Office Market Cools Off

Coming off a stellar first half of the year, the Columbus office market saw a cool-down in leasing activity and investment opportunities. During the third quarter, the office market (which includes Delaware and Franklin counties) posted 41,234 square feet of net absorption– a pullback from last quarter, but enough to lower the region’s vacancy rate 20 basis points to 8.2 percent. The Columbus office market has now enjoyed 18 consecutive quarters of growth. Local economic expansion over the past several years has led to a revival in office using
sectors such as finance, healthcare, business and professional services, and technology firms; however, limited availabilities and tightening market conditions tells us growth may be constrained moving forward.

Average asking rental rates remain on the upswing–a testament to rising occupier demand and a push towards higher quality office space. This quarter, the average Class A rate bumped to $20.99 per square foot (FSG)–an increase of 4.3 percent from last year. In Class B buildings, asking rents have risen 3.6 percent in the past year to $17.40
per square foot (FSG). Developers delivered approximately 144,000 square feet of space during the third quarter, bringing the total amount of completions for 2016 to 830,379 square feet. All of the buildings delivered this quarter are listed as medical office space. Projects in the construction phase include Alliance Data’s third building near Easton, the Buggyworks renovation in the Arena District, Phase One of Dublin’s Bridge Park
development, and The Pointe at Polaris near the Polaris Fashion Place.

Key Takeaways
> Absorption numbers were low this quarter with only 41,234 square feet, bringing the total for the year to 307,010 square feet.
> The overall vacancy rate fell 20 basis points during the third quarter to 8.2 percent. Vacancy rates have been falling since 2010.
> After a strong start to the year, Class A buildings have struggled posting negative 68,041 square feet of net absorption. The average asking rate for Class A properties now stands at $20.99 per square foot.
> Approximately 702,455 square feet are currently under construction in Columbus. The largest projects include Dublin’s Bridge Park development and the Buggyworks renovation in the Arena District.