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OFFICE TRENDS REPORTGREATER COLUMBUS REGION
www.colliers.com/columbus
Gaining SpeedCOLUMBUS REGION OVERVIEWThe Columbus office market gained 233,000 square feet of positive absorption in the fourth quarter. Except for first quarter, 2011 was a solid year for positive absorption. Construction has remained slow with very few speculative projects in the pipeline. Leasing has been consistent and there is limited opportunity for tenants who are in need of space greater than 50,000 square feet. There are only 12 class A buildings in Columbus with 50,000 square feet of contiguous space available. Chase Bank was the biggest leasing player this quarter leasing all of the vacancy at Westar IV. Duke Realty sold 19 (2.08 million square feet) class A and B properties to Blackstone, and 63 others across the country for $1.08 billion.
FORECASTS AND REFLECTIONS• The Columbus region posted strong positive
results during the fourth quarter of 2011 with the vacancy rate decreasing to 12.2 percent from 12.7 percent. The Central Business District (CBD) made the largest gains with 144,720 square feet absorbed.
• NetJets, Inc.’s construction continues for their 140,000-square-foot building at Port Columbus International Airport and construction also
continues at Water’s Edge II in New Albany. Pharmaforce completed construction of their 110,000-square-foot facility in New Albany.
• Deals are pressured by high tenant improvement costs and lower rates. Landlords are experiencing very low net effective returns on deals. Landlords are also finding it difficult to refinance buildings due to the low lease rates affecting the value.
EMPLOYMENT DRIVEN
In preliminary numbers, the Columbus MSA unemployment rate has dipped to a 6.6 during November. Total employment levels are down however, meaning that we may not see the usual causal connection between decreased headline unemployment and space leased.
MARKET INDICATORS
RENTAL RATES
Q4
2011
Q1
2012*
VACANCY
NET ABSORPTION
CONSTRUCTION —
RENTAL RATES — — *Projected trend for next quarter
Q4 2011 | OFFICE
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
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Completions Absorption Vacancy Rate
ABSORPTION, COMPLETIONS, AND VACANCY RATES
EMPLOYMENT DATAThe preliminary unemployment rate for Columbus in November dipped to 6.6 percent from 7.7 percent in October, which is the lowest it has been since December 2008. The unemployment rate is determined by the ratio of the number of those who have looked for work in the last 4 weeks compared to the total number of workers including those searching for employment (civilian labor force). This is important to note as the civilian labor force has shrunk by 21,000 since June.
The sectors which are significant for office leasing were either steady or increased in the preliminary July numbers. The information sector increased slightly in November over October, but is still down 1.8 percent year-over-year. Employment for financial activities was flat from November to October, but the growth year-over-year in November was 5.0 percent. Professional and business services gained 1,800 jobs from October to November, and the growth year over year is 1.9 percent. Education and
health services decreased by about 800 jobs and is down 1.8 percent year over year.
MARKET ACTIVITYMarket interest has increased during the fourth quarter. Colliers International attempts to discern demand for office space by tracking tenants in the market. There was a slight increase over last quarter in the size desired by tenants that have toured space and have been in the market. There were roughly 12 tenants seeking more than 25,000 square feet of space. There were 75 tenants in the market to close December, which is down by 20 from September when more than 90 tenants were in the market.
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 total amount of space in transition was slightly less than 1 million square feet. This is up 9.3 percent over the average of the past two years and up 53 percent from Q4 2010.
The Columbus office market consists of 15 suburban submarkets plus the Central Business District submarket. The Columbus region features a total of 62.6 million square feet, 43.5 million of which is suburban.
