Dozens of Columbus region companies have shed office space since COVID arrived a year ago, raising concerns about a glut of empty offices coming out of the pandemic.
More than 19% of central Ohio's offices are empty, not including offices temporarily vacated by the pandemic, according to the commercial real estate firm CBRE.
"That's the highest rate in 10 years, the result of several things from COVID," said Michael Copella, managing director of CBRE's Columbus office.
"There was less leasing activity in 2020, so less space absorbed, and construction did not stop, meaning new space was delivered."
Offices subleasing out unused space
In addition, a growing number of office users have subleased space they no longer need, adding discounted office space to the market that competes with new or already empty space.
According to the commercial real estate company Colliers, more than 90 central Ohio offices were available for sublease at the end of 2020, totaling 1.2 million square feet, more than double the amount available a year earlier.
"The rise in sublease space on the market is a predominant trend we’ve seen this year," said Brett Cisler, executive vice president with the Columbus Colliers' office. "Three fourths of current sublease spaces came on the market after COVID hit."
Offices available for sublease can be found throughout central Ohio, much of it in small spaces.
But a handful of large offices also have emptied during the pandemic and are being subleased, including thousands of square feet of suburban offices formerly occupied by Alliance Data, Ascena and Zulily, which have either reduced their staffs or sent them home to work over the past year.
Alliance Data, for example, is subleasing more than 200,000 square feet of its offices on Schrock Road in Westerville and on East Broad Street in Whitehall after determining that its staff is working well remotely.
In addition, some of Columbus' best-known companies such as Nationwide and NiSource, parent of Columbia Gas, are subleasing some Downtown space they vacated in the pandemic.
"Before, there was no space in Arena District, none in the Short North," said Copella, with CBRE. "Now we’re seeing some spaces in the more desirable areas of town."
Supply grows while demand shrinks, possibly dropping rents
While it's still a small fraction of all central Ohio office space, sublease space has softened demand and prices for new or otherwise empty space.
"Landlords are expected to slightly decrease asking rents to compete with the influx of sublease space, which could drive overall rates down in the short term," according to a Colliers year-end report on central Ohio office space.
Some companies hunting for office space before the pandemic have backed off, adding to concerns about demand. The health technology company Olive, for example, has decided to stay in its East Main Street offices after concluding that most of its staff can work remotely.
Leasing activity in general plummeted in central Ohio during the pandemic. According to Colliers, in the second and third quarters of 2020, 41 office leases were signed in central Ohio for a total of 194,000 square feet of space. During the same period in 2019, 97 leases were signed for almost 1.1 million square feet.
Also contributing to concerns about a glut of space are several new office buildings on the rise, or planned, in central Ohio, few of which have tenants in hand. New offices are going up in the Peninsula and Gravity projects in Franklinton, in Hamilton Quarter in New Albany, Confluence Village in the Arena District, Bridge Park in Dublin, Grandview Crossing in Grandview Heights, and several more are planned in Worthington and Downtown.
Brighter skies ahead?
A few new offices have landed big tenants. The engineering firm Burgess & Niple leased 45,000 square feet of new space at the Peninsula in Franklinton, Bank of America leased 60,000 square feet at the new Pointe at Polaris office building, and Hagerty Insurance Agency leased 41,000 square feet in a new Bridge Park building.
Such leases fuel confidence that demand for space – especially for new offices – will continue to climb once companies and workers feel safe to return.
Cisler, with Colliers, said he's already noticed an uptick in interest. He said 124 office users are now looking for space in central Ohio, up from a low of 98 last summer.
"There has been a positive change over the past few months," he said.