Class A office vacancy in Cincinnati continues to decline due to an improving local economy and tenants seeking new, efficient space. Class A vacancy fell below Class B vacancy and now sits at nearly 6% lower. The Cincinnati economy has seen five years of consecutive GDP growth and is expected to continue expanding in 2015. Suburban submarkets have the lowest vacancies in the region and vacancy there fell by 0.7% year-over-year due to companies expanding in tight submarkets like Blue Ash/Montgomery and West Chester.

1. Class A vacancy continues to drop with flight to quality
Fueled by an improving local economy and tenant’s appetite for new and efficient
space, Class A vacancy once again dipped below that of Class B properties.
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
Suburban submarkets remain hot
Cincinnati’s suburban submarkets compose the five lowest vacancies in the
region and continue to see increasing activity – overall total vacancy for the
suburbs fell 70 basis points, year-over-year. A number of companies with major
operations in the area announced significant investments over the past year in
Cincinnati’s tightest submarkets, including AdvancePierre, AtriCure, Masters
Pharmaceutical and numerous others. The top five submarkets also comprise
over 450,000 square feet of current construction, 22.0 percent of which is
preleased.
Top 5 lowest vacancies by submarket (500,000 SF min. inventory)
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
10.0%
15.0%
20.0%
25.0%
2010 2011 2012 2013 2014 Q1 2015
Class A vacancy Class B vacancy
0% 5% 10% 15% 20%
Blue Ash/Montgomery
Fields Ertel/Mason
East
Kenwood
West Chester

2. Current conditions – market and submarket Historical leasing activity
Source: JLL Research Source: JLL Research
Total net absorption (s.f.)
Source: JLL Research
Total vacancy rate
Source: JLL Research
Direct average asking rent ($ p.s.f.)
Source: JLL Research
-464,648
79,469
143,641
290,120
562,970
206,245
-600,000
-400,000
-200,000
0
200,000
400,000
600,000
800,000
2010 2011 2012 2013 2014 Q1 2015
$17.39
$17.94
$18.41
$19.68
$19.15
$18.88
$16.00
$17.00
$18.00
$19.00
$20.00
2010 2011 2012 2013 2014 Q1 2015
22.7% 22.6% 22.5%
21.3%
19.8%
19.1%
17.0%
18.0%
19.0%
20.0%
21.0%
22.0%
23.0%
2010 2011 2012 2013 2014 Q1 2015
Cincinnati
Landlordleverage
Tenantleverage
Peaking
market
Falling
market
Bottoming
market
Rising
market
Suburban
Urban
2,700,000
1,700,000 1,800,000
2,200,000
300,000
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
2011 2012 2013 2014 Q1 2015
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