Cincinnati OH Office Trends Q3 2011
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Cincinnati OH Office Trends Q3 2011 Document Transcript

  • 1. Q3 2011 | OFFICE CINCINNATI, OH THE KNOWLEDGE REPORT CBD Steals the Show with Several New Lease Signings EXECUTIVE SUMMARY The Greater Cincinnati office market had a flurry of activity in the third quarter of 2011. Several new lease signings were a welcome sign for a market that has seen little to no growth over the past 24 months. The overall vacancy rate came in at 20.4% and net absorption of office space for the third quarter totaled 85,568 square feet.MARKET INDICATORS Most activity occurred in the Central Business District (CBD), with several large lease signings taking Q3 11 Q4 11* place. Ohio Governor John Kasich played a huge role in the market by luring two Fortune 500 companies across the river from Kentucky to downtown Cincinnati. The incentives the Governor’s VACANCY office put on the table were too much for Omnicare and Nielsen to pass up. While this move was NET ABSORPTION disappointing for the Northern Kentucky submarket, the Greater Cincinnati market received an affirmation that these companies’ headquarters will remain in the region for some time to come. CONSTRUCTION — — Rental rates increased slightly from $17.78 per square foot to $17.91 per square foot. This increase, RENTAL RATE — — although small, is good news for the Cincinnati market which has not seen rental rates increase in the past several years. *Projected Change to Following Quarter Local employment and jobs growth continues to be the number one issue affecting the Cincinnati market, as absorption of office space is tied directly to the growth of jobs. As the Governor’s office continues to press forward, creating more jobs for the State of Ohio, we hope more outside companies will look to our area for their relocation needs. OVERALL VACANCY RATE COMPLETIONS VS ABSORPTION Overall Vacancy Rate 25% 800,000 The Office Market saw 85,568 24% 600,000 square feet of positive absorption this quarter. Square Feet 23% 22% 400,000 21% 200,000 20% 19% 0 18% 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 -200,000 -400,000 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 Completions Absorptionwww.colliers.com/cincinnati
  • 2. THE KNOWLEDGE REPORT | Q3 2011 | OFFICE | CINCINNATI CENTRAL BUSINESS DISTRICT Looking into the next quarter, the next big announcement in the CBD should come when Chiquita The downtown Central Business District was the most Brands International decides to stay in Greater vibrant submarket in Greater Cincinnati, posting more Cincinnati or relocate to a southeastern market outside than 85,000 square feet of positive absorption for of our region. The company has made headlines in the third quarter of 2011. The quarterly absorption recent weeks as it announced it is considering a move doesn’t tell the story though, as the biggest headlines out of state. Much debate has occurred on whether were made with several large lease signings in the Chiquita will stay or go. The produce company occupies downtown market. more than 150,000 square feet of Class A space in the Chiquita Center on Fifth Street, so a move out of town Omnicare signed a lease for 150,000 square feet at will certainly affect the overall vacancy rate in the Convergys’ Atrium I on Fourth Street, Nielsen signed a downtown