Columbus OH Office Trends Q3 2011

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Columbus OH Office Trends Q3 2011

  1. 1. Q3 2011 | OFFICEGREATER COLUMBUS REGIONOFFICE TRENDS REPORT Activity Turns to Gains COLUMBUS REGION OVERVIEW The Columbus office market gained 195,000 square feet of positive absorption in the third quarter. This is the second quarter in a row of positive absorption, and the last consecutive quarters of positive net absorption were fourth quarter 2008 and first quarter 2009. Construction seems to be picking up in the headlines at least as developers are discussing projects to fill demand for continuous space of 50,000 square feet or greater as well as expansion on the major firms in Columbus such as JP Morgan Chase and Nationwide Insurance. Leasing was led by JP Morgan Chase Bank filling 72,500 square feet of 1000 Polaris Parkway. Continued on page 2 ...MARKET INDICATORS Q3 Q4 FORECASTS AND REFLECTIONS 2011 2011* • The Columbus region posted positive results is expected to complete their 110,000-square- VACANCY during the third quarter of 2011 with the foot faciility in fourth quarter 2011. TJX is also vacancy rate decreasing to 12.8 percent from expected to complete its 81,000-square-foot NET ABSORPTION 13.0 percent. data center in fourth quarter 2011. CONSTRUCTION — • NetJets, Inc.’s construction continues at their • Two new office projects have been approved 140,000-square-foot building at Port Columbus for downtown. Nationwide Insurance has been RENTAL RATES — — International Airport, as does construction of approved for a 200,000-square-foot building Water’s Edge II in New Albany. Sherer’s Court on the corner of Nationwide and Spring. FBI *Projected trend for next quarter expansion of 36,000-square-foot was will anchor a new project by Nationwide Realty completed for DZ. In New Albany, Pharmaforce Investors. POSITIVE SIGNSRENTAL RATES ABSORPTION, COMPLETIONS, AND VACANCY RATES Manager’s confidence in 20.0% 300,000 the economy improved $22.00 18.0% over first quarter 2011 $21.00 200,000 but has since waned due $20.00 16.0% to less than outstanding Completions and Absorption $19.00Rental Rates 14.0% 100,000 $18.00 economic news. The US jobs report in September Vacancy Rates $17.00 12.0% 0 $16.00 10.0% showed the economy had created 103,000 $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 jobs, which may help Class A Rental Rates Class B 6.0% (200,000) managers confidence in 4.0% the economy. (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
  2. 2. RESEARCH & FORECAST REPORT | Q3 2011 | OFFICE | GREATER COLUMBUS REGION Market interest has increased during the third transition was slightly more than 1 million square Delaware County quarter. While it’s very difficult to calculate and feet which is roughly 350,000 more square feet Union County gauge market interest, Colliers International in transition than Q3 2010. Powell Polaris Westerville attempts to deduce demand by tracking tenants EMPLOYMENT DATA Licking Worthington New County in the market. There was a slight increase Dublin Albany Bethel North compared to last quarter in the size desired by Central The unemployment rate for Columbus in July Hilliard Arlington/ Easton Gahanna/ tenants that have toured space and have been in Grandview Airport remained at 8.2 percent from June, up from a six the market. There were roughly 11 tenants CBD Madison County East month low of 7.3 percent in April 2011. The seeking more than 25,000 square feet of space Southwest unemployment rate is determined by the ratio of Southeast which has not significantly changed from last Fairfield County the number of those who have looked for work in quarter. (recheck before send) the last 4 weeks compared to the total number of Pickaway County workers including those searching for Tenants are facing similar difficulties as they employment. have been throughout the recovery. Move costsThe Columbus office market consistsof 15 suburban submarkets plus the are contributing to slowing a deal down as The sectors which are significant for officeCentral Business District submarket. The financing the move has become more difficult. leasing were steady or up in the preliminary JulyColumbus region features a total of 62.6million square feet, 43.5 million of which numbers. The Information sector has remained Landlords are still facing the same bundle ofis suburban. flat January through July, but the sector is down problems they have been all year. Loan maturity 2.4 percent year-over-year. Employment for has lenders putting pressure on landlords to Financial Activities in the first half of the year lease space quickly while the lower net rental was stronger than the same period in 2011. 