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Office vacancy climbs in Central Ohio as companies look to sublease space

Office vacancy climbs in Central Ohio as companies look to sublease space

Driven by a surge in companies putting office space for sublease, office space vacancy has spiked in Central Ohio.

About 700,000 square feet of space has been put up for subleasing in the city, pushing the office vacancy rate to 11.2%. Thats the highest number since 2013, according to information from Colliers International.

Colliers tracked 90 spaces and 1.2 million square feet on the market – double that in 2019 and higher than any number in 15 years. Three-fourths of it came on the market after Covid-19 hit, though not all the listings can be directly tied to the pandemic. About 83% of it is less than 20,000 square feet.

Among big spaces, Ascena Retail Group Inc. put 135,000 square feet of space on the marker related to the closure of its Easton office. Alliance Data put about 260,000 square feet of space in Easton and Westerville on the market, and iQor put about 50,000 in New Albany.

Subleasing space adds a new dynamic into office leasing. Asking rates for this kind of property are about 8.4% below direct market rents and the deals are often shorter term, which takes the pressure off of many companies to sign longer-term leases. That type of space represents about 9.4% of the space available in the market.

At the Columbus Metropolitan Club's economic forecast event Wednesday, Tom Jalics, chief market strategist for Fifth Third Bank, said he expects work-from-home to persist for "many quarters" beyond the pandemic as companies re-think their real estate.

Only three leases of more than 12,000 square feet signed during the fourth quarter, according to Colliers. The largest was Burgess & Niple Inc.'s planned relocation to Franklinton.

But, Colliers researcher Hannah Williams wrote, the number of tenants looking for office space rose from 98 to 121.

Vacancy for direct lease space increased only a little bit to 9.7% mainly as some completed office space has been added to the market, with new space pushing asking rates to rise to $19.56 per square foot on average. Williams predicts landlords will likely decrease asking rates.

The fourth quarter also saw the highest office construction activity to date – over 1.6 million square feet of space is under construction now. Information from Dodge Data & Analytics shows that commercial construction halted during the pandemic but picked up speed toward the end of the year.