Research & Forecast Report
COLUMBUS | OFFICE
As we publish this report, the U.S. and the world at large are facing a tremendous challenge, the scale of which is unprecedented in recent history. The spread of the novel coronavirus (COVID-19) is significantly altering day-to-day life, impacting society, the economy and, by extension, commercial real estate. The extent, length and severity of this pandemic is unknown and continues to evolve at a rapid pace. The scale of the impact and its timing varies between locations. To better understand trends and emerging adjustments, please subscribe to Colliers’ COVID-19 Knowledge Leader page for resources and recent updates.
The Columbus office market started to feel the effects of the ongoing COVID-19 pandemic, recording negative net absorption of 664,924 square feet in the third quarter. Nearly 500,000 square feet of this can be attributed to sublease vacancy that has come on the market, compared to direct vacant space which has not significantly risen this year. This added sublease space also caused the overall vacancy rate to rise to 10.58 percent. Despite sublease vacancy increasing, direct vacancy remains stable, rising only by a quarter percentage to 9.37 percent this quarter. Overall asking rates remained steady at $19.18 per square foot, with Class A rates slightly decreasing to $21.29 per square foot. In order to compete with the large amount of sublease space, landlords are expected to slightly decrease asking rates which will consequently drive overall rates down in coming quarters. On a positive note, this quarter marks the highest construction activity since 2017, with 1,445,608 square feet of development underway. Additionally, the number of users looking for office space increased from 98 to 113 tenants in recent months, indicating an increase in tenant demand for space. As the office sector adapts to a post-COVID-19 world, Columbus can anticipate a slow recovery moving forward.
The office vacancy rate increased to 10.58 percent this quarter, as there was an influx of sublease availability added to the market. The Westerville submarket saw a substantial vacancy increase to 12.87 percent due to Alliance Data putting their space up for sublease and g2o vacating space at 2550 Corporate Exchange Drive. Vacancy decreased to 12.16 percent in the Dublin submarket as Quantum Health, g2o, and Management and Network Services all occupied space there.
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 1.7 million square feet– a strong indication that tenants are staying active in the market.
CONSTRUCTION ACTIVITY >>
This quarter, construction activity was the highest it has been since the third quarter of 2017. There is currently 1,445,608 square feet under construction - up 400,000 square feet from last quarter. The multi-property CoverMyMeds headquarters is expected to complete in the CBD submarket in 2021. Grandview Crossing, the only completely speculative office property to break ground this year, will finalize next spring and offer 124,250 square feet of space in Arlington/Grandview.
There was one completion this quarter totaling 29,616 square feet. The third and final property of the Easton expansion was finalized, adding available Class A space to the submarket. Throughout the rest of the year, as many as nine projects are expected to complete around the city.
SALES ACTIVITY >>
In the third quarter, 11 office properties totaling 373,705 square feet sold around Central Ohio. The total sales volume reached $36.6 million, with an average price per square foot of $119. Activity is strong, as sales volume was $27 million higher this quarter than last.
Priam Capital purchased 565 Metro Pl. S for an undisclosed price - the largest sale of the quarter. MacKenzie Holdings sold 575-615 Copeland Mill Road and 6096-6100 E. Main St. to Woodside Capital Partners as a portfolio for a total of $6.55 million. 815 W. Broad St. was bought by BaseCamp Recovery Center for $3.5 million.