OFFICE TRENDS REPORT GREATER COLUMBUS REGION www.colliers.com/columbus Opportunities Abound, Amidst Recovery COLUMBUS REGION OVERVIEW The Columbus office market gained 93,462 square feet of positive absorption in the fourth quarter. This is the third quarter in a row of positive absorption, as five of the past six quarters have resulted in positive gains for the region. Construction continues to pick up, as building has begun at Bob Evans 100,000 square foot headquarters at 8111 Smith’s Mill Road in New Albany, and the 188,000 square foot Columbia Gas of Ohio building at 10 West Nationwide Boulevard in the Arena District. The 106,500 square foot Water’s Edge II at 7995 Walton Parkway in New Albany was recently completed, where Sedgwick leased 36,000 square feet of space. The 50,545 square foot phase one of The New Albany Center of Technology at 7525 West Campus Road was completed and will be fully occupied by iQor as they signed the largest lease of the quarter. FORECASTS AND REFLECTIONS • While 2012 will be distinguished by many as the most monumental in more than five years since the financial meltdown, much of the market’s success is accredited to portfolio sale offerings and the trading of assets due to attractive pricing, prime financing and lending opportunities. • Investment sales continue to be a big storyline going into 2013, as the fourth quarter showed no signs of a slowdown. Amcor Holdings acquistion of AEW Capital’s 10-building, 780,000-square-foot portfolio of office buildings that stretch along the I-270 corridor from Dublin’s Metro Center business park to the Corporate Exchange office park in northeast Columbus was the highlight of the quarter. Blackstone unloaded an investment holding at 4650 Lakehurst Court in Dublin, as Wells Core Income REIT purchased the 164,600 square foot Class A building for $25.3 million ($153 per square foot). The Central Business District was active as the 113,309 square foot, Class A Bicentennial Plaza at 250 Civic Center Drive was purchased by Marconi Partners for just $6.1 million ($53 per square foot). • The largest new lease transactions of 2012 were JP Morgan Chase leasing 72,588 square feet at 1000 Polaris Parkway; Alliance Data leasing 68,981 square feet at 4400 Easton Commons; and iQor leasing 50,545 square feet at 7525 West Campus Road. ASKING RATES AND AVAILABILITIES Rental rates have increased over the course of 2012, as Class A rates increased from $18.61 to $18.90; while Class B rates rose from $15.47 to $15.93. Operating expenses have seen an average increase of $.33 cents in 2012 due to inflationary pressures and tax hikes. The vacancy rate fell from 11.4 percent to 11.3 percent in the fourth quarter. MARKET INDICATORS RENTAL RATES Q4 2012 Q1 2013* VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATES — *Projected trend for next quarter Q4 2012 | OFFICE $14.00 $15.00 $16.00 $17.00 $18.00 $19.00 $20.00 $21.00 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 Class A Rental Rates Class B 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% (400,000) (300,000) (200,000) (100,000) 0 100,000 200,000 300,000 400,000 500,000 600,000 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 Completions Absorption Vacancy Rate ABSORPTION, COMPLETIONS, AND VACANCY RATES
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Office Trends repOrTGreater Columbus reGion
www.colliers.com/columbus
Opportunities Abound, Amidst RecoveryColumbus reGion overviewThe columbus office market gained 93,462 square feet of positive absorption in the fourth quarter. This is the third quarter in a row of positive absorption, as five of the past six quarters have resulted in positive gains for the region. construction continues to pick up, as building has begun at Bob evans 100,000 square foot headquarters at 8111 smith’s Mill road in new Albany, and the 188,000 square foot columbia Gas of Ohio building at 10 West nationwide Boulevard in the Arena district. The 106,500 square foot Water’s edge ii at 7995 Walton parkway in new Albany was recently completed, where sedgwick leased 36,000 square feet of space. The 50,545 square foot phase one of The new Albany center of Technology at 7525 West campus road was completed and will be fully occupied by iQor as they signed the largest lease of the quarter.
ForeCasts and reFleCtions• While 2012 will be distinguished by many as the most monumental in more than five years since the financial
meltdown, much of the market’s success is accredited to portfolio sale offerings and the trading of assets due to attractive pricing, prime financing and lending opportunities.
