Office Leasing Vacancy Rates and Occupancy Rates in Commercial Real Estate

June 19, 2023   |   Office
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When leasing office space, having a thorough understanding of vacancy and occupancy rates is crucial for success in the commercial real estate industry.

In commercial real estate and office leasing, occupancy and vacancy are two crucial terms that often need clarification. Occupancy refers to the percentage of a building that tenants occupy, while vacancy refers to the percentage of a building that is not occupied.

A number of factors can affect occupancy and vacancy rates, including the location of the building, the size of the building, the amenities offered by the building, and the overall economic climate.

In general, higher occupancy rates are considered more desirable for landlords as they mean more tenants are paying rent. Lower vacancy rates can also make it easier for landlords to attract new tenants.

For tenants, occupancy and vacancy rates can be important factors to consider when choosing an office space. Tenants may prefer to lease space in a building with a high occupancy rate, as this can indicate that the building is well-managed and a strong demand for office space in the area.

Minimum Occupancy Requirements

The U.S. Environmental Protection Agency (EPA) offers ENERGY STAR certification for office buildings that meet certain energy efficiency standards. To be certified, office buildings must meet a minimum occupancy requirement.

The minimum occupancy requirements for ENERGY STAR certification vary by property type. For office buildings, the minimum occupancy requirement is 55%. This means that tenants must occupy at least 55% of the building's gross floor area.

If a building's occupancy rate falls below the minimum requirement, it may lose its ENERGY STAR certification. This can have a number of negative consequences for the building, including:

  • Reduced tenant demand
  • Increased operating costs
  • Lower property values

How to Improve Occupancy Rates

There are a number of solutions that landlords can try to improve occupancy rates in their buildings. Some of these solutions include:

  • Offering competitive rent rates
  • Providing amenities that tenants value
  • Maintaining the building in good condition
  • Marketing the building effectively

By taking these steps, landlords can help to improve occupancy rates and attract new tenants.

                                                           Source: 600 North Broadway Ave Bartow BB&T

Orlando’s Office Vacancy and Occupancy

According to SVN | Saunders Ralston Dantzler’s upcoming Commercial Real Estate Market Report, the 2022 office vacancy rate in Orange County was 8.8%. This is 5.6% lower than its peak of 14.4% during the previous economic downturn. With this data, the outlook for Orlando's office market is positive.

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As the vacancy rate is still lowering, the market seems to be stabilizing and realigning with the historical average. Orlando's office market still offers affordable, high-quality spaces while benefiting from the growing population and a tourism count of over 59 million annual visitors.

To learn more about vacancy and occupancy rates in office leasing, contact one our commercial real estate advisors today. With an office location in Downtown Orlando, our team of advisors are ready to serve you in all areas of office leasing, site selection, and commercial property management.

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