Q4 2011 - Cincinnati Office


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Q4 2011 - Cincinnati Office

  1. 1. Q4 2011 | OFFICE CINCINNATI, OH THE KNOWLEDGE REPORT OFFICE MARKET FINISHES ON TOP, AS POSITIVE MOMENTUM EXPECTED TO CONTINUE EXECUTIVE SUMMARY The Greater Cincinnati office market finished the year relatively strong, showing a modest amount of growth for the fourth quarter. The overall vacancy rate stands at 20.5% for all office property types in Greater Cincinnati. Net absorption for the quarter totaled 30,261 square feet, bringing year-to-dateMARKET INDICATORS net absorption to 50,163 square feet. Medical tenants led the way, as the top three transactions for Q4 11 Q1 12* the quarter were all medically related companies. The medical trend is expected to continue into 2012, as the industry fuels the growth of activity in commercial real estate. VACANCY For the second quarter in a row, rental rates increased slightly from $17.91 per square foot to $18.03 NET ABSORPTION per square foot. This increase continues to be welcome news for a market which has not been CONSTRUCTION — — accustomed to rental growth for the past several years. RENTAL RATE — — CENTRAL BUSINESS DISTRICT The downtown Central Business District pulled back slightly, as the submarket showed negative *Projected Change to 33,758 square feet of absorption. The average rental rate for Class A space was $23.37 per square Following Quarter foot, while Class B space was quoted at $15.34 per square foot. This increase from the previous quarter helped push the overall asking rate for all property types in the CBD to $18.84 per square foot. OVERALL VACANCY RATE The biggest news in the downtown market this quarter was Chiquita’s announcement it will relocate out of Cincinnati and move to Charlotte, North Carolina. North Carolina’s $22 million worth of25% incentives were too much for Governor John Kasich and the State of Ohio’s package of $6.5 million24% to overcome. Chiquita occupies more than 150,000 square feet of space in the Greater Cincinnati23% market, so this announcement will have a major affect on Class A office space in 2012. Hopefully, the22%21% former Chiquita Center on Fifth Street will reach an agreement for an 85,000 square foot lease with20% Nielsen, helping the CBD market backfill some of the negative absorption we will see next year.19%18% SUBURBAN MARKETS 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 09 10 10 10 10 11 11 11 11 The suburban submarkets saw a good amount of activity in the fourth quarter of 2011, as overall net absorption totaled more than 64,000 square feet. Year-to-date net absorption totaled more than 113,000 square feet. The hottest submarket for the quarter was the I-71 North Corridor, as this market produced more than 81,000 square feet of positive absorption.www.colliers.com/cincinnati
  2. 2. THE KNOWLEDGE REPORT | Q4 2011 | OFFICE | CINCINNATI Governor’s Hill and Deerfield Township led the way in Cincinnati are currently in expansion mode. Christ the suburbs, as many leases were signed or renewed, Hospital, Mercy Hospital, Children’s Hospital and UC including Campbell Sales Company, CDM and Dassault Health all have plans for expansion in 2012. Expansions Systemes. The Blue Ash submarket also saw a good range from new outpatient facilities, an increase in the amount of activity as GE signed a lease at Lake Forest number of hospital beds on main campuses and a Place and Devicor Medical Products announced plans demand for office space for back office operations. As to expand at Summit Woods II. the aging population increases their needs for medical services, we expect this trend to continue for the next CONSTRUCTION several years. As noted in the past three quarters of 2011, construction of new office space continues to be nonexistent in FORECAST Greater Cincinnati. Too much office space is on the 2012 looks to be a promising year in regards to market for our local economy to handle another project commercial real estate activity. As the job marketChiquita Center of significance. However, there are a few exceptions continues to show improvement and the overall as midrange build-to-suit projects continue to pop-up. economy gains more traction, we should see an Build-to-suit projects in development or recently increase in activity and companies beginning to explore completed include the FBI site in Kenwood (109,000 their growth plans for the next several years. Northern square feet), Urology Group’s 45,000 square foot Kentucky will look to rebound from a few major losses facility in Norwood and itelligence’s 85,000 square on the riverfront, including Omnicare and Nielsen, foot building in Blue Ash. Looking forward, anything in while the downtown Cincinnati market will continue to terms of a speculative development is two to three see tenants renewing their commitments to the CBD. years away. Balancing out our market will be the suburban submarkets, which should continue to hold ground and In addition, the major hospital groups in Greater provide enough activity for a healthy new year. UPDATE Recent Transactions FOURTH QUARTER ACTIVITY PROPERTY SUBMARKET TENANT LANDLORD SIZE TYPE 3900 Olympic Blvd NKY Catholic Health Partners Corporex Companies 75,000 Lease Renewal Lake Forest Place Blue Ash GE Duke Realty 50,000 Lease Summit Woods II Blue Ash Devicor Medical Products For 1031 Summit Woods II, LLC 47,000 Lease Renewal 1949 Dixie Highway NKY Christ Hospital N/A 44,000 Lease 150 East Fourth Street CBD Strauss & Troy Federal Reserve Bank of Cleveland 37,000 Lease Renewal Sharonview Corporate Center Tri-County Quest Global Services Allegiance Realty Corporation 27,234 Lease Renewal 4141 Rosslyn Drive Midtown Vegas Americas, Inc. RRR Properties 26,960 Sale 11370 Reed Hartman Blue Ash Advantech American Small Business Investment Corp. 17,000 Lease Deerfield Crossing I I-71 Corridor North Dassault Systemes Duke Realty 12,949 Lease Holiday Office Park CBD Periphery Family Nurturing Premier Office Park LLC 11,500 Lease Centennial Plaza III CBD TSC Apparel New Boston Citimark 11,191 Lease 8805 Governor’s Hill Drive I-71 Corridor North Campbell Sales Company New York Life Insurance Co. 11,000 Lease 4243 Olympic Blvd NKY Total Quality Logistics Corporex Companies 10,433 Lease 7671 Tylers Place Blvd I-75 Corridor North Dr. Thomas J. Knox Nick & Joyce Ruebel 10,353 Sale 8805 Governor’s Hill Drive I-71 Corridor North CDM New York Life Insurance Co. 10,150 Lease Renewal 6050 Mason Montgomery Road I-71 Corridor North AssureRX Health, Inc. City of Mason 10,000 Lease 4480 Lake Forest Drive Blue Ash Nease Performance Chemicals Corporate Woods I & II, LLC 9,224 Lease Renewal 10101 Alliance Road Blue Ash Qvidian Duke Realty 8,026 Lease 4010 Executive Park Drive Tri-County Infintech Rookwood Properties 7,534 Lease 4700 Duke Blvd I-71 Corridor North Solarsoft Business Systems CORE Realty Holdings LLC 7,256 Lease 625 Eden Park Drive CBD Periphery Smucker Sales Distribution Co. Corporex Companies 5,279 LeaseP. 2 | COLLIERS INTERNATIONAL Transactions are believed to be accurate but not guaranteed.
