Q42012 Cincinnati Market Tr

OVERALL VACANCY RATE

THE KNOWLEDGE REPORTCINCINNATI, OH

www.colliers.com/cincinnati

EXECUTIVE SUMMARYThe Greater Cincinnati Office Market continued its slow down in the 4th quarter of 2012, as market uncertainty held back companies from making any real estate decisions. The Fiscal Cliff weighed heavily on the minds of most real estate participants during this quarter, as the direction of the economy was yet to be determined. Net absorption for the quarter was down 320,686 square feet, as year-to-date net absorption totaled negative 651,835 square feet. This raised the overall vacancy rate for office properties from 19.43% to 20.03%. Rental rates crept up slightly, averaging $18.13 per square foot for all classes of office space.

CENTRAL BUSINESS DISTRICTThe Central Business District saw a small increase in positive absorption for the quarter, but not enough to swing the year-to-date numbers into positive territory. The year-to-date total was negative 145,399 square feet. The vacancy rate for the Central Business District finished at 18.09% overall. Class A and B space finished at 22.06% and 17.86% respectively. Larger transactions of note this quarter included the investment sale of Centennial Plaza to Neyer Properties. Neyer Properties continues to remain active in the acquisition of underperforming assets, and has closed on these two buildings located on Central Parkway. Neyer immediately sold Centennial Plaza One to Jedson Engineering for $1.167 million, and the engineering firm plans to relocate its headquarters in Milford to the CBD in 2013. Another notable item included Chiquita Brands officially vacating 250 E 5th Street, producing over 120,000 square feet of negative absorption in this Class A building. While the market has known of Chiquita’s plans for several months, the space was still partially occupied until this quarter.

SUBURBAN MARKETSMost of the negative absorption that occurred in the Office Market occurred in the suburbs, and the combined suburban net absorption for the quarter came in at negative 326,094 square feet. This negative absorption pushed the vacancy rate to 21.01% in the suburbs, and the year-to-date net absorption totaled negative 506,436 square feet. Much of this negative absorption through out 2012 occurred at Madison Place and RiverCenter Two in Northern Kentucky. Combined, these two Class A assets produced 365,267 square feet of negative absorption, primarily from two tenants, Omnicare and Nielsen, leaving Northern Kentucky and relocating to Ohio.

CONSTRUCTIONOn the construction side, developers are starting to dust off plans which were created before 2008 and are starting to market sites once again. Kenwood Towne Place is set to break ground “again” in 2013, while Jeffrey R. Anderson’s plans for office space at Rookwood Exchange are heating up as the first retail phase is underway. In addition, several build-to-suit projects are also in the works, with a heavy concentration on smaller medical office buildings.

MARKET INDICATORS

*Projected Change to

Following Quarter

Q4 12 Q1 13*

VACANCY NET ABSORPTION

CONSTRUCTION RENTAL RATE

Q4 2012 | OFFICE

UNCERTAINTY HOLDING OFFICE MARKET BACK

3Q12 $20.99 $15.87 $17.90

4Q12 $20.98 $15.80 $18.13

-250,000

-150,000

-50,000

50,000

150,000

250,000

350,000

450,000

3Q 10

4Q 10

1Q 11

2Q 11

3Q 11

4Q 11

1Q 12

2Q 12

3Q 12

4Q 12

16%

18%

20%

22%

24%

Vacancy

12%

14%

16%

18%

3Q 1

0

4Q 1

0

1Q 1

1

2Q 1

1

3Q 1

1

4Q 1

1

1Q 1

2

2Q 1

2

3Q 1

2

4Q 1

2

$12.00$13.00$14.00$15.00$16.00$17.00$18.00$19.00$20.00$21.00$22.00

3Q 1

0

4Q 1

0

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

CLASS A

RENTAL RATES (GROSS)

CLASS B

FORECASTAs demand has been pent up for the last half of 2012, expect to see some positive activity with the Fiscal Cliff behind us. Even though the direction of our economy has yet to be figured out, market participants are expected to jump back in and make decisions on their real estate portfolios. There is still some uncertainly about how real estate will be affected by the decisions of our congressional representatives in Washington, but an increase in demand should occur in the second half of the year. Construction will continue to perk up and rental rates should remain relatively flat.