1,300 rates required to secure those deals are below jobs were made from June to July bringing the the returns expected. Tenant improvement costs growth year-over-year in July to 1.3 percent. are being negotiated on either both of the Professional and Business Services had been agreement. Sometimes the landlord’s are stronger this year than last but that growth has negotiating pay for improvements in exchange waned in June and July. The sector gained for other incentives. 2,000 jobs from June to July but the growth year over year fell from a high of 4.7 percent in May to Market Activity Volume is the sum of the absolute just 2.5 percent in July. Education and Health value of each absorption change in the market, Services decreased by about 600 jobs and is and it tells us how much space was in transition down 2.3 percent year over year. in the quarter. The total amount of space in MARKET ACTIVITY SALES ACTIVITY PROPERTY ADDRESS SALES DATE SALE PRICE SIZE SF GRANTOR GRANTEE PRICE / SF TYPE SUBMARKET 2221 Schrock Road August 11 $6,100,000.00 42,290 MS Consultants Lexington Realty Trust $144.00 B Worthington 2151 Dublin Granville Rd August 3 $550,000.00 21,040 MAPLE CANYON CO LLC 2151 DUBLIN LLC $26.82 C Westerville 560 Cleveland Ave July 7 $2,027,352.00 19,694 Cardinal Westerville LLC Altair Professional Village LLC $102.94 B Westerville 505 High St August 1 $900,000.00 19,192 Columbus Properties LLC Sage 505 Inc $46.89 C CBD 36 Gay St September 2 $550,000.00 15,870 Mohawk Properties LLC LA Buckeye Leaseholder LLC $34.65 C CBD 1476 Manning Pkwy August 24 $1,075,000.00 13,259 Dirtworks Skfd Ltd - $81.08 C Powell LEASE ACTIVITY PROPERTY ADDRESS LEASE SF LESSOR LESSEE ASKING PRICE (FSG) TYPE SUBMARKET 1000 Polaris Pkwy 72,588 Polaris Crossing LLC JP Morgan Chase $9.95 (NNN) B Polaris 2800 Corporate Exchange 30,000 FTM Associates LLC Stanford Brown University $17.98 B Worthington 3435 Stelzer Rd 27,500 Columbus 1031 LLC Estate Infirmation Services $16.25 A Easton 3455 Mill Run Drive 22,422 One Mill LLC indiana Wesleyan $19.09 A Hilliard 775 Yard St 23,000 775 Yard Street LLC Willis Insurance $23.00 A Arlington/Grandview 775 Yard St 17,000 775 Yard Street LLC MA Architects $23.00 A Arlington/GrandviewP. 2 | COLLIERS INTERNATIONAL
  3. 3. RESEARCH & FORECAST REPORT | Q3 2011 | OFFICE | GREATER COLUMBUS REGIONUPDATE Market ComparisonsOFFICE MARKET Net Absorption Construction Asking Rental RatesSUBMARKET Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions Class A ($) Class B ($)CBD 19,091,001 2,252,341 11.8% (31,607) 16,381 - - $19.64 $16.55ARLINGTON/GRANDVIEW 4,752,155 693,191 14.6% 41,560 36,139 - - $21.60 $15.80DUBLIN 9,501,878 1,180,242 12.4% 41,814 122,473 - - $17.25 $14.81EAST 3,555,814 587,656 16.5% (40,319) (4,100) 140,000 - $17.17 $14.22EASTON 2,685,332 169,260 6.3% (21,079) 14,471 - - $17.83 $22.50GAHANNA/AIRPORT 1,262,397 159,176 12.6% 8,949 190,213 - - $17.44 $16.24HILLIARD 2,480,456 472,810 19.1% 22,199 (173,550) - - $19.96 $15.05NEW ALBANY 1,935,789 184,726 9.5% 21,529 50,208 191,000 - $18.11 $15.00NORTH CENTRAL 1,255,636 92,496 7.4% (6,849) (24,671) - - $23.00 $14.85POLARIS 4,419,869 255,423 5.8% 119,337 15,148 - - $18.95 $15.92POWELL 273,719 78,746 28.8% 2,986 2,282 - - - $14.86SOUTHEAST 402,548 60,225 15.0% 10,140 (360) - - - -SOUTHWEST 236,158 54,547 23.1% - (13,074) - - - $7.50WESTERVILLE 4,489,479 677,634 15.1% 44,358 76,779 - - $16.88 $15.09WORTHINGTON 6,496,402 1,082,019 16.7% (22,644) (22,476) - - $16.26 $14.70SUBURBAN TOTAL 43,747,632 5,748,151 13.1% 221,981 269,482 331,000 - $17.96 $14.94TOTAL 62,838,633 8,000,492 12.7% 190,374 285,863 331,000 - $18.58 $15.41 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 2,951,139 11.5% 193,367 113,503 331,000 - $18.58CLASS B 23,102,511 3,285,154 14.2% 77,640 229,227 - - $15.41CLASS C 14,060,044 1,764,199 12.5% (80,633) (56,867) - - $12.47TOTALS 62,838,633 8,000,492 12.7% 190,374 285,863 331,000 - $16.08QUARTERLY COMPARISON AND TOTALS Net Absorption Construction Asking Rental RatesQUARTER, YEAR Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions By Product TypeQ2, 2011 62,838,633 8,174,763 13.0 189,981 175,481 246,500 - $18.25 $15.25Q1, 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 $15.38 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
