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Central Ohio's Subleasing Surge

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Changing work habits and employers’ decisions to scale back office real estate have contributed to about 1 million square feet of additional sublease space becoming available in Central Ohio, bringing the current total to a little less than 2 million square feet.

Spaces of note include the 406,000-square-foot building at 5100 Rings Road in Dublin that Cardinal Health put up for sublease because more of its employees are working from home; the 235,000 square feet Upstart itself subleased from Bread Financial in 2021 at 3075 Loyalty Circle but may no longer need following a workplace strategy change; and nearly 150,000 square feet up for sublease at the former State Farm Operations Center in New Albany.

In total, there is about 1.92 million square feet of sublease space available in 67 office sites across the region, according to CBRE.

The last time there was such a large spike in sublease space was during the Great Recession in 2008 and 2009. There was about 1 million square feet available in the Columbus region in 2009, according to Colliers.

Still, industry experts say the Columbus region is in a good position compared to many other metropolitan areas.

Collin Wheeler, first vice president with CBRE, said although the total amount of sublease space is high, that’s not the whole story. Most of the available space is at a small number of large offices.

“While there are a lot of sublease spaces – obviously companies have been consolidating or giving back office space – there are a couple outliers that are just really large in size that definitely bring up the total amount of square footage on the market,” Wheeler said.

“Most of the spaces available are in big chunks,” said Grant Hartman, a vice president at Colliers.

Hartman said in many major cities, such as San Fransisco, sublease space makes up about 8% of the open office market. But according to Colliers data, sublease space in Columbus makes up just 1.7% of the available office space.

“There’s not an (epidemic) of sublease space in Columbus,” Hartman said. “Columbus is resilient, we’re in a good position.”

However, according to Newmark data, the amount of available sublease space at the end of 2022 was up 55% from the third quarter.

And since the first quarter of 2020, when there was only about 182,000 square feet of sublease space on the market, 1.9 million square feet of sublease space has been added, according to CBRE.

According to an analysis using data from CoStar, Columbus ranked eighth among 39 cities with the largest increases in sublease space from the end of 2019 to the third quarter last year.

Cardinal Health's big listing

The bulk of available sublease space is in Dublin, where Cardinal Health is seeking to sublease 406,000 square feet – the largest available sublease space on the market. Dublin represents about 33% of the available sublease space in Central Ohio.

Cardinal Health did not respond to questions.

Only a small pool of tenants could sublease that kind of space. At the same time, companies are looking for direct leases in new spaces.

“There are definitely plenty of subleases that I think will have a little bit more trouble getting leased. The (spaces) that are bigger sized and in less amenitized areas, those will likely have a little bit more headwinds than some of the newer spaces will,” Wheeler said.

More than half of the spaces available for sublease are less than 15,000 square feet, according to Colliers data.

Office spaces between 10,000 and 15,000 square feet have been the fastest to be leased over the past six months, Wheeler said. Examples of those deals include Jet Edge subleasing DataRobot’s space in Easton and Arrive Logistics subleasing a floor from BarkBox in the first phase of Gravity.

“Both of (those spaces) obviously are in high-demand areas,” Wheeler said. “(The Easton space) sits next to Pins and is right across from Restoration Hardware, so it is in a great position.

“BarkBox was the same. It was in a high-growth area with amenities, which will help attract new employees for this company, and I think that was kind of the lure for them.”

How companies are getting creative

Some employers are taking unique approaches to subleasing their spaces.

Marketing and advertising firm Treetree, for example, wants to “time share” its space with another company, subleasing its offices one or two days a week while its employees work from home.

Treetree leases a 4,000-square-foot office in the Short North and an additional 2,000-square-foot space across the hall, which CEO Becca Apfelstadt said they call the “clubhouse.” Apfelstadt said the company is in negotiations with a sublessor for the “clubhouse.”

“Both of (those spaces) obviously are in high-demand areas,” Wheeler said. “(The Easton space) sits next to Pins and is right across from Restoration Hardware, so it is in a great position.

“BarkBox was the same. It was in a high-growth area with amenities, which will help attract new employees for this company, and I think that was kind of the lure for them.”

How companies are getting creative

Some employers are taking unique approaches to subleasing their spaces.

Marketing and advertising firm Treetree, for example, wants to “time share” its space with another company, subleasing its offices one or two days a week while its employees work from home.

