Research & Forecast Report
COLUMBUS | OFFICE
The Columbus office market finished the year strong, recording 351,948 square feet of positive net absorption* in the fourth quarter. This brings year-to-date net absorption to over 1.2 million square feet. The fourth quarter is the seventh consecutive quarter of positive absorption and the third consecutive quarter of absorption above six figures, demonstrating the consistent growth of the office market. Strong leasing activity throughout the region contributed to rising absorption and declining vacancy - down to 8.8 percent this quarter. Overall asking rates remain steady at $18.75 per square foot, with Class A rates holding at $20.82 per square foot and Class B rates at $17.59 per square foot. Completed build-to-suit offices were driving forces on the market this quarter, as DHL and White Castle’s new headquarters both completed for a collective 250,000 square feet. According to The Kiplinger Forecast, GDP grew at a 2.1 percent rate this year due to home construction and government spending. GDP is expected to soften slightly to about 1.7 percent in 2020, as it is an election year. Locally, 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. The region can anticipate another strong year in 2020, as national and international firms gain interest in Columbus’ skilled workforce, strategic location and emphasis on development.
During the fourth quarter, strong leasing activity drove the Columbus vacancy rate down slightly to 8.8 percent - over 70 basis points lower than at the end of last year. The CBD submarket saw the largest vacancy decrease to 8.75 percent, as Williams Lea occupied 35,000 square feet of space there. The largest increase in vacancy occurred in the Polaris submarket to 7.97 percent as DHL vacated their space at 550 and 570 Polaris Pkwy. to consolidate at their new Westerville headquarters.
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 998,554 square feet– a strong indication that tenants are staying active in the market.
CONSTRUCTION ACTIVITY >>
Columbus construction activity will remain steady in the new year as demand for Class A office space reaches an all-time high. There is currently 858,828 square feet of space under construction - a majority being mixed-use development. The CBD is leading activity with 269,000 square feet currently underway, including the Hayden renovation on Capitol Square and The Reach on Goodale development. There were four completions this quarter, totaling 389,863 square feet. DHL and White Castle’s build-to-suit headquarters both completed for a total of 250,000 square feet. The office project at 5185 Blazer Pkwy. and new Bridge Park building at 6515 Longshore St. also completed this quarter in Dublin. As many as 11 projects are expected to finish throughout the upcoming year.
SALES ACTIVITY >>
This quarter, 11 office properties totaling 1.4 million square feet sold in Central Ohio. The total sales volume reached $220 million, with an average price per square foot of $148. This sales volume is $170 million more than last quarter’s total, demonstrating a significant increase in investor interest. Eight of the ten largest sales of the year occurred in the fourth quarter. The Hearn Company sold 10 W. Broad St. to Square Deal Capital for $61 million, making it the largest sale of the quarter and of the year. Starwood Capital Group bought the mixed-use 80 on the Commons from Kaufman Development for $31 million, or $179 per square foot. 500 S. Front St. and 855 Grandview Ave. were both purchased by Ravinia Capital Group for a total of $37.8 million.