UPDATE YTD Transactions

SALES

PROPERTY SUBMARKET TENANT/BUYER SIZE

229 West 7th Street CBD CyrusOne Inc. 350,000

Centennial Plaza One and Three CBD Neyer Properties 239,807

Crowne Pointe One and Two Tri-County Neyer Properties 148,242

Hawthorne Center Blue Ash OA Development 133,857

125 E Court Street CBD Court Street Partners, LLC 97,902

Olympic Corporate Center I NKY Neyer Properties 89,040

Center Hill Business Park Central/Midtown The Regis Investment Co. 86,292

Century Business & Service Center Tri-County RGW Development 82,775

Centennial Plaza One CBD Jedson Engineering 75,554

5155 Financial Way I-71 Corridor North Top Gun Sales Performance 67,000

1700 Edison Drive East FLF Milford LLC 58,920

Kenwood Executive Center Kenwood/Montgomery BRG 54,207

LEASES

PROPERTY SUBMARKET TENANT/BUYER SIZE

237 William Howard Taft Midtown Christ Hospital 152,000

4690 Parkway Drive I-71 Corridor North MedPlus 60,000

312 Plum CBD KAO Brands 55,000

4445 Lake Forest Place Blue Ash G.E. 54,000

525 Vine CBD Weltman, Winberg & Reis 37,365

77 Comair Blvd. NKY The Kenton County Airport Board 33,824

5300 Kings Island I-71 Corridor North ACT, Inc. 30,014

Holiday Office Park Building CBD Periphery Hamilton Co. Dev. Disability Svs. 28,306

302 W 3rd St. CBD BHDP Architecture 23,425

Kenwood Park Place Kenwood/Montgomery Jewish Hospital 21,742

Blue Ash Corporate Center I Blue Ash Lifesaver #1 Inc. 20,400

8600 Governor’s Hill Drive I-71 Corridor North G.E. 20,000

7116 Office Park Drive I-75 Corridor North ITT Tech 20,000

4680 Parkway Drive I-71 Corridor North Gensuite, LLC 19,000

311 Elm CBD Trivantis Corporation 18,618

Governor’s Pointe I-71 Corridor North Summit Funding Group 17,504

10615 Montgomery Road Kenwood/Montgomery Bethesda Hospital, Inc. 16,830

Fountain Pointe I Blue Ash Arcadis US 16,278

Transactions are believed to be accurate but not guaranteed.

