Columbus, Ohio

The Columbus market recorded a direct vacancy rate of 13.52% compared to 2008’s year end rate of 13.56%. Class A office vacancy continued to tighten as three of the four submarkets posted rates under 11% (CBD 10.69%, North 8.44%, and Northwest 5.87%). On the other hand, Class B space had significantly higher vacancy rates with only one submarket recording a rate below 18% (CBD 15.02%). Even though the amount of market space is split almost evenly between Class A and B space (13.1 million square feet and 12.8 million square feet respectively), Class A space continues to perform better with over a million feet less of available space.

Sublease vacancy decreased over the quarter by 82 basis points to 1.12%; however, with the worsening economy this rate could increase as companies are forced to reduce space and employees.

The first quarter of 2009 had 17,625 square feet of negative absorption. The majority was recorded in Class B properties, which accounted for over 15,000 square feet. Class A space recorded only 2,500 square feet of total negative absorption for the quarter. Much of the activity can be attributed to both office closures and company cost cutting, most notably in office space reductions. With the ever-increasing unemployment rate, companies are looking to reduce their size and give back or sublease any space that is not being effectively utilized.

A synopsis for Columbus Submarkets follows

Downtown
The Downtown submarket started to reverse the 2008 trend of decreasing vacancy rates by posting its first increase in over four quarters. The submarket’s direct vacancy rate increased 38 basis points ending the first quarter at 13.09%. Both Class A and B office spaces experienced increases in direct vacancy rates, although sublease rates unexpectedly declined by 28 basis points as subleasing converted back to primary vacancy or tenants picked up spaces with large discounts. About 36,500 square feet of negative absorption fueled this rise in direct vacancy. The rise in direct vacancy is an obvious result of challenging economic times as companies are forced to reduce space requirements and cut costs wherever possible. The full service asking rate dropped slightly to $20.70 compared to the end of the year 2008 rate of $20.81 per square foot.

North
The North submarket continues to have the highest direct vacancy rate for Columbus and remain one of the most competitive submarkets for tenants. However, it also delivered the largest decrease in direct vacancy and the most positive absorption during the quarter. The direct vacancy rate decreased from the end of 2008’s rate of 17.88% to the first quarter 2009 rate of 16.57%. There was over 63,000 square feet of positive absorption for the quarter. The full service asking rate did not significantly change ending the first quarter at $17.44 per square foot. With the highest vacancy rate and the lowest full service asking rate, interest in the North submarket will continue throughout the year.

Northeast
Columbus’ smallest submarket, the Northeast, experienced the largest increase in direct vacancy in the first quarter. The direct vacancy rate rose to 15.55%, an increase of 64 basis points from 2008’s year end rate of 14.91%. Corresponding with a rising vacancy rate, there was 45,500 square feet of negative absorption with 85% coming from various properties in the Westerville micro-market. The full service asking rent increased in the first quarter from $18.70 at the end of 2008 to $18.77 per square foot.

Northwest
The Northwest submarket posted the lowest direct vacancy rate of the Columbus area submarkets, continuing a trend started in the fourth quarter of last year. The direct vacancy rate ended the first quarter at 10.66%, benefiting mainly from Class A’s vacancy rate of only 5.87%. With only a 17 basis point decrease in direct vacancy rate from the end of 2008, there was only 1,200 square feet of positive absorption. The steady behavior of the Northwest submarket was due to large lease renewals in the area. The full service asking rate ended the first quarter at $18.35 per square foot, a ten cent decrease from 2008’s year end asking rate of $18.45.

Outlook

Since vacancy lags in response to market conditions, CTMT expects vacancy rates to continue to increase throughout 2009. Vacancy rates could rise as high as 20% from the current 13.64% due to further company closings or consolidations and as new speculative office properties are completed in 2009. Office property sales are anticipated to remain at a very slow pace through 2009 but as the economy rebounds CTMT forecasts that many new buyers will enter the market and buy up discounted or distressed office assets. Tenants will continue to be “golden” in this slow market as landlords compete to lure them to their properties by offering free rent, above standard tenant improvements, and discounted rental rates. 

About Colliers Turley Martin Tucker

Colliers Turley Martin Tucker recently completed the consolidation of its ownership structure with Cassidy & Pinkard Colliers, Colliers Pinkard, and Colliers ABR, forming a holding company that is one of the nation’s largest commercial real estate service firms.  The consolidated entity operates in all 50 states, completes more than $13 billion in worldwide transactions annually, and manages more than $30 billion in real estate.  The holding company’s portfolio totals 300 million square feet under property management, 210 million square feet of space for lease, and $5 billion in capital markets transactions annually.  The Corporate Solutions division sustains more than 20,000 locations for Fortune 1,000 companies and delivers a new location “Every 80 Minutes.”  Colliers is the top-ranked real estate firm on the Global Outsourcing 100 companies list, IAOP Top 100.  For more information about Colliers International, a worldwide affiliation of independently owned and operated companies, visit www.colliers.com.

There are 42 associates in the Columbus office including, 27 brokerage team members who specialize in retail, office, industrial, multi-family housing and investment sales. 

Contact Information

Wayne Henry
614-827-1724
WHenry@ctmt.com

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