Commercial property in Orlando: why is it a smart investment?

Located in Florida, Orlando shines as one of the most dynamic and booming commercial real estate hubs in the US. This rapidly growing resort city is a globally recognised tourist hotspot. Additionally, it boasts a vast amount of undeveloped land, commercial properties, and ongoing construction projects. In this article, we will touch upon the lucrative avenues of commercial property in Florida, specifically highlighting sectors worth considering for investment in Orlando.

Orlando's commercial landscape

Orlando is a prominent city situated in the core of Florida. It's renowned for its warm climate, amusement parks, and a plethora of tourist attractions. Its proximity to several other major Florida cities ensures residents have access to a broad range of services. The diversified and expanding local economy makes the city an enticing prospect for investment opportunities. Its location and abundance of entertainment venues make it an excellent choice for investments not just in houses in Florida, but also in the commercial sector.

Commercial property in Orlando: why is it a smart investment?

Orlando's trends

Top analysts forecast that Orlando is poised to rank within the 15 fastest-growing cities in terms of population, with job opportunities expected to see a twofold increase in the upcoming decades. Based on the latest census data, the city's population has surged by 29% over the past decade. Here are some key points:

Orlando boasts a population exceeding 307,000.
It's a key component of the Greater Orlando region, encompassing Kissimmee and Sanford, often referred to as Central Florida.
A GlobeSt report recently underscored that the city's burgeoning population is piquing investor curiosity in office and commercial venues.
Office work is among the fastest-growing employment sectors in Greater Orlando, as per the Bureau of Labour Statistics.
The average age in Orlando is 38.5 years.
54% of its residents are of working age, ranging from 20 to 59 years old.

Orlando's employment market

Orlando's economy is on a steady incline, largely attributed to its highly developed tourism sector. The expansion of popular theme parks and non-tourist industries in the area leads to a significant influx of capital and the creation of new job opportunities. Over the past year alone, employment in Greater Orlando has surged by more than 6.7%.

The US Bureau of Labour Statistics highlights a decline in Orlando's unemployment rate to 2.9%, with a commendable addition of over 87,000 jobs in the recent year.
Orlando is carving a niche in diverse sectors, notably manufacturing, trade, transport, finance, and leisure. Additionally, its prowess in professional and business services is gaining traction.
The dynamic economic vigour of Orlando is reflected in the remarkable GDP of the Orlando-Kissimmee-Sanford area, registering a strong $144 billion, showcasing a 53% growth over the past ten years.
The city's economic tapestry is intricate. It's a hub for regional offices and corporate headquarters. Additionally, Orlando is becoming a nexus for burgeoning industries such as optics, photonics, advanced manufacturing, and autonomous vehicles. The city also excels in fields like life sciences, healthcare, aerospace, defence, and fintech, underscoring its multifaceted industrial terrain.
Central Florida's employment landscape is dotted with industry giants. Walt Disney World Resort dominates the entertainment sector, while AdventHealth shines in healthcare. In education, entities like Orange County Public Schools stand out, and Orlando International Airport is a linchpin in transportation. The presence of tech behemoths such as Lockheed Martin and Siemens Energy further accentuates the region's vibrant job market.
The city's allure for entrepreneurs and investors is amplified by its cost-effective business operations, tax-friendly climate, and reasonably priced real estate.
Data USA indicates a near 5% yearly surge in average household incomes, with property values witnessing a rise of over 9% in the preceding year.
In the realm of respected educational establishments nearby, the University of Central Florida, Florida A&M University College of Law, and Valencia College are particularly noteworthy.
Orlando Airport is notably the second most frequented in Florida. Prominent airlines operating at Orlando International Airport encompass Frontier, JetBlue, Lufthansa, and Virgin Atlantic, among others.

All these factors highlight the city's economic and investment appeal. Now, let's discuss the commercial real estate segments that offer the most promising returns.

Warehouse rentals

Rental rates in Orlando's industrial sector have reached unprecedented highs, with vacancy levels at an all-time low. The rapid growth of the e-commerce sector in Central Florida, combined with a dense population, has driven demand for distribution centres. Furthermore, a scarcity of truck drivers has led to more stops in the supply chain, creating an investment opportunity. Opening a warehouse for rental to major businesses is an attractive investment strategy in Orlando.

Total industrial space: 1.27 million m².
Average asking rent: $110 per m² per year.
Vacancy rate: 3.7%.
Key tenants by deal volume: Mavis Discount Tire, Empire, United Estate, Walmart.
New construction: 687,800 m² is currently under development.

Office real estate

Now is the perfect time to purchase office spaces. According to reports from major commercial real estate agencies, the asking rent has remained unchanged over the year and may start to decrease as property owners become more competitive. This will attract new companies to the city, and demand will naturally increase. Here are the most recent figures for Orlando's office market:

Total office space: 3.33 million m².
Average rent: $277 per m² per year.
Vacancy rate: 13.8%.
New construction: 711,510 m² of commercial real estate is currently under development.
Major office hubs: Central Business District, Maitland.

Commercial property in Orlando: why is it a smart investment?

Retail spaces

Demand for retail in Orlando is on the rise due to a continuous influx of migrants and a growing economy. In 2023, the visitor count at Orlando International Airport is nearing the numbers seen before the pandemic. Data from 2022 suggests that the demand for retail spaces in Orlando pushed up the asking rental rates, driven by high occupancy, scarce availability in top locations, and a surge in consumer expenditure.

Key investment indicators include:

Total retail space: 14.14 million m².
Average asking rent: $274 per m² per year.
Vacancy rate: 3.6%.
Average family income in Orlando: $64,936, with 63% of households earning $50,000 or more annually.

Investing in RV parking

Another unconventional yet attractive investment opportunity is in parking for RVs or "homes on wheels".

Firstly, RV campgrounds with essential amenities are increasingly sought after by those unbound by a specific location due to retirement or roles that allow remote work.

Secondly, millennials, who are keen on active holidays and have started families, are also driving demand as they gravitate towards the freedom these campgrounds offer.

Seasoned operators and analysts report a surge in campground investors. They believe that current investments are likely just the tip of the iceberg, with the real volume of investment in this sector to unfold in the near future.

The RV business maintains steady demand as many discover the joy and affordability of a holiday on wheels. For instance, Sun Communities, a real estate investment trust, has previously invested $1.6 billion in the RV sector. Sun's revenue from RV park construction in Q1 2022 increased by 20.5% compared to the same period in 2021.

In Florida, and particularly in Orlando, there's a growing popularity for premium-style RV resorts. These are full-fledged resorts with amenities including waterpark pools, relaxation zones, and restaurants. Investing in this segment promises a quick return on investment in the near future.