top of page
  • Halle Smith

Q3 2023 INDUSTRIAL & OFFICE MARKET UPDATE

Written by: Collin Fitzgerald and Brooke Ferman, Research Team


As the Research Team, Collin, Research Manager, and Brooke, Research Analyst, specialize in research capabilities, providing support for the Colliers Columbus Office, Industrial and Retail groups. They are 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. They also assist the marketing and research director on special projects and corporate initiatives. Keep reading for Collin and Brooke's take on market trends in the Columbus office and industrial sectors.


Industrial Market Update

The Columbus industrial market has continued its positive absorption trend, recording 1.5 million square feet of absorption this quarter. Vacancy rates increased to 4.38 percent and overall asking rates remained steady at $7.07 NNN. Construction activity has remained steady this quarter with seven projects coming out of the ground totaling 4.4 million square feet. There were 10 completions equating to 4.2 million square feet with 14.1 million square feet currently under construction. Some developments have not been leased due to a shift in demand as tenants are becoming more hesitant due to macroeconomic uncertainty. As a result, we anticipate less new construction in coming quarters, but the Columbus market remains healthy overall.



Vacancy

Vacancy has increased this quarter by 20 basis points due to many buildings being delivered vacant which is contrary to past quarters. The Fairfield submarket had the highest vacancy rate at 12.47 percent due in part to 0 Robinett Way Canal Pointe Building A and B delivering 825,000 square feet of vacant space. The Madison submarket saw a large drop in vacancy as a result of 200 Park West Dr (371K square feet) leased to GXO Logistics Supply Chain, Inc.


Net Absorption

Net absorption was over 1.5 million square feet this quarter. Demand weakened after significantly high leasing volume in the previous quarter. Despite the decreased activity, there were still large leases signed in the Greater Columbus area. The positive absorption was steered by GXO Logistics Supply Chain, Inc. taking 371,500 square feet in the Madison submarket at 200 Park West Drive. A 183,528 square-foot sublease was signed in by FST Logistics, Inc. in the Southwest submarket at 3495 Gantz Road. We anticipate the trend of weakening demand in the fourth quarter but overall still see the year ending with positive market activity.


Construction & Completions

With over 4.2 million square feet of construction completed and 4.4 million square feet breaking ground, the delta of overall construction QoQ remains even but has decreased nine percent YoY. We are seeing the decrease in construction due to developers and lenders being cautious about the economy and rising interest rates. The majority of submarkets are tracking well over 500,000 square feet under construction. The Licking County submarket continues to lead construction with six projects underway, all modern bulk buildings. VanTrust is developing the 1.2 million square feet DSV build-to-suit project that just broke ground this quarter near Intel. Red Rock Developments also broke ground this quarter on their 946,400 square foot speculative development at 7409 Mink Street in Pataskala, OH. As the market stands, 68 percent of the construction remains speculative. However, we anticipate this trend to continue to slow and shift to more build-to-suit projects as the debt and capital markets continue to remain difficult for speculative construction.


The Pickaway submarket experienced the most growth adding two buildings including 714 Bosses Way developed by Heitman - totaling over 1.1 million square feet. The Union submarket had the largest delivery this quarter, which was Scotts Miracle-Gro BTS developed by Crawford Hoying which was 1.2 million square feet. These submarkets are on the outskirts of Columbus and therefore have more land readily available. Of the 33 buildings delivered this year, eight were in the Pickaway and Union submarkets. Of the total number of buildings delivered YTD 60 percent were modern bulk buildings.


Sales

Square feet sold doubled this quarter with 2.5 million square feet traded in the greater Columbus area. The Southwest and West submarkets had the highest volume of sales with seven sales each. The largest sale in price and square feet was in the Licking submarket when Exeter bought three properties totaling over one million square feet for $113 million ($107.00/sf) at 8950 Smith’s Mill Road, 8255 Innovation Campus Way and 13289 Worthington Road from VanTrust. The second largest sale in price and square feet was also in the Licking submarket. Hines Global Income Trust, Inc. bought the 697,860 square feet property for $67 million ($96.15/sf) at 9157 Mink Street from Core5.


Industrial Construction Shift

Over the past few quarters, we have anticipated a shift in the industrial construction boom. With deliveries outpacing projects breaking ground there has been a shift in vacancy. A majority of the projects that are underway have not been preleased due to a lack of demand as tenants are increasingly weary of economic downturn as opposed to the last two years. Globe St said, “with elevated replacement costs and lack of inexpensive money, a fall in deliveries will tighten demand and vacancy rates.”


