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Q1 2011 | INDUSTRIALGREATER COLUMBUS REGIONINDUSTRIAL TRENDS REPORT Market Stumbles into 2011 INDUSTRIAL MARKET OVERVIEW Much of the gains from the close of 2010 have slipped as the Columbus industrial market incurred 468,993 square feet of negative absorption. However, optimism about growth and sustained recovery should remain as the general economic and industrial picture is brightening in multiple sectors of the Central Ohio economy. Further, despite strong direct real estate indications, businesses are announcing plans for expansion and many of the region’s largest firms are reporting numbers in the black. This will inevitably pour over into real estate as we’re seeing with the growth of office andMARKET INDICATORS industrial parks in New Albany. Continued on page 2... Q1 Q2 FORECASTS AND REFLECTIONS 2011 2011* VACANCY • The Columbus region posted poor results for • Construction activity has increased as the first quarter of the year with the vacancy expected and there is more currently under NET ABSORPTION rate increasing by 3 basis point to 13.2 construction than there has been in any single percent. Average asking rental rates remained quarter since the third quarter of 2008. Also CONSTRUCTION relatively stable, though Flex/R&D space has worthy of note is that all of the construction RENTAL RATES — — continued to decline. coming down the pipeline is build-to-suit • There were a number of significant sales this rather than speculative building. Accel Inc *Projected change from previous quarter quarter including the sale of 1999 Westbelt began construction of their 417,000-square- Drive, which has begun demolition of a portion foot facility in New Albany. of the building. RENTAL RATES PROPERTY TYPE VACANCY RATES OVER COMPLETIONSRENTAL RATES Asking rental ratesRates for the Major Product Types 17.0 2,000,000 remained steady or down $82.5 $2.20 16.0 from the fourth quarter 1,500,000 $2.15 2010 to first quarter 20112.0 15.0 $6 $2.10 1,000,000 for warehouse/distribution. Rental Rate $2.05 1.5 14.0 It seems that they are $2.00 1.0 $1.95 13.0 500,000 more accurately reflecting $4 $1.90 deal rates compared to the0.5 12.0 $1.85 0 average asking rental rates 0 $1.80 11.0 reported during the 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q10 4Q10 (500,000) $2 10.0 recession and recovery. 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 (1,000,000) This could reflect that General Industrial R&D/Flex Warehouse/Dist. 9.0 there is much less fear 8.0 (1,500,000) about where the market is 1 5 10 15 20 25 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 30 than there has been. Completions Absorptions Total Marketwww.colliers.com/columbus
RESEARCH & FORECAST REPORT | Q1 2011 | INDUSTRIAL | GREATER COLUMBUS REGION Delaware REGIONAL INDUSTRIAL ECONOMICS has normalized as well. Freight transportation County Union The Federal Reserve Bank of Cleveland reports shipping volume rose from early February to County twice a quarter in the Federal Reserve’s Beige mid-March and most firms are expecting a North Book about the economic activity of the fourth greater increase in activity compared to 2010. LickingMadisonCounty County district, which includes the Columbus Diesel fuel costs are obviously creating need for Metropolitan Statistical Area (MSA). The Beige logistics to find other ways to cut costs and avoid West East Book from March 2011 reported that industrial passing the increase on to customers. CBD activity in the fourth district experienced continued improvement in new orders and The Bureau of Labor Statistics reported that Southwest Southeast Fairfield production during the previous six weeks. Freight Manufacturing employment, 62,600 employees, County transportation executives again reported had not significantly changed from January to Pickaway County concerns about fuel prices, though some had February, and was only down .4 percent from a found ways to pass the higher diesel prices on to year ago. Trade, Transportation, and UtilitiesThe Columbus industrial market consists customers. Manufacturers reported that employment fell by 400 but was higher comparedof 10 suburban submarkets and the to a year ago by 1.7 percent. Mining, logging, and production was higher than a year ago withCentral Business District. The total some firms experiencing low double-digit Construction was up 300 and up 8.4 percentinventory for the region is 205 millionsquare feet of space increases. Expectations called for continued from a year ago. (Note: Percent change year- growth through at least the first half of 2011. over-year is a useful tool for removing potential Capacity utilization continued to