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Q2 2011 | OFFICEGREATER COLUMBUS REGIONOFFICE TRENDS REPORT Activity Turns to Gains COLUMBUS REGION OVERVIEW The Columbus office market gained 189,981 square feet of positive absorption in the second quarter. The optimism from last quarter that vacancy rates would drop this quarter due to increased activity has played out. Similar to first quarter 2011, significant downsizing occurred as Verizon Wireless vacated 198,000 square feet of 5000 Britton Road, and expansion occurred in the Central Business District (CBD) as a number of smaller to medium tenants expanded their footprints within their current buildings. Looking forward indications of market growth are less positive. State-wide and local employment growth is sputtering or reversing course, however the signs within the real estateMARKET INDICATORS industry are still fairly positive. Continued on page 2 ... Q2 Q3 2010 2011* FORECASTS AND REFLECTIONS • The Columbus region posted positive results strengthened marginally this quarter by $.15. VACANCY during the second quarter of 2011 with the Class B average asking rental rates also vacancy rate decreasing to 13.0 percent from decreased by $.21. NET ABSORPTION 13.4. • Landlords and tenants are still spending an CONSTRUCTION — — • NetJets Inc construction continues at their extended amount of time coming to terms on 140,000-square-foot building at Port Columbus rates, but the majority of deals are done with RENTAL RATES — — International Airport, as does construction in added concessions and for financially secure *Projected trend for next quarter New Albany. tenants. Landlords desire security and tenants • Average asking rental rates for class A are looking to have their build-outs be turnkey. POSITIVE SIGNSRENTAL RATES ABSORPTION, COMPLETIONS, AND VACANCY RATES After three quarters of 20.0% 300,000 negative absorption the $22.00 18.0% Columbus region posted $21.00 200,000 $20.00 16.0% its strongest results since first quarter 2008. Completions and Absorption $19.00 100,000Rental Rates 14.0% $18.00 Vacancy Rates $17.00 12.0% 0 $16.00 10.0% $15.00 (100,000) $14.00 8.0% 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 Class A Rental Rates Class B 6.0% (200,000) 4.0% (300,000) 2.0% 0.0% (400,000) 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 Completions Absorption Vacancy Ratewww.colliers.com/columbus
RESEARCH & FORECAST REPORT | Q2 2011 | OFFICE | GREATER COLUMBUS REGION Market interest has increased during the first security is not available from the tenant the Delaware County quarter. While it’s very difficult to calculate and landlord will look for ways to reduce their cost of Union County gauge market interest accurately, Colliers tenant improvements by having the tenant modify Powell Polaris Westerville International attempts to deduce demand by their requirements or contribute funds to build Licking Worthington New County tracking tenants in the market. There was a out. Dublin Albany Bethel North Central slight increase compared to last quarter in the Hilliard Arlington/ Grandview Easton Gahanna/ Airport size desired by tenants that have toured space Market Activity Volume is the sum of the absolute and have been in the market. There were roughly value of each absorption change in the market, CBD Madison East County Southwest 11 tenants seeking more than 25,000 square feet and it tells us how much space was in transition Southeast Fairfield of space which has not significantly changed in the quarter. Roughly 300,000 fewer square County from last quarter. feet were in transition this quarter than in the Pickaway County first quarter last year. The total amount in Tenants are active in the market but there are transition was slightly more than 700,000 square many firms who are hanging on to cash in order feet. This is significant as the general trend isThe Columbus office market consistsof 15 suburban submarkets plus the to protect themselves. Just as banks are making that the first quarter has the highest amount ofCentral Business District submarket. The loans more difficult to secure, firms are hanging space in transition.Columbus region features a total of 62.6 on to assets and being very scrupulous withmillion square feet, 43.5 million of which hiring or capital decisions. There is a fair amount There were no investment sales or significantis suburban. of looking and waiting as firms are rethinking purchases this quarter. Last quarter there were plans multiple times. In line with this protective numerous buildings sold by Duke, as well as the approach, tenants are opting to renew instead of Atlas building and LeVeque towers in the CBD. incurring