With high occupancy rates, tight supply for prime space, and increased consumer spending, overall asking rental rates continued to move upward during the second quarter.
The national and global economy experienced its fair share of fluctuations during the quarter, from geopolitical events and increased interest rates to the ongoing war in Ukraine and recovery from the pandemic. However, signs of activity and demand for retail space in the Central Florida market remained relatively constant in light of the fluctuating economic forces globally.
Orlando metro area unemployment rate hit 3.7%, falling 220 basis points (bps) year-over-year (YOY), on the addition of 91,400 jobs, for an impressive job growth rate of 9.7%. In addition, retail landlords benefited from steady employment gains in sectors that positively impacted demand. Those sectors included an increase in leisure and hospitality of 10.8% and retail trade job growth of 4.7%.
As a result, the overall vacancy rate decreased to 5.4% during Q2 2022, an 80-basis point drop year-over-year. Vacancy total for 1st generation space decreased 310 basis points to 8.5% year-over-year, while 2nd generation space vacancy dropped to 5.2%, an 80-basis point decrease over last year. Part of the decrease in vacancy was due to single tenant space, which saw a reduction in the vacancy rate by 40 basis points below last year, to 2.6% during the quarter.
With high occupancy rates, tight supply for prime space, and increased consumer spending, overall asking rental rates continued to move upward during the quarter. 1st generation space (space built within the last five years) had an occupancy rate of over 94%, with asking rental rates ranging averaging $32 - $40 per sq. ft., an increase of 16% over the asking rental rates in 2nd quarter of 2019 before the pandemic. Additionally, 2nd generation space vacancy dropped to 5.2%, an 80-basis point decrease over last year, pushing asking rental rates up 3% over last quarter to $27.00 - $36.00 per sq. ft., especially for premium space in core submarkets.
Retail investment demand in Central Florida increased through the second quarter of 2022, with investment offerings falling short of demand. Investor interest remained robust, especially in retail centers, which doubled in the number of sales from the same time a year ago. The average sale price per square foot also increased, up 89.4% to $229 per square foot.