MARKET ACTIVITY
SALES ACTIVITY
PROPERTY ADDRESS SALES DATE SALE PRICE SIZE SF BUYER SELLER PRICE / SF TYPE SUBMARKET
10 W Broad Street October $27,000,000 407,340 True North Management Invesco Real Estate $66.28 A CBD
4700 Lakehurst Court December $17,744,927 214,458 Blackstone Duke Realty $82.74 B Dublin
5475 Rings Road December $12,040,119 145,512 Blackstone Duke Realty $82.74 A Dublin
5455 Rings Road December $12,003,050 145,064 Blackstone Duke Realty $82.74 A Dublin
Two Easton Oval December $10,648,214 128,690 Blackstone Duke Realty $82.74 A Easton
6500 Emerald Parkway December $10,614,289 128,280 Blackstone Duke Realty $82.74 A Dublin
4349 Easton Way December $9,478,060 114,548 Blackstone Duke Realty $82.74 A Easton
4449 Easton Way December $8,860,383 107,083 Blackstone Duke Realty $82.74 A Easton
5500 Glendon Court December $8,606,610 104,016 Blackstone Duke Realty $82.74 A Dublin
4400 Easton Commons December $8,399,255 101,510 Blackstone Duke Realty $82.74 A Easton
5550 Blazer Parkway December $7,062,706 85,357 Blackstone Duke Realty $82.74 A Dublin
5555 Parkcenter Circle December $6,964,241 84,167 Blackstone Duke Realty $82.74 A Dublin
5600 Blazer Parkway December $5,915,389 71,491 Blackstone Duke Realty $82.74 A Dublin
8720 Orion Place December $5,744,890 52,000 Patrick Kelly Miller Investment JV $110.48 B Polaris
250 W Rich Street December $5,200,000 113,309 Genworth Financial Arshot Investment $45.89 A CBD
5500 Frantz Road December $4,736,382 57,242 Blackstone Duke Realty $82.74 B Dublin
6525 W Campus Oval December $4,327,400 66,575 Blackstone Duke Realty $65.00 A New Albany
2400 Corporate Exchange
December $1,850,000 93,547 Chou Katella Partners Joseph Skilken Company $19.78 B Westerville
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 LEASE SF LANDLORD TENANT ASKING PRICE (NNN) TYPE SUBMARKET
565 Metro Place 30,000 Two Metro Place Partners LLC Metro Park $12.00 A Dublin
445 Hutchinson Avenue 13,621 EOP-Community Corporate Center LLC
Amerassist $10.00 A Worthington
P. 2 | COLLIERS INTERNATIONAL
RESEARCH & FORECAST REPORT | Q4 2011 | OFFICE | GREATER COLUMBUS REGION
COLUMBUS REGION MARKET
Colliers International has changed the critieria for inclusion in the office dataset. All 10,000 square foot, class A, B and C buildings, not owned and fully leased by government are included in the dataset.
UPDATE Market Comparisons
OFFICE MARKET
Net Absorption Construction Asking Rental Rates
SUBMARKET Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions Class A ($) Class B ($)
CBD 19,091,001 2,107,621 11.0 65,897 161,101 - - $19.82 $16.87
ARLINGTON/GRANDVIEW 4,752,155 672,459 14.2 22,192 56,871 - - $21.22 $15.66
DUBLIN 9,501,878 1,274,119 13.4 (93,877) 28,596 - - $17.32 $14.95
EAST 3,555,814 542,166 15.2 (1,510) 41,390 140,000 - $17.03 $14.32
EASTON 2,685,332 166,634 6.2 2,626 17,097 - - $17.90 $22.50
GAHANNA/AIRPORT 1,262,397 151,172 12.0 8,004 198,217 - - $17.63 $16.34
HILLIARD 2,480,456 457,110 18.4 15,700 (157,850) - - $19.95 $15.03
NEW ALBANY 1,935,789 182,628 9.4 2,098 52,306 191,000 - $18.12 $15.00
NORTH CENTRAL 1,255,636 90,764 7.2 1,732 (22,939) - - $23.00 $14.16
POLARIS 4,419,869 231,526 5.2 23,897 39,045 - - $18.78 $15.69
POWELL 273,719 65,916 24.1 12,830 15,112 - - - $14.76
SOUTHEAST 402,548 60,225 15.0 - (360) - - - -
SOUTHWEST 236,158 38,061 16.1 16,486 3,412 - - - $7.50
WESTERVILLE 4,489,479 579,949 12.9 97,685 174,464 - - $16.77 $15.01
WORTHINGTON 6,496,402 1,022,533 15.7 59,486 37,010 - - $16.26 $14.42
SUBURBAN TOTAL 43,747,632 5,535,262 12.7 167,349 482,371 331,000 - $17.94 $14.86
TOTAL 62,838,633 7,642,883 12.2 233,246 643,472 331,000 - $18.61 $15.47
Net Absorption Construction Asking Rental Rates
PROPERTY TYPE Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions By Product TypeCLASS A 25,676,078 2,819,295 11.0 53,021 245,347 331,000 - $18.61
CLASS B 23,102,511 3,140,756 13.6 97,398 373,625 - - $15.47
CLASS C 14,060,044 1,682,832 12.0 82,827 24,500 - - $12.94
TOTALS 62,838,633 7,642,883 12.2 233,246 643,472 331,000 - $16.35
QUARTERLY COMPARISON AND TOTALS
Net Absorption Construction Asking Rental Rates
QUARTER, YEAR Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions By Product TypeQ3, 2011 62,838,633 7,876,129 12.7 238,414 410,226 331,000 - $18.58 $15.41
Q2, 2011 62,838,633 8,114,543 12.9 194,313 171,812 246,500 - $18.25 $15.25
Q1, 2011 62,838,633 8,394,042 13.4 (14,500) (14,500) 246,500 65,000 $18.10 $15.46
Q4, 2010 40,544,677 7,188,371 17.73 (13,360) (253,648) 65,000 - $18.56 $14.96
RESEARCH & FORECAST REPORT | Q4 2011 | OFFICE | GREATER COLUMBUS REGION
COLLIERS INTERNATIONAL | P. 3
DUKE PORTFOLIO SALEDuke Realty announced a change in the targeted composition of their holdings to 60 percent in industrial buildings, 25 percent in office properties and 15 percent in medical office real estate. To reflect that, they sold 19 office properties in the Columbus MSA and 63 others in markets such as Chicago, Dallas, Minneapolis, Tampa, Orlando and Atlanta. Blackstone Real Estate Partners VII purchased the portfolio for $1.08 Billion. In total, 2.08 million square feet of mostly class A office space transferred.