  4. 4. RESEARCH & FORECAST REPORT | Q3 2011 | OFFICE | GREATER COLUMBUS REGIONCENTRAL BUSINESS DISTRICT The big story out of Polaris this quarter is JPThe CBD incurred negative 42,000 square feet Morgan Chase leasing 72,588 square foot atof absorption. The expansions last quarter have 1000 Polaris Parkway. Chase bank employment 512 offices ingiven way to shrinkage this quarter. ATNTdownsized at 150 Gay Street by 19,000 square has swelled recently as the firm has hired aggressively. 61 countries onfeet. There were a few law firms and legal 6 continentsservice firms that left space for about 17,600 Westerville had strong absorption with Creditsquare feet total. Karlsberger, central Ohio’s Union taking 14,000 square feet at 501 Schrock, United States: 125 taking space at 6363 Presidential Gateway, and Canada: 38fourth-largest architecture firm, closed its doors Latin America: 18after 83 years in business. The firm left 30,000 Stanford Brown University signing a ten-year, Asia Pacific: 214square feet at 99 Main Street. 30,000-square-foot deal at 2800 Corporate EMEA: 117 Exchange Drive. • $1.5 billion in annual revenueIn terms of positive absorption, there were two In Worthington, a portfolio of properties on • 978.6 million square feet underlarger footprint law firms who leased space at management250 Broad Street and 10 Broad Street for 16,000 Busch Boulevard sold at the very close of the third quarter. 6460 Busch Boulevard, 6660 • Over 12,500 professionalsand 17,100 square feet respectively. StrategicPublic Partners leased 15,000 square feet at 88 Doubletree Avenue, and 6600 Busch BoulevardBroad Street. sold for $1.5 million, which is roughly $13 per GREATER COLUMBUS REGION: square foot. Richard B. Schuen SIOR CCIMRennovations are underway at both 51 High CEO | Principal | Columbus 8800 Lyra DriveStreet which will be available in January 2012 WEST MARKET Suite # 150and 232 N High Street for which the completion Columbus, Ohio 43240 The west submarkets, are Arlington/Grandviewdate is not finalized. TEL +1 614 410 5612 and Hilliard. In Hilliard, Indiana Wesleyan leased 22,422 square feet at 3455 Mill Run Drive. InTwo new office projects have been approved for Grandview, leasing was led by insurance broker Leslie Hobbsdowntown. Nationwide Insurance has been Willis Group Holdings, PLC. Willis leased 23,000 Marketing & Research Managerapproved for a 200,000 square foot, $26 million square feet under a ten year deal. 8800 Lyra Drivebuilding on the corner of Nationwide Avenue and Suite # 150Spring Street. The property could hold 1,000 Columbus, Ohio 43240 SOUTH MARKETworkers and would help ease the inflow of 1,400 TEL +1 614 410 5640 The south submarkets are the Southwest andemployees the firm is bringing into the CBD. The the Southeast. Very little change occurred inFBI will anchor Nationwide Realty’s new $10 these submarkets as these are among the Jonathan Badgleymillion project at 425 W. Nationwide Blvd. smallest least populated submarkets. Research Analyst 175 South Third StreetNORTH COLUMBUS MARKET Suite # 285 EAST MARKETThe north submarkets are Dublin, Powell, Polaris, Columbus, Ohio 43201 The east submarkets are the East side, Easton, TEL +1 614 437 4495North Central, Worthington, and Westerville. In Gahanna/Airport, and New Albany. ConstructionWorthington, DZ has completed a 34,000 square in New Albany has been steady.foot expansion of their datacenter. In otherconstruction news, Daimler announced plans for In Easton, McGraw Hill has left 36,000 squarenew construction in Westerville. Daimler and feet out of 1 Easton Oval and they may be leavingCasto are seeking approval for rezoning of 20.7 more space, up to 30,000 square feet. In East, This document/email has been prepared by Colliersacres near Africa Road and Polaris Parkway. Safe Auto moved their calling center operation International for advertising purposes. ColliersThe plans call for the construction of a pair of out of 3861 Broad Street, leaving 47,000 square International statistics and data are audited annually and may result in revisions to previously reported quarterly117,152-square-foot office buildings and develop feet. Positive leasing was driven by Estate and final year-end figures. Sources include Columbusfour retail parcels. Information Services who took 27,000 square Dispatch, Business First, Xceligent, and the Wall Street Journal. feet of 3435 Stelzer Road. Accelerating success.www.colliers.com/columbus

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