Columbus’s diverse mix of state government, educational institutions, Fortune 500 companies and startup businesses lend resilience to the commercial real estate market. Local agents are confident that 2012’s rebound will continue, provided the overall economy remains steady.
“Columbus is hard to generalize across the board. We’re an insulated market. … I think there were lots of positive signs [in 2012]. You’ve got an overall decrease in vacancy,” says Andy Mills, vice president of investment services for Continental Realty/Cushman & Wakefield and chair of commercial investment on the Columbus Board of Realtors.
Cushman & Wakefield’s Office Snapshot report shows a vacancy rate of 16.2 percent in the third quarter, down from 17.2 percent from the third quarter of 2011. Direct asking rents increased from $15.89 per square foot in 2011 to $17.27 in 2012. Continental’s Industrial Snapshot report reveals moderate growth in the industrial market in the third quarter; vacancy rates decreased to 9.3 percent compared with 11 percent in the third quarter of 2011. Third-quarter industrial rents stayed roughly the same year to year at $4.40 per square foot in 2012 compared with $4.85 in 2011.
“I think across the board there’s strong activity,” says Mills. “From an office perspective, there’s great momentum with some of the big leases in the Arena District [and] Grandview Yard.” Mills predicts New Albany and the hospital growth along state Route 315 will remain an attractive market for commercial real estate development.
Low interest rates will continue to fuel construction, says Jim Newton, chief economic advisor for Commerce National Bank. “Construction activities, both residential and nonresidential, are probably going to do better,” he says.
Columbus Board of Realtors President Jim Coridan predicts a strong apartment market in 2013. “Commercially, if you look at the apartment market there’s a lot of construction going on. Rentals seem to be really good.”
Coridan says while retail and industrial spaces are doing better than in 2011, he sees some office properties having a tough time. “It just depends on your building,” he says.
Though national absorption levels have improved across property types, continued economic uncertainty stemming from national and international debt problems continues to cast a shadow over the national CRE markets, according to Deloitte’s Commercial Real Estate Outlook report for 2013.
Deloitte’s forecast predicts weak economic growth will continue to have a negative effect on property fundamentals including rents, vacancy rates and development activity, and will put the squeeze on capital markets including lending, transactions and pricing. Those trends, in turn, will put downward pressure on asset values, refinancing, development revenues, tenant retention and rental growth.
Though Central Ohio is somewhat insulated, CRE stakeholders will be smart to follow Deloitte’s recommendation to “focus on alternate mechanisms to grow revenues, margins and retain tenants.”
Reprinted from the January 2013 issue of Columbus C.E.O. Copyright © Columbus C.E.O.