Treetree leases a 4,000-square-foot office in the Short North and an additional 2,000-square-foot space across the hall, which CEO Becca Apfelstadt said they call the “clubhouse.” Apfelstadt said the company is in negotiations with a sublessor for the “clubhouse.”

“We are seeing more people back in the office more often,” Wheeler said. “From our experience, having walked a lot of spaces every week, it seems like the companies that do have people in seem to be really thriving. And you can almost feel like a cultural buzz around the office.”

Hartman said if his clients are moving, they are trading up to better quality spaces.

A lot of companies are also looking for the right fit, Wheeler said. Many tenants are seeking out mixed-use developments in the Short North, Bridge Park in Dublin and at Easton, as well as existing buildings in places such as New Albany and Polaris, where there are restaurants, entertainment and other amenities nearby.

That’s the “experience” part of the equation.

“Most employers are trying to justify the commute,” Wheeler said. “If it takes 20 minutes to get in, rather than sitting on an island somewhere where there’s no lunch options, people like having something that just has some vibrancy and some community about it.

“I think the experiential piece is not walking into a sea of cubicles,” he said.

Wayne Harer, executive managing director at Newmark, said the spaces that are most attractive have amenities in the building or nearby.

“The only way to get people into the office is to make it fun and exciting,” he said.

More sublease space likely will come on the market in the first six months of 2023, Harer said, thanks to employers continuing to make decisions about office space and the economy.

What does the future hold?

JLL data show the threat of a recession and the impacts of hybrid work seem to be more significant for the office market than previous downturns.

But that’s only part of the story, said Sam Stouffer, research manager at JLL. He said the sublease market had stabilized at the beginning of 2022 and vacancy only rose at the close of the year when Cardinal and Upstart decided to sublease their spaces.

According to JLL, the vacancy rate rose to 20% and absorption fell to negative 740,000 square feet in the fourth quarter, which is the lowest absorption total in a single quarter last year.

Absorption was positive in 2022 before those large office blocks came on the market.

Many office tenants in 2023 are expected to stay put.

Pre-pandemic, about 15% of companies were renewing their leases. Today that figure has doubled to 30%, according to JLL.

Clayton Davis, managing director at JLL, said this could be because companies are still strategizing how to maximize their return on their office investment or because it is too expensive to move.

“Companies may be choosing to renovate their current space to meet how people work now and not incur moving costs,” Davis said.

Available spaces that have less than two years on a lease term might have a harder time being leased, because companies tend to make long-term decisions and don’t want to have to decide again so soon, Wheeler said.

About half of sublease spaces available are with companies that have four or more years left on their leases, according to CBRE.

Davis said that many companies are taking a “sincere look” at how their spaces are designed before deciding whether to stay, move or downsize and sublease.

“We will continue to see people really evaluating their spaces in a way they hadn’t before,” Davis said.

And that could mean more spaces coming up for sublease.


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Grant Hartman

Vice President | Columbus

Columbus

As a  Brokerage Associate at Colliers International, Grant specializes in office leasing and sales, in addition to contract work and negotiation, in the Greater Columbus area. He is a motivated entrepreneur providing successful solutions for his clients and colleagues.


In 2013, Grant received his Ohio Real Estate Sales License from Hondros College of Business and immediately began practicing commercial real estate. He has been involved in numerous transactions totaling more than $4,865,000 in value, and is currently listing over 500,000 SF of commercial space for lease.

As a natural born Buckeye, he received his Bachelor’s degree from The Ohio State University in 2017 with a major in Financial Services; Education and Human Ecology and a minor in Business Management. In his tenure at OSU, he was a member of the Fisher Real Estate Society.


Prior to joining Colliers International, and during his education at The Ohio State University, Grant was a Realtor with Keller Williams Consultants Realty, where he helped buyers and sellers with contract negotiations and assisted buyers in purchasing residential and land investment opportunities. His experience as a Realtor led to an internship at Colliers | Greater Columbus Region, where he then advanced into the Broker in Training Program before becoming a Brokerage Associate. In addition, Grant owns and manages three residential investment properties in The Ohio State Housing District.

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Brooke Ferman

Research Analyst

Columbus

Brooke specializes in research capabilities, providing support for the Brokerage, Property Management, Facility Services, Accounting, Project Management, Construction and Development departments. She is responsible for executing data reports, maintaining a commercial property database, reporting quarterly trends, performing data analysis and utilizing statistical information to predict future behavior in the market.

She also assists the marketing and research director on special projects and corporate initiatives.

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