the extra cost of moving. Significant office growth will only occur when firms begin Class B space remains the strongest performing hiring again and that will in large part depend on subtype in the region as well as the most the national economy as Columbus’ economy palatable. Class B has more space vacant than class A or C meaning that there are more options For landlords, securing the lease is becoming available for tenants to secure the correct space more important. Landlords are reviewing tenant configuration. The compressed prices are a financials more closely and are asking the tenant double-edge sword for class B however as class for additional security deposits and personal B is much closer priced to class C, class A space signatures in some cases. If the additional prices have also been compressed. MARKET ACTIVITY SALES AND DEALS PROPERTY ADDRESS SALES DATE SALE PRICE SIZE SF SALES PRICE / SF SUBMARKET 6397 Emerald Parkway May 2011 $3,400,000 45,716 $74.37 Dublin 255 East Main Street May 2011 $8,500,000 106,288 $79.97 CBD 4343 Easton Commons II April 2011 $16,700,000 101,869 $163.93 Easton 463 North High Street June 2011 $900,000 25,500 $35.19 CBD PROPERTY ADDRESS LESSOR LESSEE LEASE SF ASKING PRICE / SF (FSG) SUBMARKET 5455 Rings Road Duke Realty Corp Alcatel-Lucent 121,035 $11.45 (NNN) Dublin 825 Tech Center Drive 825 Tech Center Drive Chase 72,000 - Gahanna/Airport LLC 800 Tech Center Drive Morrison Taylor LTD Chase 54,615 - Gahanna/Airport 7775 Walton Parkway Waters Edge at New Blue Mile 23,558 - New Albany Albany LLC 4300 E. Broad Street First Community Bank - 21,448 - East 7450 Huntington Park 7450 Huntington Park First Community Bank 18,610 $16.00 Worthington Drive Associates LLCP. 2 | COLLIERS INTERNATIONAL
RESEARCH & FORECAST REPORT | Q2 2011 | OFFICE | GREATER COLUMBUS REGIONUPDATE Market ComparisonsOFFICE MARKET Net Absorption Construction Asking Rental RatesSUBMARKET Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions Class A ($) Class B ($)CBD 19,091,001 2,194,334 11.5 15,911 74,388 - - $18.38 $16.26ARLINGTON/GRANDVIEW 4,752,155 705,044 14.8 28,550 16,971 - - $22.18 $15.96DUBLIN 9,501,878 1,190,856 12.5 142,338 111,859 - - $17.84 $14.81EAST 3,555,814 547,337 15.4 26,568 36,219 140,000 - $16.59 $12.38EASTON 2,685,332 148,181 5.5 44,903 35,550 - - $18.70 -GAHANNA/AIRPORT 1,262,397 168,125 13.3 138,853 181,264 - - $17.63 $15.96HILLIARD 2,480,456 495,009 20.0 (184,434) (195,749) - - $19.88 $14.02NEW ALBANY 1,935,789 206,255 10.7 43,266 28,679 106,500 - $18.05 $15.00NORTH CENTRAL 1,255,636 85,647 6.8 1,306 (17,822) - - $23.00 $15.76POLARIS 4,419,869 374,760 8.5 (24,542) (104,189) - - $18.29 $16.54POWELL 273,719 81,732 29.9 (7,837) (704) - - - $15.40SOUTHEAST 402,548 70,365 17.5 - (10,500) - - - -SOUTHWEST 236,158 54,547 23.1 (13,074) (13,074) - - - $7.50WESTERVILLE 4,489,479 793,196 17.7 41,643 32,421 - - $16.86 $15.47WORTHINGTON 6,496,402 1,059,375 16.3 (63,470) 168 - - $16.74 $14.37SUBURBAN TOTAL 43,747,632 5,980,429 13.7 174,070 101,093 246,500 - $18.19 $14.81TOTAL 62,838,633 8,174,763 13.0 189,981 175,481 246,500 - $18.25 $15.25 Net Absorption Construction Asking Rental RatesPROPERTY TYPE Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions By Product TypeCLASS A 25,676,078 3,184,510 12.4 36,504 (48,664) 246,500 - $18.25CLASS B 23,102,511 3,321,227 14.4 98,765 193,154 - - $15.25CLASS C 14,060,044 1,669,026 11.9 54,712 30,991 - - $12.33TOTALS 62,838,633 8,174,763 13.0 189,981 175,481 - - $15.88QUARTERLY COMPARISON AND TOTALS Net Absorption Construction Asking Rental RatesQUARTER, YEAR Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions By Product TypeQ1, 2011 62,838,633 8,394,042 13.4 (14,500) (14,500) 246,500 65,000 $18.10 $15.46Q4, 2010 40,544,677 7,188,371 17.73 (13,360) (253,648) 65,000 - $18.56 $14.96Q3, 2010 40,544,677 7,184,011 17.72 (191,783) (240,288) 90,000 - $18.77 $15.38Q2, 2010 40,544,677 6,992,228 17.25 54,334 (48,505) 90,000 - $19.30 $15.82 COLUMBUS REGION MARKET Colliers international has changed the critieria for inclusion in the office dataset. All 10,000 square foot, class A , B, C buildings, not owned and fully leased by government are included in the dataset. This has changed the overall vacancy rate significantly from the numbers at the close of 2010. COLLIERS INTERNATIONAL | P. 3
