Columbus, OH/USA

COLUMBUS, OH – JULY 28, 2009 – Even with signs of economic recovery becoming evident, Columbus’ direct office vacancy rate increased 53 basis points during the quarter. The mid-year rate was 14.08% compared to 13.55% at the first quarter’s close. Class A office space continued to outperform Class B space with all four submarkets posting direct vacancy under 12% (CBD 11.71%, North 8.37%, Northeast 11.69%, and Northwest 6.18%). Conversely, Class B space struggled with only one submarket recording a direct vacancy rate under 20% (CBD 15.72%). Even though the amount of market space is split almost evenly between Class A and Class B space (13.2 million square feet and 12.9 million square feet respectively), Class A space continues to perform better with over 1.2 million square feet less of available space. Sublease vacancy also experienced an increase of 20 basis points ending the second quarter at 1.32%. Reduction of employees and space was a continuing trend throughout the second quarter.

ABSORPTION
The second quarter saw almost 157,000 square feet of negative absorption. Over 77% (121,400 square feet) of that negative absorption came from Class B space, whereas Class A space only accounted for just over 35,000 square feet. This continues the trend of negative absorption set in the first quarter and can still be attributed to both office closures and company cost cutting.

NEW CONSTRUCTION
No new office construction projects were announced during the quarter but two were delivered to the market. Both completions were build-to-suit and owner/user projects. Cardinal Health moved into their 350,000 square foot expansion at their headquarters at 4765 Emerald Parkway in Dublin. The other completion was Grange Insurance’s new headquarters at 643 South High Street in the CBD. Grange will start relocating employees to the new 195,000 square foot facility throughout the rest of the year. There are currently five properties under construction totaling 637,000 square feet in the four Columbus submarkets.

THREAT OF RECEIVERSHIP PROVES SMALL
There has been and continues to be an expectation that, as the Columbus office market catches up to the recession, there office property foreclosures will surge. In the first half of 2009, however, there were few examples to support this conclusion. The most notable was Northeast Business Campus, which entered receivership during the first quarter. The six building office campus was appointed to Gryphon Asset Management, LLC after Bank of America foreclosed on the 200,000 square foot campus. The portfolio was purchased by Chicago-based Rushmore Properties out of receivership three years ago. Other notable buildings going into receivership were Airport II at 2740 Airport Drive (65,000 SF), 5747 Perimeter Loop Road (64,000 SF), and 1600 Watermark Drive (45,000 SF). It is anticipated that the latter will be sold to the Franklin County Board of Mental Retardation and Development Disabilities.

Outlook/Forecast
For the rest of 2009, CTMT expects available space to continue to accumulate as corporations shed employees and trim space to reduce operational costs. The few tenants in the market are choosing shorter term deals as they evaluate future business trends. Most are opting to remain in existing space rather than commit capital to relocation. Large investment grade office sales transactions will continue to be sluggish as lending sources are still hesitant to finance commercial office properties. Many large investment buyers are waiting on the sidelines to jump into the market when they feel risk has been sufficiently abated.

About Colliers Turley Martin Tucker

Colliers Turley Martin Tucker has consolidated its ownership structure with Cassidy & Pinkard Colliers, Colliers Pinkard, and Colliers ABR, forming a holding company that is one of the largest commercial real estate service firms in the U.S.  In 2008, the consolidated entity completed more than $9.2 billion in worldwide transactions, including over $3.5 billion in capital markets transactions, and managed more than 335 million square feet of real estate.  The Corporate Solutions division supports more than 22,000 locations for Fortune 1000 companies and delivers a new location “Every 80 Minutes.”  Colliers International is ranked as one of the 2009 World’s Top 100 outsourcing service providers by International Association of Outsourcing Professionals, IAOP Top 100.  For more information about Colliers International, a worldwide affiliation of independently owned and operated companies, visit www.colliers.com.

Contact Information

Wayne Henry
614.827.1724
WHenry@ctmt.com

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