 

*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. Properties Colliers | Columbus tracks are 10,000 square feet and above, industrial and flex properties, single and multi-tenant and now includes owner occupied buildings.


Check out the full Q3 2023 Industrial Trends report here!


 

Office Market Update

The Columbus office market saw negative absorption for the fourth consecutive quarter coinciding with a vacancy rate increase of 28 basis points from last quarter. This is largely due to the downsizing of numerous companies in the market, such as Grange Insurance who vacated 54,630 square feet at 671 S High Street. Sublease vacant space has continued to increase since 2020, now landing at a rate of 3.78 percent. Asking rates have remained steady for an overall full-service gross rate of $22.07. Following the national trend seen in other markets CBD’s, Columbus saw its own CBD vacancy rates rise again this quarter. One factor is the high cost of rent and maintenance in the central business district. Many businesses are finding it more affordable to move to suburban areas where rent and other expenses are significantly lower.



Vacancy

The vacancy rate has increased 32 basis points YTD, now at 19.05 percent. The New Albany submarket has stayed the highest vacancy rate at nearly 40 percent, which is due to ThirtyOne Gifts vacating their 175,000 square feet space at 8111 Smith’s Mill Road earlier this year. Columbus’ overall sublease vacancy continues to increase, primarily due to companies downsizing, such as CoverMyMeds which recently listed 51,000 square feet for sublease at 910 John Street. Grange Insurance downsized by 54,630 square feet at 671 S High Street and have a remaining 167,000 square feet in the building making it one of the largest downsizes of the quarter.


Market Activity

This quarter the Columbus office market posted a negative absorption of 143,429 square feet. Demand continues to slow as some companies look to reduce their footprint in the market. Overall, the square footage of new leases signed has shrunk in size appreciably by 68 percent YoY. Leasing activity in the third quarter was anchored by Ineos Composites signing 34,077 square feet at 995 Yard Street in the Arlington/Grandview submarket. In the fourth quarter, we anticipate that more tenants will post their spaces for sublease or not renew their current leases.


Construction

Construction has remained unchanged since the beginning of the year with 11 projects consisting of just under 1.1 million square feet. Most office construction is taking place in the CBD totaling, over 430,000 square feet, and is expected to deliver late fourth quarter or early 2024. The majority of the larger office construction projects reside in Arlington/Grandview, CBD, and Dublin submarkets all have buildings under construction that are larger than 120,000 square feet. The remaining office construction with smaller builds is in the North Central, Delaware, Westerville, and Worthington submarkets. A continued decrease and pause in office construction projects is predicted throughout the remainder of 2023 and into early 2024 as there is a turn in focus for move-in ready, furnished spaces starts to rise.


Sales

Sales volume increased by 35 percent square feet QoQ mainly due to larger buildings sold. Over 700,000 square feet sold in the greater Columbus area in the third quarter. The highest volume of sales was in the East submarket with seven sales. The largest sale in price and square feet was in the New Albany submarket when New Albany Portfolio LLC bought the 205,000 square feet property for $7.9 million at 7400 West Campus Road from KIRCO. The second largest sale was in the Worthington submarket, The Champion Companies bought the 142,246 square feet property for $7.6 million at 400 East Campus View Boulevard from ParkStone Capital.


Sublease Space and Redevelopment Impacting CBD Vacancy

The Columbus office market has seen an increase in vacancies since the beginning of this year. Nationally, CBD vacancy rates rose by 50 basis points while suburban levels increased by 30 basis points. Columbus’ CBD has increased by only two basis points showing the Columbus office market resiliency as opposed to other markets’ CBDs. The increase in overall vacancy space is largely in part to the rise in sublease space as well as the redevelopment projects being taken off the tracked set decreasing the amount of inventory. Sublease activity may have been influenced by the pandemic, but it has continued to gain traction, not decelerating since 2020. Over 80 percent of sublease space is vacant and move-in ready. Continental Centre is one of the downtown office buildings that is being redeveloped, which has been vacant since 2014 and was previously the Ohio Bell Southwestern headquarters. 150 E Gay Street will be converted into a mixed-use building with 409 apartments and retail space. Most tenants in the market are focused on the downtown area, however, we anticipate tenants to continue to follow the trend of smaller signed leases in newer class A buildings in suburban or CBD peripheral areas.


 

Check out the full Q3 2023 Office Trends report here!


95 views0 comments

Recent Posts

See All

Comments


bottom of page