• investment sales continue to be a big storyline going into 2013, as the fourth quarter showed no signs of a slowdown. Amcor Holdings acquistion of AeW capital’s 10-building, 780,000-square-foot portfolio of office buildings that stretch along the i-270 corridor from dublin’s Metro center business park to the corporate exchange office park in northeast columbus was the highlight of the quarter. Blackstone unloaded an investment holding at 4650 Lakehurst court in dublin, as Wells core income reiT purchased the 164,600 square foot class A building for $25.3 million ($153 per square foot). The central Business district was active as the 113,309 square foot, class A Bicentennial plaza at 250 civic center drive was purchased by Marconi partners for just $6.1 million ($53 per square foot).
• The largest new lease transactions of 2012 were Jp Morgan chase leasing 72,588 square feet at 1000 polaris parkway; Alliance data leasing 68,981 square feet at 4400 easton commons; and iQor leasing 50,545 square feet at 7525 West campus road.
askinG rates and availabilities
rental rates have increased over the course of 2012, as class A rates increased from $18.61 to $18.90; while class B rates rose from $15.47 to $15.93. Operating expenses have seen an average increase of $.33 cents in 2012 due to inflationary pressures and tax hikes. The vacancy rate fell from 11.4 percent to 11.3 percent in the fourth quarter.
market indiCators
rental rates
Q4
2012
Q1
2013*
vaCanCy
net absorption
ConstruCtion
rental rates — *projected trend for next quarter
Q4 2012 | Office
$14.00
$15.00
$16.00
$17.00
$18.00
$19.00
$20.00
$21.00
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
Class A Rental Rates Class B
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
(400,000)
(300,000)
(200,000)
(100,000)
0
100,000
200,000
300,000
400,000
500,000
600,000
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
Completions Absorption Vacancy Rate
absorption, Completions, and vaCanCy rates
employment dataThe preliminary unemployment rate for columbus in december fell to 5.5 percent from 5.9 percent in september according to the Bureau of Labor statistics. Year-to-date unemployment has dipped 25 percent, or 1800 basis points from the 7.3 percent unemployment levels recorded at the beginning of the year. Unemployment is at its all time low since January of 2010, when we saw unemployment levels nearly reach 10 percent. The unemployment rate is determined by the ratio of the number of those who have looked for work in the last four weeks compared to the total number of workers including those searching for employment.
The sectors significant in office leasing have remained steady or up in the preliminary december numbers. The information sector has remained flat throughout most of the year. employment for financial Activities closed the year stronger than a year ago (2011), with nearly 3 percent growth, and over 2,700 jobs created in the sector. professional and Business services have been stronger this year than last, but that growth has waned this quarter. The sector gained an impressive 5,500 jobs through september (3 percent growth), but has lost 2,200 of those jobs in recent months. education and Health services is really beginning to gain momentum and has added 2,500 jobs this quarter, (over 10,000 jobs for the year), and is up 9.2 percent year over year.
market aCtivityThe columbus office market continued recovering in most submarkets across the region in 2012. The central Business district (cBd) office fundamentals tightened materially over 2012 with vacancy rates dropping from 11 percent to 10.8 percent, while the suburban office sector fundamentals tightened even more, with vacancy rates dropping from 12.7 percent to 11.6 percent. colliers international tracks demand for office space by tracking tenants in the market. The average number of tenants in the market has decreased slightly in fourth quarter 2012 from the third quarter 2012, 81 to 72. However, there are more tenants seeking large spaces than last quarter; 14 tenants are looking for more than 25,000 square feet, and there are 23 tenants looking for 10,000 up to 25,000 square feet of space.
Market Activity Volume is the sum of the absolute value of each absorption change in the market, and it tells us how much space was in transition in the quarter. The market outlook remains optimistic as office leasing activity posted an additional 703,046 square feet, which is higher than it has been in prior fourth quarters when only 448,696 square feet on average were in transition. Over 3,553,530 square feet of space was in transition in 2012, down from the 4 million square feet recorded in 2011.
The columbus office market consists of 15 suburban submarkets plus the central Business district submarket. The columbus region features a total of 63 million square feet, 43.7 million of which is suburban. colliers international office dataset includes all 10,000 square foot, class A, B, and c buildings, not owned and fully leased by the government.
