Q3 OFFICE AND INDUSTRIAL UPDATE
Written by: Hannah Williams, CPRC
Hannah specializes in research capabilities, providing support for the Colliers Columbus Office, Industrial, Retail, and Multifamily 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 to get Hannah’s take on market trends in the Columbus office and industrial sectors.
The Columbus industrial market continued a strong year with a record third quarter, posting 3,660,680 square feet of positive net absorption. The ongoing COVID-19 pandemic has caused the already rising e-commerce industry to skyrocket in recent months, indicated by an influx of demand from these types of users. Due to this sustained demand, Columbus has seen absorption greater than 1 million square feet in 12 of the past 13 quarters. Additionally, this quarter marks the highest absorption in a single quarter since 2016. Despite recording positive absorption, vacancy slightly increased to 4.9 percent, as nearly 1 million square feet of new available speculative development was added to the market. This first-class space also caused overall and warehouse/distribution rates to rise, to $3.88 per square foot and $3.67 per square foot, respectively. In the past quarter, more than 4 million square feet of product broke ground and the number of users looking for industrial space increased from 102 to 120 tenants, demonstrating the strength of the industrial market. Central Ohio can expect continued activity in coming months as COVID-19 fuels growth in the industrial sector.
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.
CLICK HERE to access the full Q3 Office and Industrial Trends Reports.