The properties in the transfer are largely in the area of the Tuttle Crossing mixed-use development in northwest Columbus and Dublin and the Easton mixed-use development in northeast Columbus. Duke will still own about 44 acres of development land in the Tuttle Crossing office market, as well as 6 acres in nearby Hilliard and another 10 acres in Easton.
CENTRAL BUSINESS DISTRICTThe CBD showed positive absorption of 65,000 square feet. In terms of positive absorption deals, there were numerous smaller leases adding to strong leasing including WSA Architecture, Hunt Law, CBKT and Buckeye community health. Huntington Bank had previously been scheduled to give back a floor at a time to 41 S High over the course of three years, but they have elected not to do so this year.
Nationwide Insurance has been approved for a 200,000 square foot facility where they will house the flush of new employees transferring into downtown. Nationwide Realty is also developing a new 51,300-square-foot, $10 million project. Located at 425 W. Nationwide Blvd, the site will be anchored by FBI. Renovations at 232 North High Street continue.
NORTH COLUMBUS MARKETThe north submarkets are Dublin, Powell, Polaris, North Central, Worthington and Westerville. In Worthington, AmerAssist took 13,000 square feet of space at 445 Hutchinson Avenue, after moving out of 460 Polaris Parkway. Large changes occurred in Westerville with Chase
taking 82,000 square feet at 460 Polaris Parkway.
WEST MARKETThe west submarkets are Arlington/Grandview and Hilliard. The Hilliard market saw a slight gain in absorption from LAMS Charter School, leasing 15,700 square feet of 3042 McKinley Avenue.
SOUTH MARKETThe south submarkets are the Southwest and the Southeast. Very little change occurred in these submarkets as these are among the smallest, least populated submarkets.
EAST MARKETThe east submarkets are the East side, Easton, Gahanna/Airport and New Albany. Construction in New Albany has been steady.
In East, Alvis House and Village Network took 11,900 square feet at 899 Broad Street, and PASS High School took 9,000 square feet at 4300 Kimberly Parkway.
In New Albany, Daimler is developing a 3-building, 150,000-square-foot campus at 7525 West Campus Road called the New Albany Center of Technology. The center will function as a operations center, with internet capability and other technology services.
LANDLORD/TENANT One of the most difficult issues for landlords in getting deals done is the fierce competition for tenants, while also structuring a deal that avoids including termination clauses. There is limited pressure to make a deal. The market is tightening up but not to a point where larger tenants are rushing for a decision, so large deals are still taking a long time.
In terms of what tenants are facing, large institutional tenants are growing and starting to dive in and take advantage of the market. This in turn, is creating the positive absorption. Some of the industries represented by tenants in the market are universities, banking, non-profit and technology/IT.
GREATER COLUMBUS REGION:
Richard B. Schuen SIOR CCIMCEO | Principal | Columbus8800 Lyra DriveSuite # 150Columbus, Ohio 43240TEL +1 614 410 5612
Leslie HobbsMarketing & Research Manager8800 Lyra DriveSuite # 150Columbus, Ohio 43240TEL +1 614 410 5640
Jonathan BadgleyResearch Analyst175 South Third StreetSuite # 285Columbus, Ohio 43201TEL +1 614 437 4495
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• 978.6 million square feet under management
• Over 12,500 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, and the Wall Street Journal.
www.colliers.com/columbus
Accelerating success.
RESEARCH & FORECAST REPORT | Q4 2011 | OFFICE | GREATER COLUMBUS REGION