Research & Forecast Report
COLUMBUS | INDUSTRIAL
The Columbus industrial market finished 2019 with year-to-date net absorption* of 5,254,378 square feet, despite recording 126,048 square feet of negative absorption in the fourth quarter. This marks the first quarter of negative net absorption of the year, due to a record number of projects under construction but only three completions. Strong leasing activity and completed build-to-suit warehouses are expected to drive absorption positive in the first half of 2020. Vacancy increased slightly to 4.61 percent but is 24 basis points lower than it was at the end of last year, demonstrating steady growth in the industrial sector. Overall asking rates held steady at $3.51 per square foot, with rates for warehouse/distribution properties reaching $3.32 per square foot. In the fourth quarter, international retailers and 3PL providers were driving forces on the Central Ohio market, as Gap, Hollingsworth Logistics, Walmart and FedEx collectively took 800,000 square feet of space throughout the area. Demand for state of the art warehouse space propelled construction activity to 9.7 million square feet - the most there has ever been underway at once. The Columbus unemployment rate remained at 3.7 percent this quarter due to the city being considered at “full employment” compared to the rest of the country. GDP grew at 2.1 percent this year but is expected to soften slightly to 1.7 percent due to an upcoming election year. The industrial market can anticipate sustained growth in the future, as tenants, investors and developers continue to recognize Columbus as an international logistics hub.
The vacancy rate increased slightly from 4.24 percent to 4.61 percent this quarter, as the market posted negative net absorption. The Southeast submarket saw the largest vacancy decrease to 6.04 percent, as Gap, FedEx and Total Distribution all leased space in the area. The East submarket saw the most significant increase in vacancy to 6.54 percent, as a large tenant vacated 383,000 square feet of space at 1120 Morrison Road.
MARKET ACTIVITY >>
Market activity is often correlated to positive or negative absorption. However, in cases when a tenant leaves one space for another, the positive and negative absorption cancels out. The Market Activity Volume (MAV), which is the absolute sum of absorption change in the market, gives a better idea of overall activity. This quarter, the MAV was 3.5 million square feet – a strong indication that tenants are continuing to stay active in the market.
CONSTRUCTION ACTIVITY >>
With first-class warehouse space in high demand, construction numbers continue to skyrocket. Development is at an all-time high, with over 9.7 million square feet under construction in the fourth quarter. The Licking, Madison and Southeast submarkets each have more than 2.8 million square feet of speculative and build-to-suit space currently underway. Three properties totaling 965,380 square feet reached completion this quarter. Gap’s 400,000-square-foot expansion to their warehouse on Green Pointe Drive was finalized. The Northeast 302 project completed, adding 302,880 square feet of speculative space to the Licking submarket. Central Park Gahanna was completed for a total of 262,500 square feet and is close to being fully leased. Central Ohio can expect more than 10 million square feet of completions in the upcoming year.
SALES ACTIVITY >>
This quarter, 23 industrial properties totaling 3.3 million square feet sold in Central Ohio for a total sales volume of $213 million, or an average of $73 per square foot. The total sales volume was $150 million higher this quarter than last, demonstrating ongoing investor interest. LBA Realty purchased the 717,717-square-foot warehouse at 3099 Rohr Road for $45.6 million - the largest sale of the quarter. Starwood Real Estate bought a portfolio of Central Ohio properties for $39.2 million. 2450 Creekside Pkwy. sold to DRA Advisors for $38 million, or $58 per square foot.