Demand for Larger Office Spaces Crowding Out Smaller Firms?

That situation appears to be the case in central Florida, according to an Orlando Business Journal article.

The cause? The region has been courting so-called corporate immigrants to relocate there, hoping that more business behemoths will result in higher paying jobs and an overall positive economic effect. Without the availability of larger office spaces, some major corporations could decide to set up shop elsewhere.

As a result, landlords have been taking smaller rental spaces off the market and, in some cases, combining the spaces into larger configurations – a clear move to play to the demand for larger office spaces.

“Anything under 5,000 square feet is getting to be hard to find in a quality building,” says one commercial rental pro. “It leaves you having to educate your clients on what to expect in the market.”

And even when a larger space becomes available, it doesn’t sit on the market for long. Verizon Communications reportedly flew the coop on a 130,000 square foot office space. Not long thereafter, Deloitte leased the space to house an IT operations center.

The impact of such market conditions hasn’t been lost on developers, some of whom seem inclined to build larger office spaces – even on spec – to meet the rising demand. As our commercial pro notes, “Tenants don’t want to wait around — they want it now.”

Such market conditions could have a ripple effect on residential spaces, as well. Particularly in neighborhoods where longtime industry tenants have left the area or simply gone out of business. Much like the steel market implosion decades ago, the acreage formerly dedicated to factories and nearby housing could be reimagined as large office spaces and associated upscale housing.

While markets are always hard to predict – particularly real estate markets — it’s possible that, down the road, some companies with space to spare could consider re-designing their digs to accommodate a smaller firm. That might work especially well if the companies involved were already partners in some way. Even competitors might gain some benefit from having a rival startup under the same roof.


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