Ahead of the loss of its anchor tenant, the landlord for Travel and Leisure Co.'s soon-to-be-former headquarters is testing its luck by listing the building in the greater Orlando, Florida, area as a chance to capitalize on the region's booming tourism industry.
Northridge Capital is hunting for a buyer interested in taking on the nearly 360,000-square-foot property at 6277 Sea Harbor Drive, a building that has housed the travel and timeshare giant's corporate hub for more than a decade. With Travel and Leisure's decision last year to relocate downtown, occupancy at the Williamsburg-area office building will plummet below 10% once the publisher's lease expires in October.
Arlington, Virginia-based Northridge acquired the building in mid-2015 for nearly $65 million, according to property records. The property, located across the street from SeaWorld Orlando, was fully leased to the vacation company at the time of the deal. The real estate asset manager has enlisted JLL to help market the Sea Harbor Drive building as an "opportunistic play."
Travel and Leisure's imminent exit "presents a unique opportunity for investors by providing business plan optionality," according to JLL marketing materials. "Investors can reposition the asset for development, capitalizing on the area’s strong tourism, residential growth and growing business ecosystem."
JLL declined CoStar News' requests for additional comment, and Northridge Capital did not immediately respond.
Testing demand
The listing lands at a thorny point for the Orlando office market, where demand has fallen to its lowest level in more than two decades.
Tenants collectively handed back more space than they leased for the first time in nearly a quarter century, according to CoStar analysis. And while the regional vacancy rate of about 9.5% is still far below the national average of roughly 14%, the tourism hot spot is still wading through a record burst of sublet availabilities, and fizzled demand is expected to keep that rate elevated for the foreseeable future.
What's more, office valuations continue to slide, with most of the recent deals across the Orlando area trading at discounts far below their previous investments.
Pricing for the Sea Harbor Drive listing has not been publicly disclosed, but "the property will trade at a significant discount to replacement cost," according to the marketing materials, providing another upside for prospective buyers as rising construction costs make ground-up development increasingly difficult to build. JLL estimates that the cost to replace the main office building and adjacent parking garage could surpass $175 million, or about $488 per square foot.
Once its lease expires, Travel and Leisure will decamp to downtown Orlando’s 501 W. Church St. building following a long-term lease the vacation company signed last year for the entirety of the 182,461-square-foot property. The relocation will result in a substantial downsizing from the company's current footprint of about 310,000 square feet in the Sea Harbor Drive building, according to CoStar data.
However, the move echoes a sentiment rippling across the national office market among tenants prioritizing space in newer, better-located buildings as an investment in their workplace culture.
“Our move to Downtown Orlando will help us attract and retain outstanding talent in a competitive marketplace, while providing a modern office environment in the heart of our growing city,” Kimberly Marshall, Travel and Leisure's chief human resources officer, recently said of the move.
Travel and Leisure, formerly known as Wyndham Destinations, will soon join other corporate giants such as AAA, Darden Restaurants, Universal Orlando, KPMG and Deloitte with major hubs in downtown Orlando.
The company, one of Central Florida’s largest employers, will move upward of 900 jobs from its current headquarters and said it expects to create another 102 “high-value, high-wage jobs” over the next five years.