market. lease for 85,000 square feet at the Chiquita Center andChiquita Center Vorys, Sater, Seymour and Pease LLP signed a lease SUBURBAN MARKETS for 75,000 square feet at Great American Tower. As The suburban submarkets remained flat, as net these companies have yet to move in, the majority of absorption totaled negative 331 square feet. F+W these new leases will not affect the vacancy rate Publications decided to relocate further north, moving AVG. ASKING RATES (PER SF-FULL SERVICE GROSS) until 2012. 62,000 square feet from Kenwood to Blue Ash. The Average Rental Rate (Gross) relocation out of Kenwood increased the vacancy rate $18.25 Rental rates in the Central Business District averaged in this submarket to 10.6%, marking the first time in $22.93 per square foot for Class A space and $15.39 $18.00 several quarters the Kenwood submarket has hit a per square foot for Class B space. These are gross double digit vacancy rate. The Blue Ash submarket $17.75 numbers, meaning the rental rate is the tenant’s gained from this move, as well as a couple other new all-inclusive rental payment, including taxes and $17.50 deals in this area. Blue Ash posted 151,015 square feet operating expenses. 1Q11 2Q11 3Q11 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 of overall net absorption, while the vacancy rate dropped from 19.7% to 16.1%. UPDATE Recent Transactions LEASING ACTIVITY PROPERTY SUBMARKET TENANT LANDLORD SIZE TYPE Executive Center 1 Tri-County Humana Right Source 111 Merchant St Holdings 173,397 Direct Lease Atrium I CBD Omnicare Convergys 150,000 Direct Lease 19 Broadcast Plaza CBD WXIX Broadcast Plaza LLC Tappan Properties 87,734 Sale Chiquita Center CBD Nielsen Columbia Development 85,000 Direct Lease Centre Pointe Office Park I-75 Corridor North GE Aviation Duke Realty 81,000 Direct Lease Great American Tower CBD Vorys, Sater, Seymour and Pease Western & Southern 60,000 Direct Lease 11333 Cornell Park Drive Blue Ash Cornell Park Drive LLC State Automobile Mutual Insurance 28,998 Sale 600 Vine CBD Rendigs, Fry, Kiely & Dennis LLP Hertz Center 26,000 Direct Lease Cornerstone Office Park Midtown Neace Lukens Cornerstone at Norwood LLC 26,000 Direct Lease McCauley Place Blue Ash Catholic Health Partners Duke Realty 20,902 Direct Lease Liberty Commons I-75 Corridor North Christ Hospital Liberty Medical LLC 17,213 Direct Lease 312 Plum Street CBD MCI Metro JV/CVG Partners LLC 17,205 Lease Renewal 11223 Cornell Park Drive Blue Ash Girl Scouts of America Dbi Properties LLC 17,000 Sale Hawthorne Center Blue Ash Coca-Cola Company Al Neyer, Inc. 14,860 Direct Lease Chemed Center CBD Greenebaum, Doll & McDonald, PLLC 255 Fifth Limited Partnership 12,021 Lease Expansion Edgewood Medical Buildings NKY Combined Care Management N/A 11,660 Sale 8805 Governors Hill Drive I-71 Corridor North Camp Dresser & McKee New York Life Insurance Co. 10,150 Direct Lease Harrison Business Center West Sure Seal Werster Erlene 10,000 Direct LeaseTransactions are believed to be accurate but not guaranteed.P. 2 | COLLIERS INTERNATIONAL