market aCtivity
sales aCtivity
property address sales date sale priCe size sF buyer seller priCe / sF type submarket
10 Building portfolio 11/6/2012 $25,100,000 780,000 Amcor Holdings inc. AeW capital $32 B northeast
4650 Lakehurst court 12/6/2012 $25,300,000 164,600 Wells core income reit Blackstone Group $153 A dublin
4485 northland ridge Boulevard 12/3/2012 $26,650,000 263,068 Taurus investment Holdings realty finance partners $101 B north central
445 Hutchinson Avenue 12/7/2012 $20,550,000 250,169 445 Hutchinson LLp investors Group Blackstone Group $82 A Worthington
250 civic center drive 11/27/2012 $6,100,000 113,309 Marconi partners LLc Genworth financial $53 A cBd
3401 Morse crossing 12/12/2012 $8,928,000 85,094 Jp Morgan chase Bank rb 3401 Morse LLc $106 B easton
77-83 Outerbelt street 10/24/2012 $695,000 12,200 sama Management Group LLc 77-83 Outerbelt street LLc $56.96 B Gahanna/Airport
11299 stonecreek drive 11/5/2012 $1,100,000 11,000 stonecreek professional Bldg. ii LLc Holzer Wollam-pickerington $83 B southeast
powell polaris
worthington
westerville
newalbany
LickingCounty
Fairfield County
Madison County
Union County
Delaware County
Pickaway County
dublinbethel
easton
east
Gahanna/airport
cBd
Hilliard
southwestsoutheast
arlington/Grandview
northCentral
LeAse AcTiViTY
property address sales date lease sF tenant askinG priCe (nnn) type submarket
7525 West campus road 12/3/2012 50,545 iQor $11.95 A new Albany
2 Miranova place 11/13/2012 42,606 isaac Wiles Law Offices $13.50 A cBd
7795 Walton parkway 12/14/2012 36,000 sedgwick $14.95 A new Albany
4449 easton Way 11/23/2012 18,314 clark schaefer $13.90 A easton
565 s Metro place 11/16/2012 16,830 Hylant Group $11.00 A dublin
8800 Lyra drive 10/24/2012 15,680 chipotle Accounting $13.50 A polaris
425 n Metro place 10/24/2012 15,442 navidea Biopharmaceuticals $10.95 B dublin
630 Morrison road 11/17/2012 10,417 Aerotek $10.95 A Gahanna
495 s Metro place 10/31/2012 9,496 pepper construction $10.95 A dublin
p. 2 | Colliers international
research & fOrecast repOrt | Q4 2012 | Office | Greater cOlumbus reGiOn
vaCanCy
Two main factors are constraining office demand, according to a report from property and portfolio, a team of expert commercial real estate forecasters and market financial analysts. first, the average amount of office space leased by tenants has shrunk 21 percent over the last 10 years in a fundamental shift in the way companies use office space due to a variety of factors, and secondly tenants are still expanding into leased but under-utilized space. Although the columbus office vacancy rate decreased to 11.4 percent in the third quarter, a full percentage point from a year ago, ppr continues to expect the vacancy rate to fall another 1.8% nationwide through 2016 as supply diminishes and the economy rebounds, by far the steepest drop among commercial property types.
update market Comparisons
oFFiCe market
net absorption Construction asking rental rates
submarket total sF vacant sF vacancy % Current Quarter year-to-date Current Completions Class a ($) Class b ($)
TOTAL 63,192,662 7,143,523 11.3% 93,462 350,209 391,000 395,500 $18.90 $15.93
net absorption Construction asking rental rates
property type total sF vacant sF vacancy % Current Quarter year-to-date Current Completions by product typecLAss A 26,013,781 2,849,353 11.0% 54,449 (20,612) 388,000 395,500 $18.90
cLAss B 23,207,076 2,902,936 12.5% 33,676 230,926 11,000 - $15.93
cLAss c 13,881,805 1,391,234 10.0% 5,337 139,895 - $13.50
Quarter, year total sF vacant sF vacancy % Current Quarter year-to-date Current Completions by product typeQ3, 2012 63,051,662 7,188,414 11.4 246,232 174,114 457,000 - $19.16 $15.60
research & fOrecast repOrt | Q4 2012 | Office | Greater cOlumbus reGiOn
Colliers international | p. 3
Central business distriCtThe cBd incurred 36,469 square feet of positive absorption. The 60,543 square feet of space that was leased at Two Miranova place this quarter was enough to prevent a downturn this quarter. isaac Wiles Law Offices leased 42,606 square feet, and pizzuti added another 11,367 square feet. Title first moved out of 25,870 square feet at 555 s. front street after the building fell into receivership.
nationwide Mutual insurance co., downtown columbus’ largest private employer with 8,200 workers, now occupies six buildings with a combined 2.6 million square feet in and around the Arena district after its recent completion of its 188,000 square foot building at 10 West nationwide Boulevard. The federal Bureau of investigation has also finished its 51,000 square foot building at 425 West nationwide Boulevard near Huntington park in the Arena district. The fBi occupies 44,926 square feet, but there is still 6,844 square feet still available. The completion of these two projects caps what’s been a tremendous year for the revitalized district.
