An Orlando-based company has sold three office buildings for a profit since the end of December, illustrating the neighborhood’s strength even as the Greater Orlando office market continues to struggle.
Owens Realty Services, through its affiliate Owens Realty Capital, sold Baldwin Park III to Demetree Global for $11.3 million in a transaction that closed earlier this month. The deal came a few months after Owens Realty sold a pair of adjacent office buildings, Baldwin Park I & II, for $15.215 million to Galium Capital in a transaction that closed December 31. Owens Realty represented itself in both deals.
The three buildings, in separate transactions, sold for a combined $26.215 million, or $239.87 per square foot, a roughly 23% profit from the $21.5 million that Owens Realty paid for the properties before the pandemic. The firm bought Baldwin Park III in 2016 for $8.5 million and acquired Baldwin Park I & II in 2018 for $13 million.
Baldwin Park III, a 44,478-square-foot Class A office building, was fully occupied. Baldwin Park I & II, two Class A buildings with a total of 64,810 square feet, were collectively 97.5% leased. In comparison, A Q1 report from Cushman & Wakefield found that the overall office vacancy rate in the Orlando market was 17.0%, with Class A properties posting an 18.2% vacancy rate.
Palmer Vietor, Executive VP of Investments and Acquisitions at Owens Realty, told GrowthSpotter that the location in Baldwin Park was a major reason why the company was able to get the favorable valuations for the three properties.
“I think one of the major pieces is there were great Class A buildings close to Winter Park where executives could drive five to ten minutes from wherever their house was to get to a great newer building,” Vietor said, explaining that rents per square foot in Baldwin Park are typically about $10 less than office buildings in Downtown Winter Park.
“A trend that has been ongoing since COVID is the ability to walk out the front door and have a myriad of options for retail, lunch, dinner, Publix…it is all right there. I think that was a huge piece to it,” Vietor explained. “Also, this kind of boutique-style building, since COVID, has really come into favor. Tenants don’t have to go park in a 10-story structured garage, and wait to get in and out. They can park right behind the building, walk up whenever they want, and it’s not a long elevator ride to their space.”
Vietor explained that the limited supply of office space in Baldwin Park is why office buildings in the neighborhood have continued to flourish, even as the greater market struggles. The only other large office building in Baldwin Park, the 165,000-square-foot Baldwin Point property, is also fully occupied, meaning the four largest office properties in the neighborhood have a combined vacancy rate of less than 1.0%.
“Baldwin Park was built out under specific guidelines with high barriers to entry for office space. I don’t think they’re going to build any more office space over there, so when we did have space come available, it actually was almost a good thing because we could typically increase our rates 10-plus percent, given that there’s there’s really no other options there. I think the lack of available good space in the immediate submarket of Baldwin Park, but also in Winter Park, really helped drive competition for spaces that came available,” he said.
According to Vietor, rents for the company’s Baldwin Park office properties eight years ago were in the mid-20s per square foot, but are now in the mid- to high-30s. In comparison, Cushman & Wakefield reports that asking rents in the Greater Orlando market are $27.4 per square foot.
“These are truly one-of-a-kind buildings in a one-of-a-kind sub market that really did allow us to maximize our investment, even in a market today that’s incredibly challenged in the office space. It really just comes down to the old real estate saying — location, location, location,” Vietor said.
Have a tip about Central Florida development? Contact me at (407)607-8160 or TyWilliams@GrowthSpotter.com. Follow GrowthSpotter on Facebook and LinkedIn.