trend higher for seasonal employment factors.) manufacturers and steel producers, and inventories remained close to targeted levels. DISTRIBUTION ANALYSIS Freight transportation experienced mixed results The Boyd Company released a comparative because of severe winter weather, but most analysis of the operating costs of a expected sales growth to be stronger in 2011 175,000-square-foot warehouse in 50 U.S. than in years past. cities, which included Columbus. Surveyed cost factors included “nonexempt labor costs for The April 2011 Beige Book reported that activity warehouse, material handling, packing, light in the fourth district had improved slightly on assembly and administrative support workers; balance. Manufacturers saw stable or rising industrially-zoned land costs; new warehouse orders and some continued to see double-digit construction costs; electric power costs; natural increases since the December report. Most gas costs; real estate property taxes; as well as manufacturers are expecting that orders will transportation costs.” Columbus was the middle increase from 2010 levels and that seasonal of the road at 24th with yearly estimated trends will return to normal. Capacity utilization operating costs of $8,748,247. MARKET ACTIVITY SALES AND DEALS PROPERTY ADDRESS SALES DATE SALE PRICE SIZE SF SALES PRICE / SF TYPE 1999 Westbelt Drive Jan 2011 $5,200,000.00 202,000 $24.74 Warehouse/Distribution 2550 John Glenn Ave Feb 2011 $4,550,000.00 205,109 $22.18 Warehouse/Distribution 4343 Williams Road Jan 2011 $2,050,000.00 296,945 $6.90 Warehouse/Distribution 807 W. 3rd Ave. Jan 2011 $1,900,000.00 20,960 $90.65 Light Industrial 2000 Westbelt Drive Jan 2011 $1,900,000.00 53,604 $35.44 Warehouse/Distribution 2850 Charter Street Jan 2011 $1,312,370.00 50,000 $26.25 General Industrial 341 O’Neill Jan 2011 $850,000.00 81,106 $10.48 Light Industrial PROPERTY ADDRESS LESSOR LESSEE LEASE SF ASKING PRICE / SF (NNN) TYPE 4458 Alum Creek Drive ProLogis SB Capital 209,947 $2.75 Warehouse/Distribution 2781 Westbelt Drive Trident AIM Logistics 70,000 $1.99 Warehouse/Distribution 4311 Janitrol First Industrial Reville Wholesale 36,111 $2.95 Warehouse/Distribution 2101 Southwest Blvd. ProLogis Confidential 36,000 $3.50 Warehouse/DistributionP. 2 | COLLIERS INTERNATIONAL
RESEARCH & FORECAST REPORT | Q1 2011 | INDUSTRIAL | GREATER COLUMBUS REGIONUPDATE Market ComparisonsINDUSTRIAL MARKET Net Absorption Construction Asking Rental RatesSUBMARKET Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions WH/Dist R&D/FlexCBD 5,907,062 1,039,290 17.6 39,385 39,385 - - - $4.97EAST 20,185,366 3,919,952 19.4 (84,031) (84,031) 523,000 - $2.82 $5.18FAIRFIELD 6,902,992 573,207 8.3 17,600 17,600 - - $5.02 -LICKING 18,557,116 1,451,516 7.8 - - - - - -MADISON 6,883,029 - 0.3 (16,179) (16,179) 1,470,000 - - -NORTH 16,933,852 1,539,811 9.0 28,725 28,725 - - $3.46 $5.37NORTH DELAWARE 9,039,642 830,162 9.3 (33,662) (33,662) - - $3.13 -PICKAWAY 3,449,964 71,900 2.3 (8,800) (8,800) - - $2.48 -SOUTHEAST 64,252,530 10,459,928 17.1 (396,855) (396,855) - - $2.82 $3.02SOUTHWEST 17,651,352 1,453,809 9.3 (117,548) (117,548) - - $2.93 $4.67UNION 6,245,713 562,055 9.1 (33,342) (33,342) - - $4.50 $6.08WEST 35,914,981 5,251,755 14.8 135,714 135,714 - - $2.35 $4.26TOTALS 211,923,599 27,972,230 13.2 (468,993) (468,993) 1,992,000 - $2.72 $4.19 Net Absorption Construction Asking Rental RatesSUBMARKET Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions By Product TypeR&D/FLEX 20,210,125 3,017,655 20.7 (9,816) (9,816) - - $4.19GENERAL INDUSTRIAL 71,826,637 5,897,135 9.7 98,875 98,875 587,000 - $3.13WAREHOUSE/ 119,886,837 18,238,595 18.7 (558,052) (558,052) 1,405,000 - $2.72DISTRIBUTIONTOTALS 211,923,599 27,972,230 13.2 (468,993) (468,993) 1,992,000 - -QUARTERLY COMPARISON AND TOTALS Net Absorption Construction Asking Rental RatesQUARTER, YEAR Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions ($)Q4, 2010 205,420,829 26,113,915 12.71 743,685 (766,901) 1,575,000 (536,292) $2.57Q3, 2010 205,957,121 27,183,626 13.20 313,420 (1,381,820) 170,000 - $2.93Q2, 2010 205,957,121 27,513,381 13.36 (337,420) (1,695,550) 170,000 (1,985,385) $3.18Q1, 2010 207,989,506 27,991,561 13.46 (1,358,130) (1,358,130) 170,000 - $3.18 CONSTRUCTION CONTRACTS The Columbus industrial market is gaining significant build to suit space. Notwithstanding the announcement of many large projects in New Albany and Madison County, industrial permit growth has slowed compared to the 75 percent grow in 2010. McGraw- Hill reported that in February new commercial building contracts totalled $57.8 million, a 16 percent gain from a low in January. COLLIERS INTERNATIONAL | P. 3