west marketThe west submarkets are Arlington/Grandview and Hilliard. The Arlington/Grandview submarket posted another strong quarter of positive absorption as over 34,754 square feet of positive absorption took place. numerous leases were signed at 2323 West fifth Avenue including a significant 14,629 square foot lease signed by Manley deas Kochalski.
nortH Columbus marketThe north submarkets are dublin, powell, polaris, north central, Worthington and Westerville. The fourth quarter storyline for the north submarket is the immense amount of investment sales to trade. (See Sales Activity on Page 2)
dublin saw insignificant absorption of 1,982 square feet which can be attributed to a number of significant renewals that were signed, dropping the vacancy rate from the previous quarter by 300 basis points. Hylant Group leased 16,830 square feet at 565 south Metro place, navidea Biopharmaceuticals leased 15,442 square feet at 425 north Metro place, and pepper construction leased 9,496 square feet at 495 south Metro place.
powell and north central saw slight absorption changes and limited movement on the leasing side as most of the transition came through an investment sale at 4485 northland ridge Boulevard. realty finance partners sold its 263,068 square foot building Taurus investment Holdings for $26.7 million ($101 per square foot). Vacancy rates remain stable at 11.1 percent, after a high of 22 percent in the second quarter.
polaris and Westerville saw sizable changes from the previous quarter as two notable leases transpired at 8800 Lyra drive. chipotle Accounting leased 15,680 square feet, and camp dresser & McKee leased 10,271 square feet. American family insurance downsized out of its previous 57,697 square feet of space at 550 polaris parkway, causing 32,643 square feet of negative absorption for the quarter. Westerville was able to manage 16,477 square feet of positive absorption despite multiple smaller vacancies.
Worthington had 42,436 square feet of negative absorption after Molina Healthcare of Ohio moved out of northwoods ii at 8101 High street. Molina Healthcare of Ohio will expand into the 160,000 square foot building it purchased at 3000 corporate exchange for $8.5 million. Blackstone continued to trim its investment holdings as it sold its 250,169 square foot, class A office building located at 445 Hutchinson Avenue for $20.5 million.
east marketThe east submarkets are the east side, easton, Gahanna/Airport and new Albany. These submarkets have historically been among the most active, and have continued that trend throughout most of 2012. Absorption in easton was positive as 20,814 square feet of space traded. clark schaefer signed a 18,314 square foot lease at easton Way One located at 4449 easton Way. Jp Morgan purchased a 85,094 square foot office building that they previously had fully leased located at 3401 Morse crossing for $8.9 million ($106 per square foot). Gahanna posted strong figures as Aerotek leased 10,417 square feet at 630 Morrison road. As mentioned earlier, new Albany remains the focal point for new construction, as over 156,500 square feet of projects are in progress, and another two hundred thousand are in the pipeline for future quarters. new Albany recorded 22,043 of positive absorption, in large part due to sedgwick leasing 36,000 square feet at Water’s edge ii.
landlord/tenant
The types of tenants seen most frequently in the market have been general medical, insurance, higher education, law firms after mergers, and technology users. Tenants still lack the urgency to close deals, due to short term efficiency concerns, unwillingness to sign long term leases, and speculation of lower net rental rates in conjunction with higher opertaing expenses that we have seen as of late. Overall costs to make a move, and to build out space are more expensive than tenants are willing to invest. Tenants are uncertain on the long term stability of the economy. The reooccuring issue facing landlords is creating a steady cashflow, especially for landlords who want to renegotiate their debt, and to offer significant concessions.
united states:
Greater columbus regionrichard B. schuen siOr cciMceO | principal | columbusTwo Miranova placesuite 900columbus, Ohio 43215tel +1 614 410 5612
522 offices in 62 countries on 6 continentsUnited states: 147canada: 37Latin America: 19Asia pacific: 201eMeA: 118
• $1.8 billion in annual revenue
• 1.25 billion square feet under management
• Over 12,300 professionals
This document/email has been prepared by colliers international for advertising purposes. colliers international statistics and data are audited annually and may result in revisions to previously reported quarterly and final year-end figures. sources include columbus dispatch, Business first, Xceligent, costar, chain store Age, Wall street Journal, Bureau of Labor statistics, Bureau of economic Analysis, property and portfolio, Gallup and the cleveland federal reserve.
www.colliers.com/columbus
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research & fOrecast repOrt | Q4 2012 | Office | Greater cOlumbus reGiOn
