Written by: Kyle Ghiloni
Kyle is a member of the Columbus Industrial Team at Colliers | Columbus. He provides a unique level of experience having been mentored by the Columbus Industrial Team for three years prior to his college graduation. Kyle’s persistence and desire to learn adds yet another dimension to a team of seasoned real estate advisors. Keep reading for Kyle's take on the current state of the Columbus industrial market.
Columbus market vacancy has risen for a second consecutive quarter, and most recently, 1.1 million square feet of negative absorption. Do you anticipate increased leasing activity throughout the rest of the year?
It is worth noting that 2023 was a banner year for Columbus with +/- 18.1 million square feet of new product delivered. This all culminated as we began to experience longer lease-up times and therefore we have seen an uptick in vacancy, along with some tenants rightsizing their footprints. Economics 101 is all about supply versus demand; as we are creating nearly no new supply, and our tenant demand, although correcting, is still historically strong, I anticipate our vacancy rate to drop back down over the next two quarters. Columbus is also experiencing pockets of varying demand and vacancy in different size ranges and submarkets. Our team would be happy to discuss these trends further.
Construction activity has decreased by over 25% year-over-year, with build-to-suits becoming more prevalent. Do you see this trend continuing throughout the year?
The uncertainty with capital markets and interest rates continue to create a math problem for speculative development, and although tenant demand is correcting to a healthier pre-pandemic level, the slower velocity and higher vacancy rates are not yet palatable to investors. The trend of built-to-suit construction is two-fold: 1) Columbus is seeing a trend of more specialized uses such as manufacturing that require a more purpose-built development, and 2) as developers are not willing to build speculatively this naturally steers some tenants this direction. “Uncertainty” seems to be the big word and until the markets’ confidence shifts this trend will likely continue.
What is your take on the current industrial market?
Overall, I think the slowdown has been useful by keeping everything in check. The growth we saw over the last 24-36 months was not sustainable long-term. I would rather the pace wane off, as it has, rather than become anything more aggressive, other markets have experienced. Columbus tends to not experience the high-high’s or low-low’s that some other areas do. That, paired with our cities’ competitive advantages and notable announcements, I am confident we will remain healthy and optimistic about the future.
For more information on the Columbus Industrial market, view our Q1 2024 Industrial Trends.