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

Jan-

09Fe

b-09

Mar

-09

Apr

-09

May

-09

Jun-

09Ju

l-09

Aug

-09

Sep-

09O

ct-0

9No

v-09

Dec-

09Ja

n-10

Feb-

10M

ar-1

0A

pr-1

0M

ay-1

0Ju

n-10

Jul-1

0A

ug-1

0Se

p-10

Oct

-10

Nov-

10De

c-10

Jan-

11Fe

b-11

Mar

-11

Apr

-11

May

-11

Jun-

11Ju

l-11

Aug

-11

Sep-

11O

ct-1

1No

v-11

Dec-

11Ja

n-12

Feb-

12M

ar-1

2A

pr-1

2M

ay-1

2Ju

ne-1

2Ju

ly-1

2A

ug-1

2Se

p-12

US Unemployment Rate Ohio Unemployment Rate

Cincinnati Unemployment Rate Columbus Unemployment Rate

Cleveland Unemployment Rate

THE KNOWLEDGE REPORT | Q4 2012 | OFFICE | CINCINNATI

P. 2 | COLLIERS INTERNATIONAL

SUBMARKET Total Inventory Total Vacant SF

4Q 2012 Net Absorption

YTD Net Absorption Vacancy Rate Avg. Rate

Blue Ash 4,598,290 755,630 29,021 24,003 16.43% $17.80

CBD 18,047,286 3,264,001 5,408 (145,399) 18.09% $19.24

CBD Periphery 3,495,606 913,769 (23,692) 2,026 26.14% $17.14

East 2,556,179 498,308 13,173 (56,245) 19.49% $15.69

I-71 Corridor North 4,464,807 907,973 (23,048) 127,318 20.34% $18.97

I-75 Corridor North 2,271,896 185,764 (143) 53,029 8.18% $19.94

Kenwood / Montgomery 2,070,071 211,835 36,139 53,135 10.23% $21.51

Midtown 3,317,554 621,410 (33,268) (157,159) 18.73% $18.08

NorthernKentucky 7,366,882 1,788,388 (146,676) (405,595) 24.28% $18.45

Tri-County 4,824,584 1,455,543 (196,870) (163,411) 30.17% $15.44

West 752,742 165,473 19,270 16,445 21.98% $17.29

Market Totals 53,765,897 10,768,094 (320,686) (651,835) 20.03% $18.13

SUBMARKET DATA

AVG. ASKING RATES (PER SF-FULL SERVICE GROSS)

$12.00

$13.00

$14.00

$15.00

$16.00

$17.00

$18.00

$19.00

$20.00

$21.00

$22.00

3Q 1

0

4Q 1

0

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

CLASS A

CLASS B

OVERALL (GROSS)

$12.00

$13.00

$14.00

$15.00

$16.00

$17.00

$18.00

$19.00

$20.00

$21.00

$22.00

3Q 1

0

4Q 1

0

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

CLASS A

CLASS B

OVERALL (GROSS)

3Q12 $20.99 $15.87 $17.90

4Q12 $20.98 $15.80 $18.13

-250,000

-150,000

-50,000

50,000

150,000

250,000

350,000

450,000

3Q 10

4Q 10

1Q 11

2Q 11

3Q 11

4Q 11

1Q 12

2Q 12

3Q 12

4Q 12

16%

18%

20%

22%

24%

Vacancy

12%

14%

16%

18%

3Q 1

0

4Q 1

0

1Q 1

1

2Q 1

1

3Q 1

1

4Q 1

1

1Q 1

2

2Q 1

2

3Q 1

2

4Q 1

2

$12.00$13.00$14.00$15.00$16.00$17.00$18.00$19.00$20.00$21.00$22.00

3Q 1

0

4Q 1

0

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

CLASS A

RENTAL RATES (GROSS)

CLASS B

QUARTERLY NET ABSORPTION

Squa

re F

eet


COLLIERS INTERNATIONAL | P. 3

CEO | PRINCIPAL: Shenan P. Murphy, CCIM+1 513 721 4200

522 offices in 62 countries on 6 continentsUnited States: 147Canada: 37Latin America: 19Asia: 36ANZ: 165EMEA: 118

• $1.8 billion in annual revenue

• 1.25 billion square feet under management

• Over 12,300 professionals

Colliers International statistics are audited annually and may result in revisions to previously reported quarterly and final year-end figures

www.colliers.com/cincinnati

Colliers International | Greater Cincinnati 425 Walnut Street, Suite 1200Cincinnati, OH 45202

Office Services | Greater Cincinnati

3

8

INT’LAIRPORT

I-75 NORTH OFI-275

OUTLYING WARRENCOUNTY

I-71 NORTH OF I-275TRI-COUNTY

BLUE ASH

KENWOOD/MONTGOMERY

EASTMIDTOWN

CBD-PERIPHERY

NORTHERN KENTUCKY

WEST

Fred A. Macke, Jr., SIORBrokerage Senior Vice President

Principal | Cincinnati

[email protected] +1 513 562 2233

Richard P. MederBrokerage Senior Vice President



Chris Vollmer, Jr.Brokerage Vice President


John P. Schenk, CCIM, SIORBrokerage Senior Vice President



Chris Vollmer, SIORBrokerage Senior Vice President



Matthew H. SmythBrokerage Senior Associate


Brian T. Graham, CCIMValuation & Advisory Services

Director of Research | [email protected] +1 513 562 2214
