Written by: Brooke Ferman
As a Research Analyst, Brooke specializes in research capabilities, providing support for the Colliers Columbus Office, Industrial and Retail groups. She is responsible for executing data reports, maintaining a commercial property database, reporting quarterly trends, performing data analysis and utilizing statistical information to predict future behavior in the market. She also assists the marketing and research director on special projects and corporate initiatives. Keep reading for Brooke's take on market trends in the Columbus office sector.
The Columbus office market continues to adjust to the evolving workplace environment. Negative absorption was recorded for the first quarter of 2023, and the vacancy rate increased to 18.73 percent. From a positive perspective, asking rates increased by $1.59 for an overall rate of $22.02. The rising asking rates indicate that the demand for office space remains targeted on new construction and Class A space, which offers desirable amenities. Development remains strong, with 11 projects comprising 1,097,606 square feet under construction.
Vacancy
The vacancy rate continues to increase, now at 18.73 percent. New Albany’s rate at 30.97 percent is due to the Discover Building sale-leaseback. Additionally, Easton recorded an elevated rate when Upstart vacated 240,000 square feet at 3075 Loyalty Circle. Vacancy decreased to 15.90 percent in Gahanna/Airport after Designer Brands Inc. occupied over 57,000 square feet at Columbus International Aircenter, 3980-4020 E 5th Ave.
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 offset. The Market Activity Volume (MAV), which is the absolute sum of absorption change in the market, provides a better idea of overall activity. This quarter, the MAV was 1,300,730 square feet.
Construction
Construction remains steady with 11 projects consisting of 1,097,606 square feet. The majority of office construction, over 430,000 square footage, is in the CBD submarket and is expected to deliver late fourth quarter or early 2024. The four properties under construction in the Arlington/Grandview, CBD and Dublin submarkets are all larger than 120,000 square feet. The remaining construction is in the North Central, North Delaware, Westerville and Worthington submarkets. A decrease in office construction is anticipated throughout the remainder of 2023 while demand for furnished, renovated and quickly available spaces rises.
Completions
One project delivered this quarter in the greater Columbus area. Gravity II’s completion in the CBD submarket totals 195,000 square feet. This project joins the mixed-use space at Gravity I with 80,000 square feet of office space.
Sales
This quarter, 52 office properties totaling over one million square feet sold in Central Ohio. The average price per square foot was $169.62, and the average building size was just over 20,000 square feet. The largest sale was in New Albany totaling over 333,000 square feet. Discover Financial Services sold its property at 6500 New Albany Road to Feazel for $9.65 million ($28.96 PSF). Westar I and II with over 279,000 combined square feet in Polaris, both sold to Melrose Solomon Enterprises.
Appealing Amenities
Flight to quality is a significant shift that has affected the market. Although it has been trending for years, it is a top focus for landlords and tenants now more than ever with the hybrid working schedule. Landlords want their space to appeal to top tenants, while occupants prefer a space that encourages employees to work in the office. Benefits such as a gym, cafe, natural lighting, collaboration rooms, personalized areas and furnished spaces are examples people seek when considering flight to quality.
*A new statistics set for reporting trends was created at the beginning of 2023. Please note that when comparing current trends to past quarters, there will be discrepancies. Colliers | Columbus tracks assets which are 20,000 square feet and above, Class A and B properties, single and multi-tenant and includes limited owner-occupied buildings.
Check out the full Q1 2023 Office Trends report here!