  • 3. THE KNOWLEDGE REPORT | Q3 2011 | OFFICE | CINCINNATI AVERAGE ASKING TOTAL DIRECT SUBLEASE TOTAL VACANT OVERALL PRIOR QUARTER NET YTD NET RATE UNDER INVENTORY VACANT SF VACANT SF SF VACANCY RATE VACANCY RATE ABSORPTION ABSORPTION (GROSS) CONSTRUCTIONBLUE ASHClass A 2,679,557 461,434 0 461,434 17.2% 22.3% 136,282 110,631 $20.91 84,598Class B 1,885,234 277,823 1,099 278,922 14.8% 15.6% 14,733 27,512 $15.56Class C 368,274 53,936 0 53,936 14.6% 21.7% 0 330 $13.50TOTAL 4,933,065 793,193 1,099 794,292 16.1% 19.7% 151,015 138,473 $18.70 84,598CBDClass A 8,866,525 1,557,473 70,467 1,627,940 18.4% 19.2% 77,273 314,790 $22.93Class B 6,924,138 1,111,991 0 1,111,991 16.1% 16.3% 4,627 -56,274 $15.00Class C 2,754,230 758,005 0 758,005 27.5% 24.6% 3,999 -288,577 $11.84TOTAL 18,544,893 3,427,469 70,467 3,497,936 18.9% 19.0% 85,899 -30,061 $18.72CBD PERIPHERYClass A 1,264,688 395,036 5,428 400,464 31.7% 32.0% 4,393 4,220 $22.07Class B 1,347,043 341,290 13,000 354,290 26.3% 27.6% 7,477 -8,375 $15.39Class C 857,197 212,839 0 212,839 24.8% 21.5% -28,839 -26,386 $12.21TOTAL 3,468,928 949,165 18,428 967,593 27.9% 27.7% -16,969 -30,541 $17.28EASTClass A 786,963 129,306 0 129,306 16.4% 12.8% -28,424 -26,639 $19.97Class B 889,675 179,896 0 179,896 20.2% 20.8% 5,216 2,631 $14.01Class C 641,989 140,427 0 140,427 21.9% 27.8% 38,022 38,849 $12.61TOTAL 2,318,627 449,629 0 449,629 19.4% 20.0% 14,814 14,841 $15.32I-71 CORRIDOR NORTHClass A 2,816,264 618,470 0 618,470 22.0% 22.1% 4,792 34,701 $19.61Class B 1,156,788 391,178 0 391,178 33.8% 34.9% 12,602 14,099 $15.50Class C 35,040 0 0 0 0.0% 0.0% 0 0TOTAL 4,008,092 1,009,648 0 1,009,648 25.2% 25.6% 17,394 48,800 $18.10I-75 CORRIDOR NORTHClass A 1,603,815 193,569 0 193,569 12.1% 13.1% 16,876 14,455 $21.00Class B 501,094 56,351 0 56,351 11.2% 8.2% -15,039 -15,439 $18.47Class C 167,891 28,387 0 28,387 16.9% 13.8% -5,273 -10,083 $11.68TOTAL 2,272,800 278,307 0 278,307 12.2% 12.1% -3,436 -11,067 $19.57KENWOOD/MONTGOMERYClass A 944,328 126,958 5,736 132,694 14.1% 6.3% -72,786 -43,595 $26.45 109,000Class B 939,605 151,687 0 151,687 16.1% 15.3% -7,622 -13,177 $17.92Class C 44,955 0 0 0 0.0% 0.0% 0 1,500TOTAL 1,928,888 278,645 5,736 284,381 14.7% 10.6% -80,408 -55,272 $22.04 109,000MIDTOWNClass A 1,276,956 167,189 0 167,189 13.1% 13.3% 2,328 3,624 $23.28Class B 764,808 132,578 30,000 162,578 21.3% 19.8% -10,997 -53,418 $17.76Class C 898,340 186,516 0 186,516 20.8% 19.5% 23,449 49,398 $13.16TOTAL 2,940,104 486,283 30,000 516,283 17.6% 17.0% 14,780 -396 $17.91NORTHERN KENTUCKYClass A 3,517,813 643,687 0 643,687 18.3% 16.5% -38,243 43,531 $20.71Class B 3,017,169 555,028 4,570 559,598 18.5% 20.9% 71,192 -26,912 $16.59Class C 566,028 122,998 10,000 132,998 23.5% 19.0% -13,974 -13,099 $12.51TOTAL 7,101,010 1,321,713 14,570 1,336,283 18.8% 18.6% 18,975 3,520 $18.42TRI-COUNTYClass A 1,741,868 534,317 7,487 541,804 31.1% 28.1% -52,487 3,581 $17.56Class B 2,229,938 664,205 19,390 683,595 30.7% 30.2% -10,724 -16,358 $13.97Class C 517,338 176,320 0 176,320 34.1% 28.1% -21,937 -26,109 $13.32TOTAL 4,489,144 1,374,842 26,877 1,401,719 31.2% 29.1% -85,148 -38,886 $15.50WESTClass B 346,694 85,464 0 85,464 24.7% 23.1% -5,325 -19,572 $16.34 51,200Class C 360,933 117,667 0 117,667 32.6% 25.4% -26,023 -31,337 $10.93TOTAL 707,627 203,131 0 203,131 28.7% 24.3% -31,348 -50,909 $13.67 51,200MARKET TOTALSClass A 25,498,777 4,827,439 89,118 4,916,557 19.3% 19.4% 50,004 459,299 $21.35Class B 20,002,186 3,947,491 68,059 4,015,550 20.1% 20.4% 66,140 -165,283 $15.39Class C 7,212,215 1,797,095 10,000 1,807,095 25.1% 23.0% -30,576 -305,514 $12.30TOTAL 52,713,178 10,572,025 167,177 10,739,202 20.4% 85,568 -11,498 $17.91 244,798QUARTERLY COMPARISONQ3-11 52,713,178 10,793,202 20.4% 85,568 $17.91Q2-11 53,805,774 10,926,546 20.3% -57,767 $17.78Q1-11 53,805,774 10,868,779 20.2% (39,299) $17.85Q4-10 37,170,512 8,387,729 22.6% 164,236 $18.11Q3-10 37,038,512 8,461,570 22.8% (19,950) $18.04Q2-10 36,997,992 8,367,632 22.6% (5,736) $18.03 COLLIERS INTERNATIONAL | P. 3
