Walt Disney certainly helped put Orlando on the map as a major tourist destination. Last year, a record-high 72 million visitors helped support a thriving hospitality business. But Orlando is proving that it has a lot more to offer with a growing economy and population that goes far beyond just amusement parks.
Office Space heating up in Orlando
Employers have been gobbling up available office space for the past several years. The combination of steady expansion and very little new construction has left Orlando with one of the lowest office vacancies in the country. Marcus & Millichap is forecasting that office vacancies will decline another 80 basis points this year to reach 10.6%. Demand is pushing rents to new high levels, which also is putting Orlando on the radar for office investors.
According to Reonomy, 142 office properties have sold in Downtown Orlando over the past 12 months. In one of the largest property sales this year, Cousins Properties sold a three-property portfolio to a San Diego investment group for a reported $208 million. We took a look at the assets in Reonomy, which span a total of 1 million square feet:
- The 28-story Bank of America Center 390 N. Orange Ave. sold for 81.9M
- The 18-story Citrus Center at 255 S. Orange Ave. sold for 61.5M
- The 19-story One Orlando Centre at 800 N. Magnolia Ave. sold for 64.6M
Downtown Orlando: Creative Village Development
Developers also recognize the growing demand for space, and despite the hurdles of getting new office projects financed today, there are a few projects in the works that will have a significant impact on the market. One game changer for Downtown Orlando is the ambitious Creative Village mixed-use development. The 68-acre redevelopment of the former Amway Arena has been years in the making with a vision to create a transit-oriented “live, work, learn and play” innovation district.
The master plan for the $1 billion project includes up to 1.2 million square feet of office/creative space, 750,000 square feet of higher education space, 1,500 residential units, 1,500 student housing beds, 150,000 square feet of retail and commercial space, 225 hotel rooms and green space. In just 2017, over 150 properties were sold in the area of the Creative Village. Creative Village also will be adjacent to the LYNX Central Station, which is the primary transit station in Downtown Orlando for the SunRail commuter line.
The Role of Tech
One of the key components of the Creative Village is a new downtown campus for the University of Central Florida Valencia that will serve about 7,700 students, faculty and staff. The first phase of the campus is slated to open in August 2019. The campus is expected to be a huge asset to employers who are hungry for talent, especially young tech-savvy millennials. Phase one development also will include a 600-bed student housing development, a 256-unit mixed-income apartment community and a 300-plus-unit market-rate apartment project.
Creative Village is a public/private partnership between the City of Orlando and the master developer, which is a joint venture between Bank of America Community Development Corporation and a local team led by Ustler Development Inc. The city is the landowner and also came up with the original idea, which was to create a hub for high-tech, digital media and creative companies.
Another goal of the project is to further solidify Orlando’s position in Florida’s High Tech Corridor. The growing Tech Corridor runs from Orlando through Sarasota and parts of the eastern coast. It is a collaborative initiative that spans 23 counties, three research universities, 14 community and state colleges and dozens of public and private organizations working together to build a stronger tech cluster across industries ranging from aviation and interactive entertainment to nanotechnology.
Tech is certainly part of the story fueling economic and job growth across Orlando. The city is on pace to add 1,000 new jobs a week and has the lowest unemployment rate in the state at 3.3%, according to Cushman & Wakefield. That job growth also is attracting a steady stream of new residents. Multifamily sales within the 68 acres that the creative village spans were over 35 total buildings in 2017 alone, not including the vacant land purchased for multifamily development purposes. The MSA population reached 2.4 million in January 2017 and is expected to grow by another 400,000 by the end of 2021.
Florida CRE Market Growth
Orlando is riding a bigger wave of economic growth sweeping across Florida. Economists are predicting that the state’s economy will grow faster than the nation at a rate of 2.9%. Florida’s GDP also is expected to break the $1 trillion mark by 2019. Some of the sectors giving the economy an added boost – besides tourism and tech – are the booming housing market and a growing healthcare market that is serving the state’s aging population of retirees.
One of the challenges facing Orlando is that positive outlook, combined with more investors that are shifting their focus to high-growth secondary markets, is creating a very competitive investment market. Florida also tends to be a gateway for international investors coming in from Central and South America. So, those looking to gain a foothold in the Orlando market, or establish a bigger presence, are finding that they have to work harder to uncover off-market buying opportunities.
Reonomy offers real-time access to detailed property data that business owners, investors and commercial real estate professionals need in today’s competitive marketplace. Try Reonomy National for free today.