Orlando leads the nation in industrial rent growth, which is in part a result of the post-pandemic industrial leasing and development boom. Orlando additionally has had such strong rent growth due to a consistent decline in vacancy after successive years of above-average leasing demand.

The second-quarter ranking marks a slight jump for Orlando, which ranked third in the first quarter for industrial rent growth. At the end of 2022, Orlando was eighth in the nation. A brisk leasing pace has forced an upward trajectory in overall rents, and industrial employment in Orlando has grown by more than 20% over the past five years as a result of the sector's growth.

The Fort Lauderdale, Jacksonville, Miami and Tampa markets were also represented in the top 10 U.S. markets for rent growth in the second quarter.

Leasing interest in spaces 25,000 square feet and smaller in Orlando has been high, although there is a potential pocket of rent weakness that exists in larger buildings 500,000 square feet and greater, given lessened demand for large blocks of distribution space. As a result, landlords for those projects may be increasingly forced to reconsider their willingness to drop their rates, at least in the near term. That said, strong demand persists for buildings up to 200,000 square feet, and rent growth in this range is likely to remain healthy in the near term.

Some landlords for newly completed properties in key corridors have been successful in instituting rent bumps on each subsequent new lease following the signing of the first deal, with the rate rising on average about $0.25 per square foot each time. Escalations in annual rent have also moved upward to 4% on average, with some smaller deals as high as 5%.

Several key industrial areas, including northwest Orange County, southeast Orange County, southwest Orange County and Lake County, have all seen year-over-year rent growth in excess of 15%, helped in no small part by strong net absorption recorded in those areas, with net absorption meaning the change in the number of square feet occupied.

While the pace of growth has begun to decelerate, moving toward the midpoint of the third quarter, near-term prospects for a healthy growth rate remain promising. Looking ahead, Orlando is projected to experience the third fastest pace of rent growth in the nation over the next four years with an expected annual growth of 6.5%, outpaced only by Fort Lauderdale at 7.1% and Miami at 7.2%. That ranks Orlando higher than the major California markets of Inland Empire and Los Angeles, as well as the dominant Northern New Jersey market.

In the meantime, the combination of an exceptionally low vacancy rate and a brisk pace of tenant demand will ensure that rent growth for the balance of 2023 remains solid.