RESEARCH & FORECAST REPORT | Q2 2011 | OFFICE | GREATER COLUMBUS REGIONCENTRAL BUSINESS DISTRICT SOUTH MARKETThe CBD showed marginal gains in absorption. The south submarkets are the Southwest andAs mentioned on page one there were a number the Southeast. There was very little movement in 480 offices inof expansions and there were a a significantnumber of deals done between 900 to 2,500 these submarkets this quarter. One class C building was vacated in the Southwest for 13,074 61 countries onsquare feet. Looking forward to third quarter, all square feet. 6 continentsof the leases that the State of Ohio operationswere under expired at the end of June. The United States: 95 EAST MARKET Canada: 17movement of those operations will certainly The east submarkets are the East side, Easton, Latin America: 17affect the composition of space downtown. Gahanna/Airport, and New Albany. There is a lot Asia Pacific: 52There were also two very large users touring of development and leasing occurring in the east EMEA: 85space this quarter and they are both expected to submarkets. Chase hired many of the 1,000 new • $1.6 billion in annual revenuesign in the third quarter. employees needed to help absolve the bad • 672.9 million square feet under mortgages on their books. Chase filled more managementNORTH COLUMBUS MARKET than 120,000 square feet of absorption in • Over 10,000 professionalsThe north submarkets are Dublin, Powell, Polaris, Gahanna/Airport. Construction in New AlbanyNorth Central, Worthington, and Westerville. and NetJet’s new facility in the East continue. GREATER COLUMBUS REGION:Class A leasing was cumulatively strong in the Richard B. Schuen SIOR CCIMnorth submarkets with more than 110,000 EMPLOYMENT DATA CEO | Principal | Columbussquare feet of absorption. Polaris, however, lost The unemployment rate for Columbus in June 8800 Lyra Driveslightly more than 29,000 square feet. Last was 8.2 percent, up from a six month low of 7.3 Suite # 150quarter Polaris lost 80,000 square feet of space. Columbus, Ohio 43240 percent in April 2011. The unemployment rate is TEL +1 614 410 5612 determined by the ratio of the number of thoseThe average asking rental rates dipped in all FAX +1 614 410 3312 who have looked for work in the last 4 weekssubmarkets especially in Polaris which lost $.83. compared to the total number of workers and Leslie HobbsOverall, class A space is being taken but not at a those searching for employment. The one month Marketing & Research Managerpace that will allow landlords increase average jump in unemployment from 7.4 percent in May 8800 Lyra Driveasking rental rates in the short term. to 8.2 percent in June was not surprising given Suite # 150 Columbus, Ohio 43240 the national and state new jobs numbers whichAlcatel-Lucent moved into their new space in the TEL +1 614 410 5640 have been exhibits in dismally slow growth. The120,000-square-foot lease at 5455-5475 Rings FAX +1 614 410 3310 recovery has slogged. This is a concern forRoad, Atrium II in Dublin. The firm moved 600 landlords but good news for tenants who are Jonathan Badgleyemployees to the new location. looking to expand or begin new leases. Research Analyst 8800 Lyra Drive Suite # 150WEST MARKET The sectors which are significant for office Columbus, Ohio 43240 leasing were steady or up in the preliminary TEL +1 614 410 5652The west submarkets, are Arlington/Grandview June numbers. The information sector was FAX +1 614 410 3327and Hilliard. Continued price compression basically flat January through June, but thebetween class A and B is likely for some time in sector was down a steady 1.8 percent eachHilliard. Verizon Wireless’ downsizing 198,000 month year-over-year. Employment for Financialsquare feet at 5000 Britton Road in Hilliard will Activities in the first half of the year was strongerlikely keep prices low for class A space in that than the same period in 2011. 1,300 jobs were This document/email has been prepared by Collierssubmarket and surrounding submarkets. With lost from May to June however which brought International for advertising purposes. Collierssuch a large new vacancy, Hilliard was the worst International statistics and data are audited annually and the growth year-over-year in June to 0 percent. may result in revisions to previously reported quarterlyperforming submarket, though beyond Verizon’s Professional and Business Services has been and final year-end figures. Sources include Columbusdownsize the submarket would have gained Dispatch, Business First, Xceligent, and the Wall Street much stronger this year than last, though from Journal.13,000 square feet of positive absorption. May to June 400 jobs were lost. Education and Health Services decreased by about 1300 jobsThe average asking rental rate for class A space but is only down 1.3 percent compared to Junein Arlington/Grandview shows a dramatic last year.increase and it has to with what prices werereported, rather than a substantive change in theprice of the subtype in that submarket. Accelerating success.www.colliers.com/columbus