RESEARCH & FORECAST REPORT | Q1 2011 | INDUSTRIAL | GREATER COLUMBUS REGIONAverage asking rental rates in 2010 dipped Construction is now well underway with thecloser to deal rates for warehouse/distribution aforementioned Accel facility and constructionspace which is much closer to $2.00 per square continues for the Vee Pak site. 480 offices infoot rather than $3.00 per square foot. Despitethe strong position for tenants, the amount of NORTH 61 countries onbuild-to-suit construction is an obvious indicator The submarkets comprising the northern 6 continentsthat some firms weathered the recession very columbus are North and North Delaware. Thewell. It seems that the depressed leasing prices United States: 95 northern submarkets feature some of the lowest Canada: 17and the aggressiveness of municipalities around vacancy rates in the region considering that they Latin America: 17Central Ohio are making the choice to build Asia Pacific: 52 make up 12 percent of the market. Pricing foreasier. EMEA: 85 these submarkets reflects that. As most submarkets are experiencing soft asking rates • $1.6 billion in annual revenueMarket activity and interest did not increase because of low demand, the North and North • 672.9 million square feet under substantially this quarter but there were a few Delaware are very close to their Q1 2008 asking managementmore large players actively seeking space in the rates. • Over 10,000 professionalsmarket compared to 2009. Business developmentgroups such as TechColumbus, and Ohio’s SOUTHEASTaggressive tax abatement plans, run by the Ohio UNITED STATES:Department of Development and local The Southeast submarket was the worst hit this Columbusmunicipalities such as Dublin and New Albany, quarter with Medline vacating nearly 400,000 Richard B. Schuen SIOR CCIMhave been greasing the wheels for bringing in square feet of space at 5900 Opus Drive. Kraft CEO | Principal | Columbusnew manufacturing in the energy and high tech also vacated roughly 160,000 from 2225 Speigel 8800 Lyra Drive Drive. Suite # 150sectors. These groups will continue to play a big Columbus, Ohio 43240factor in bringing in new tenants and for retaining TEL +1 614 410 5612current regional players. SOUTH FAX +1 614 410 3312 The southern submarkets are Pickaway andMarket Activity Volume is the sum of the absolute Fairfield counties. Fairfield saw a change of Leslie Hobbsvalue of each absorption change in the market. negative 17,600 square feet of absorption. Marketing and Research ManagerThe Market Activity Volume was down Pickaway experienced 8,800 of negative 8800 Lyra Drive Suite #150significantly from Q1 2010 when nearly 5.5 absorption. The vacancy rates for these two Columbus, Ohio, 43240million square feet of space was in transition. submarkets are among the lowest in the region TEL +1 614 410 5640Slightly more than 2.8 million square feet of but neither submarket represents a significant FAX +1 614 410 3310space was in transition in Q1 2011. amount of total square footage.Low transaction volume compared to year-ago Jonathan Badgleynumbers is an important measure of SOUTHWEST Research Analyst 8800 Lyra Drive The Southwest submarket returned almost as Suite # 150CENTRAL BUSINESS DISTRICT much as was gained in the fourth quarter 2010 Columbus, Ohio, 43240 with 117,548 negative absorption. Prices have TEL +1 614 410 5652The Central Business District (CBD) recorded a remained stable in this submarket. FAX +1 614 410 3327second straight quarter of positive absorptionwith 39,385 square feet, though it leaves thevacancy rate relatively unchanged. WEST The submarkets on the west side of Franklin This document/email has been prepared by ColliersEAST county are West, Madison, and Union. The West International for advertising purposes. Colliers International statistics and data are audited annually and submarket experienced a relatively insignificantThe submarkets comprising eastern Columbus may result in revisions to previously reported quarterly positive absorption of 135,714 square feet. and final year-end figures. Sources include Columbusare East and Licking County. The East Dispatch, Business First, Xceligent, and the Wall Streetexperienced a relatively small amount of negative Journal. CSX purchased both 1999 Westbelt Drive andabsorption in the first quarter with slightly more 2000 Westbelt Drive. The firm plans to demolishthan 84,000 square feet left unoccupied. Two the 202,000-square-foot 1999 Westbelt Drive.larger changes did occur in Licking but the The firms plans for 2000 Westbelt Drive arevacancy remained unchanged: 100,000 square unknown.feet was vacated at 111 Enterprise Drive and100,000 square feet was occupied at 113Enterprise Drive. Accelerating success.www.colliers.com/columbus