Class A vacancy once again has dipped below that of Class B properties as a number of tenants opt for more modern and newer space, compelled by improving economic conditions.
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Cincinnati Office Insight - Q1 2015
1. Tenants exhibit flight to quality as Class A vacancy continues to drop
Class A vacancy once again has dipped below that of Class B properties as a
number of tenants opt for more modern and newer space, compelled by
improving economic conditions. Class B vacancy momentarily fell below Class A
vacancy in the years following the recession as cautious tenants were weary to
commit to more costly space, but as those leases begin to expire and
fundamentals once again fall into alignment, corrections in the market now
portray Class A vacancy nearly 6.0 percent lower than in Class B assets.
Office vacancy by Class
Source: JLL Research
Local economy continues to grow
Cincinnati’s economy continues to grow at a healthy pace, posting five
consecutive years of real GDP growth since 2009 and outpacing growth at a
national level between the years 2010 and 2012. Looking ahead, local real GDP
is expected to expand by 2.7 percent during 2015, an increase of 60 basis points
from the previous year. Employment is also expected to rise. Job growth boomed
over 2014, thanks largely to increased hiring in Cincinnati’s growing professional
and business services and industrial sectors. Currently, total non-farm
employment now sits at roughly 1.1 million.
Annual percentage change of real GDP (chained 2009 dollars)
Source: JLL Research
Cincinnati tops Great Lakes income growth
According to a recent report from the Bureau of Economic Analysis (BEA) that
estimates purchasing power of personal income across regions and over time,
Cincinnati enjoyed the highest growth in personal income out of the Great Lakes
markets between the years 2011 and 2012, the latest data available. Over that
time period, income growth in Cincinnati climbed 3.4 percent, outpacing the
national average of 2.3 percent. Meanwhile, Detroit, Columbus, Pittsburgh and
Cleveland posted income growth rates of 2.7 percent, 2.6 percent, 2.2 percent
and 2.1 percent, respectively.
Real personal income growth
Source: JLL Research
19.1%
Total vacancy
206,245
Q1 2015 net absorption (s.f.)
-0.8%
12-month rent growth
2,164,533
Total under construction (s.f.)
52.0%
Total preleased
Office Insight
Cincinnati | Q1 2015
Expanding economy driving down vacancy
-5%
0%
5%
2009
2010
2011
2012
2013
Est.2014
Forecast
2015
United States Cincinnati MSA
$35,000
$40,000
$45,000
$50,000
Cleveland Pittsburgh Columbus Detroit Cincinnati
2011 real personal income 2012 real personal income
10.0%
15.0%
20.0%
25.0%
2010 2011 2012 2013 2014 Q1 2015
Class A vacancy Class B vacancy