  • 4. THE KNOWLEDGE REPORT | Q3 2011 | OFFICE | CINCINNATIRental rates in the suburban submarkets averaged One major construction announcement that made$17.49 per square foot for all property types. Class regional headlines was the start of the anticipated 512 offices inA space in the suburbs was recorded at $20.42 Rookwood Exchange development in Norwood.per square foot. This continues to make Class A This development was sidelined for the past three 61 countries onspace less expensive in the suburbs than Class A years, but has received the green light by its 6 continentsspace in the CBD. developer Jeffrey R. Anderson Real Estate. The first phase of this project will consist of a 123- United States: 125 Canada: 38 room Courtyard by Marriott Hotel and a 16-screen Latin America: 18CONSTRUCTION movie theater that includes a 7,000 square foot Asia Pacific: 214 restaurant and bar with VIP balcony seating. The EMEA: 117Too much economic uncertainty combined with development will eventually include two large • $1.5 billion in annual revenuehigh vacancy rates in most submarkets continues upscale restaurants, office space and possibly two • 979 billion square feet underto limit construction this year. As previously additional hotels. managementreported, The Banks mixed-use development • Over 12,000 professionalscontinues to move forward, but no new officespace is anticipated anytime soon with this project. FORECAST OFFICE TEAM: Brian T. Graham, CCIMThree sites in the suburban submarkets are moving The fourth quarter of 2011 should cool in terms of +1 513 562 2214towards completion. These sites include the first new lease signings, but as tenants begin to move R. Travis Likes, MCREphase of the FBI site in Kenwood totaling 109,000 into vacant space from deals signed previously this +1 513 562 2248square feet, Duke Realty’s Western Ridge Medical year, we should see a small amount of positive Fred A. Macke, Jr., GRI, SIOROffice Building, totaling 29,700 square feet and the absorption towards the end of December. This +1 513 562 2233Urology Group in the midtown submarket, totaling positive absorption should put the year-to-date net Richard P. Meder, CCIM, SIOR45,000 square feet. absorption back in the black, which is welcome +1 513 562 2253 news for the Greater Cincinnati Market. John P. Schenk, CCIM, SIOR +1 513 562 2279 Matthew H. Smyth +1 513 562 2260 OFFICE SUBMARKETS Chris Vollmer, SIOR +1 513 562 2244 OUTLYING WARREN COUNTY Chris Vollmer, Jr. +1 513 562 2242 I-75 NORTH OF CEO/PRESIDENT: I-275 Shenan P. Murphy, CCIM +1 513 721 4200 DIRECTOR OF RESEARCH: Brian T. Graham, CCIM I-71 NORTH OF I-275 +1 513 562 2214 TRI-COUNTY BLUE ASH GRAPHIC DESIGNER: WEST Ricky Dennis +1 513 562 2213 KENWOOD/MONTGOMERY Colliers International | Greater Cincinnati 425 Walnut Street, Suite 1200 MIDTOWN Cincinnati, OH 45202 CBD-PERIPHERY 3 EAST Colliers International statistics are audited annually and may result in revisions to previously INT’L reported quarterly and AIRPORT final year-end figures NORTHERN KENTUCKY Accelerating success. 8www.colliers.com/cincinnati