenport, with its proximity to Interstate 4 and U.S. Route 27, is getting attention as well. As Orlando’s industrial boom spreads, emerging Central Florida markets such as Daytona Beach and Cocoa Beach are also gaining more traction because of users’ needs to be located along I-95. Investors have taken note. Those that once looked primarily at South Florida for industrial land are now bullish on Orlando. New York-based REIT Colony Capital is on an aggressive buying spree, purchasing $221.6 million of industrial real estate to date. Many other brand name national REITs and investment firms have been actively scouting for properties and land opportunities to try and grow their Central Florida portfolios. As national money pours into Orlando, developers are eager to sell stabilized properties to finance the next wave of industrial development. Everybody wants a piece of a trend that shows no signs of easing up as we enter the second half of 2017.  

— By Josh Lipoff, Vice President of Industrial Real Estate Services, JLL. This article was originally published in the August 2017 issue of Southeast Real Estate Business.