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 continues to be impacted by the ongoing COVID-19 pandemic, posting negative net absorption of 278,546 square feet this quarter. A majority of this can be attributed to a rise in sublease vacancy that has come on the market, compared to direct vacant space which has not been hit as hard thus far. The nearly 700,000 square feet of added sublease space this year has driven vacancy up to 11.2 percent in the fourth quarter. However, vacancy for direct space remains stable in comparison, increasing slightly to 9.7 percent mainly due to completed vacant speculative space added to the market. This new construction caused overall asking rates to rise to $19.56 per square foot and Class A rates to increase to $21.43 per square foot. Despite average rates not yet being affected by the pandemic, landlords are expected to slightly decrease asking rents to compete with the influx of sublease space, which could drive overall rates down in the short term. On a positive note, this quarter marks the highest office construction activity to date, with 1,603,649 square feet of projects underway. Additionally, the number of tenants looking for office space increased in the second half of the year from 98 to 121 users, indicating growing demand. Columbus can anticipate a slow but steady recovery in 2021 as the economy recovers and the office sector adapts to a post-COVID-19 world.
The office vacancy rate increased to 11.2 percent this quarter, as more sublease availability and new speculative vacancy were added to the market. The Gahanna/Airport submarket saw a substantial vacancy increase to 12.81 percent due to Zulily putting two of their spaces up for sublease. Vacancy decreased to 15.99 percent in the Worthington submarket as multiple tenants occupied space and no large vacancies occurred there in the fourth quarter.
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 842,716 square feet– a strong indication that tenants are staying active in the market.
CONSTRUCTION ACTIVITY >>
This quarter, construction activity reached a record high in the office sector. There is currently 1,603,649 square feet under construction - double the amount from this time last year. The highly anticipated Scioto Peninsula development broke ground this quarter, expected to complete in 2022. Both phases of Grandview Crossing, the only completely speculative office property to break ground this year, will finalize next summer and offer 248,500 square feet of space in Arlington/Grandview. There were four completions this quarter totaling 331,358 square feet. The Pointe at Polaris II, The Hayden and two new Bridge Park buildings were all finalized, providing more Class A space to the market. Throughout the coming year, as many as 10 projects are expected to complete around the city.
SALES ACTIVITY >>
In the third quarter, 11 office properties totaling 1.4 million square feet sold around Central Ohio. The total sales volume reached $85.3 million, with an average price per square foot of $96. Activity is strong, as sales volume was $49 million higher this quarter than last. Group RMC purchased 65 E. State St. for $36.8 million - the largest sale of the quarter. The Daimler Group sold 380 Polaris Pkwy. to The Champion Companies for $15.75 million, or $149 per square foot. 150 E. Gay St. was sold by LNR Partners to an undisclosed buyer for $11.4 million in an investment sale.