Astor’s insights for real estate investing – Central Florida’s Industrial MarketNovember, 21 2022
Low Vacancy, New Development, Rent Growth Reflect Industrial Demand in Orlando
Industrial real estate has been the standout sector in real estate for close to a decade!
As one of the hottest commodities for investors, industrial has seen the largest gains in terms of both rents and asset prices for properties in prime industrial markets around the country, particularly in the Northeast!
The Central Florida counties of Orange County, Volusia County and Brevard County comprise a growing industrial region driven by favorable demographics, a structural shift in consumption, and dynamic local industries.
Development in the region in relation to population growth remains significantly below peer regions – and under the national average. The Orlando Metro population has grown by nearly 10% over the past five years, yet metro market inventory has grown by less than 7%.
Moreover, the region’s population growth forecast is one of the highest in the entire country – future 5-year growth is charted at 10.8%, far exceeding the 3.4% national average forecast. In addition, headquarters relocations and company expansions in Central Florida continue to accumulate.
Source: Newmark Central Florida Market Reports
Industrial assets are one of the safest asset classes to invest in during economic uncertainty. Regardless of rising interest rates, Investment sales have reached $145 per square foot nearing a record high.
- 7.4 msf Under Construction
The Orlando industrial market hit a new record for the number of projects under construction, totaling 7.4 msf with 20% already pre-leased. As vacancy rates continue to sit at all-time lows of 3.9%, a wave of new development is on the horizon to fuel substantial industrial demand in Orlando.
- 472,902 msf Net Absorption
Orlando recorded a third consecutive quarter of positive net absorption, totaling 472,902 sf, bringing the year-to-date net absorption to just over 1.7 msf. The three largest move-ins of the quarter were Escalade Sports, United Facilities and Scenario.
- $10.25 psf Direct Asking Rent
Industrial asking rents continue to climb at an unprecedented pace, resulting in a 5% increase from the second quarter to $10.25 per square foot (psf) NNN. With 7.4 msf of new inventory under construction and limited available space across the market, it is likely that rates will continue to trend upward moving forward.
- 5.9 msf Availabilities
Available space across the Orlando market is at a record low of 5.9 msf. Occupiers continue to chase high-quality warehouse space, leaving very little new inventory available in the market as it delivers.
- 3.9% Vacancy
Remaining at historic lows, Orlando’s overall vacancy ended the third quarter at 3.9%. As demand continues to outpace supply, vacancy is expected to stay relatively low for the near future.
- $145 psf Investment Sales
Industrial sales volume in 2022 is on track to set a record as it has already surpassed 2021’s volume. After the recent interest rate hikes from the Federal Reserve, investors are parking capital in the industrial sector as the asset class is considered one of the safest to weather economic uncertainty.
Continued growth in the logistics, transportation and construction sectors will drive much of the industrial leasing activity in Orlando, which is expected to accelerate from its current pace. The construction sector is also expected to contribute significantly to GDP growth in Orlando moving forward through 2025.
Among other assets, the industrial sector may still be the safest place for buyers and the best option for sellers to maximize value as allocations and capital deployment enter the year’s final months.