  3. 3. THE KNOWLEDGE REPORT | Q4 2011 | OFFICE | CINCINNATI SUBMARKET DATA SUBMARKET Total Inventory Total Vacant Vacancy Rate Quarterly YTD Avg. Rate SF Absorption Absorption Blue Ash 4,933,065 847,069 17.2% (52,777) 85,696 $18.53 CBD 18,445,393 3,432,194 18.6% (33,758) (63,819) $18.84 CBD Periphery 3,468,928 990,611 28.6% (12,407) (42,948) $17.41 East 2,387,562 442,091 18.5% 7,538 57,379 $15.48 I-71 Corridor 4,008,092 927,915 23.2% 81,733 130,533 $18.73 North I-75 Corridor 2,252,800 255,803 11.4% 22,504 11,437 $20.12 North Kenwood / 2,008,962 284,723 14.2% (342) (55,614) $22.36 Montgomery Midtown 3,160,104 701,103 22.2% 35,180 34,784 $17.40 Northern 7,101,010 1,387,312 19.5% (51,029) (47,509) $18.25 Kentucky Tri-County 4,489,144 1,402,653 31.2% (934) (39,820) $15.75 West 763,281 173,978 22.8% 34,553 (19,956) $18.04 MARKET 53,018,341 10,845,452 20.5% 30,261 50,163 $18.03 TOTALS AVG. ASKING RATES (PER SF-FULL SERVICE GROSS) QUARTERLY NET ABSORPTION Quarterly Net Absorption Class A Rent Class B Rent Overall Average Rent 400,000 The Office Market$22.00 300,000 saw 30,261 square$21.00 feet of positive Square Feet 200,000$20.00 absorption$19.00 100,000 this quarter.$18.00 0$17.00 -100,000$16.00$15.00 -200,000$14.00 -300,000 1Q11 2Q11 3Q11 4Q11 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 -400,000 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 COLLIERS INTERNATIONAL | P. 3
  4. 4. THE KNOWLEDGE REPORT | Q4 2011 | OFFICE | CINCINNATI OUTLYING WARREN 512 offices in COUNTY 61 countries on I-75 NORTH OF I-275 6 continents United States: 125 Canada: 38 I-71 NORTH OF I-275 Latin America: 18 TRI-COUNTY Asia Pacific: 214 WEST BLUE ASH EMEA: 117 • $1.5 billion in annual revenue KENWOOD/MONTGOMERY • 979 billion square feet under management MIDTOWN • Over 12,000 professionals CBD-PERIPHERY 3 EAST CEO | PRINCIPAL: INT’L Shenan P. Murphy, CCIM AIRPORT +1 513 721 4200 Colliers International | Greater Cincinnati NORTHERN KENTUCKY 425 Walnut Street, Suite 1200 8 Cincinnati, OH 45202 Colliers International statistics are audited annually and may result in revisions to previously reportedOffice Services | Greater Cincinnati quarterly and final year-end figuresBrian T. Graham, CCIM Fred A. Macke, Jr., SIOR Richard P. Meder John P. Schenk, CCIM, SIORBrokerage Associate and Brokerage Senior Vice President Brokerage Senior Vice President Brokerage Senior Vice PresidentDirector of Research Principal | Cincinnati Principal | Cincinnati Principal | Cincinnatibrian.graham@colliers.com fred.macke@colliers.com richard.meder@colliers.com john.schenk@colliers.comDIR +1 513 562 2214 DIR +1 513 562 2233 DIR +1 513 562 2253 DIR +1 513 562 2279Matthew H. Smyth Chris Vollmer, SIOR Chris Vollmer, Jr.Brokerage Senior Associate Brokerage Senior Vice President Brokerage Vice Presidentmatt.smyth@colliers.com Principal | Cincinnati chrisjr.vollmer@colliers.comDIR +1 513 562 2260 chris.vollmer@colliers.com DIR +1 513 562 2242 DIR +1 513 562 2244www.colliers.com/cincinnati