Q4 INDUSTRIAL AND OFFICE 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 finished 2020 with a strong fourth quarter, posting 2,184,850 square feet of net absorption. This brings year-to-date net absorption to over 10.6 million square feet - the highest annual absorption the Columbus market has ever recorded. The already thriving industrial sector has skyrocketed this year, as the e-commerce industry has grown exponentially due to the ongoing COVID-19 pandemic. Sustained demand in prime warehouse space has yielded absorption greater than 1 million square feet in 13 of the past 14 quarters in Central Ohio. This activity drove vacancy down in the fourth quarter, from 4.9 percent to 4.74 percent. Overall asking rates held steady at $3.89 per square foot, but new speculative availability increased rates for warehouse/distribution properties to $3.74 per square foot. In the past quarter, nearly 2 million square feet of product broke ground and the number of users looking for industrial space increased to 130 tenants, demonstrating the resiliency of the industrial market. Central Ohio can expect continued activity in the new year as COVID-19 fuels demand in the industrial sector.
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.
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