q1 2013 columbus market trends office

Office Trends repOrTGreater Columbus reGion

www.colliers.com/columbus

Office Occupancy Mirrors Job GrowthColumbus reGion overviewThe columbus office market gained 162,701 square feet of positive absorption in the first quarter. This is the fourth quarter in a row of positive absorption, as six of the past seven quarters have resulted in positive gains for the region. The vacancy rate now stands at 11.7 percent. construction continues to pick up, as building has begun at Bob evans 160,000 square foot headquarters at 8111 smith’s Mill road in new Albany, as well as the 280,000 square foot columbia Gas of Ohio building at 240 West nationwide Blvd in the Arena district. The 188,000 square foot nationwide Mutual insurance headquarters, in conjuction with the 51,000 square foot fBi headquarters at 425 West nationwide Boulevard in the Arena district were recently completed. nationwide fully occupies their building, while the fBi occupies 44,926 square feet of its 51,000 square foot building. franklin county children’s services completed construction on its 103,000 square foot class A space located at 4071 east Main st. in the east submarket.

ForeCasts and reFleCtions• investment sales will continue to be a big storyline in 2013, as the first quarter showed no signs of a slowdown.

duke realty, a public investment reiT with $674 million of commercial properties in columbus, continues to dispose of its suburban class A office assets. Atrium i, located at 5525 parkcenter drive in dublin, recently sold for $43.9 million. The 315,102 square foot Atrium i is fully occupied by nationwide insurance. easton iii, located at 3344 Morse crossing in easton, recently sold for $18.9 million. The 135,482 square foot easton iii is the headquarters for Lane Bryant. Both assets sold for $139 per square foot, and were acquired by chamber street properties, a private investment trust valued at $142 million for its columbus commercial properties.

• The largest new lease transactions of 2013 were cardinal Health expanding 61,128 square feet at 6000 parkwood place; fBi leasing 44,926 square feet at 425 West nationwide Blvd; and casto leasing 37,075 square feet at 250 civic center drive.

askinG rates and availabilities

rental rates have increased over the course of the past quarter, as class A full service rates increased from $19.20 to $19.27, while class B full service rates rose from $15.93 to $16.07. Operating expenses saw an average increase of $0.33 in 2012, and the trend has continued in 2013 after posting a $0.05 uptick. The vacancy rate remained at 11.7 percent in the first quarter.

market indiCators

rental rates

Q1

2013

Q2

2013*

vaCanCy

net absorption

ConstruCtion

rental rates — *projected trend for next quarter

Q1 2013 | 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

1Q13

Class A Rental Rates Class B

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

(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

1Q13

Completions Absorption Vacancy Rate

absorption, Completions, and vaCanCy rates

market aCtivityMarket 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 1,558,845 square feet, which is higher than it has been in prior first quarters when only 807,838 square feet on average were in transition. colliers international tracks demand for office space by tracking tenants in the market. The average number of tenants in the market has increased dramatically in first quarter of 2013 from the fourth quarter 2012, 72 to 83. 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 31 tenants looking for 10,000 up to 25,000 square feet of space.

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 operating 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 reoccuring issue facing landlords is creating a steady cashflow, especially for

landlords who want to renegotiate their debt, and to offer significant concessions.

employment dataThe preliminary unemployment rate for columbus in february rose to 6.4 percent from 5.5 percent in december according to the Bureau of Labor statistics. Unemployment is still significantly better than 2010 when we saw unemployment levels nearly reach 10 percent. Year-over-year unemployment has dipped 13 percent, or 800 basis points from the 7.2 percent unemployment levels recorded at the beginning of february of 2012. columbus was the second ranked city in the country in terms of job creation for the first quarter of 2013. currently, the rest of Ohio is 110 basis points below the national average, and has not fared as well as columbus in terms of job growth and recovery.

The sectors significant in office leasing have remained steady or down in the preliminary february numbers. The information sector has remained flat throughout the first quarter. employment for financial Activities closed the year strong in 2012, but has not performed well in 2013 after posting a 2 percent decline, and a loss of 400 jobs in the sector. professional and Business services continue to compress after losing 2,200 jobs for the second consecutive quarter. education and Health services are really beginning to gain momentum and has added 700 jobs this quarter, up 2 percent since fourth quarter.

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, 43.3 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

5525 parkcenter circle 3/15/2013 $43,900,000 315,102 chamber street properties duke realty $139 A dublin

3344 Morse crossing 3/15/2013 $18,900,000 135,485 chamber street properties duke realty $139 A easton

250 east Town street 2/27/2013 $1,800,000 22,400 franklin University cBc companies inc. $80 c cBd

1501-1509 stonecreek drive 2/25/2013 $1,325,000 15,611 parkway center LLc stonecreek Office LLc $85 B southeast

5757 Beechcroft road 1/11/2013 $925,000 13,490 c3H Ltd. Beechcroft partners LLc $69 B Worthington

673 Mohawk street 1/14/2013 $830,000 13,250 Mohawk Village properties LLc pandiatonic properties LLc $63 B cBd

540 north cleveland Avenue 1/28/2013 $796,800 10,624 Barksdale LLc Altair professional Village $75 B polaris

423 east Town street 2/28/2013 $690,000 9,382 downtown Technology center cap cit Ltd. $74 c cBd

6209 riverside drive 2/22/2013 $595,000 7,344 Hilltop 6209 LLc signature investments $81 c dublin

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

6000 parkwood place 3/27/2013 61,128 cardinal Health (expansion) $12.50 A dublin

425 West nationwide Boulevard 1/1/2013 44,926 fBi $16.50 A cBd

250 civic center drive 3/1/2013 37,075 casto $11.50 B cBd

100 Old Wilson Bridge road 1/1/2013 30,000 Worthington industries $8.00 B Worthington

2228 cityGate drive 3/8/2013 17,028 Zulily $9.95 B east

7277 smith's Mill road 1/7/2013 11,470 White fence surgical suites $17.95 A new Albany

525 Metro place north 1/9/2013 10,806 Via Quest $8.00 B dublin

1600 dublin road 3/18/2013 10,000 Time Warner (expansion) $11.50 B Arlington/Grandview

7450 Huntington park drive 1/30/2013 9,940 Quantum (expansion) $10.95 B Worthington

8000 Walton parkway 1/24/2013 7,500 Ohio Health $14.95 A new Albany

p. 2 | Colliers international

research & fOrecast repOrt | Q1 2013 | Office | Greater cOlumbus reGiOn

oFFiCe mediCal ConstruCtion

Medical office construction as picked up as two new projects recently began. Ohio Health will be a 35,000 square foot anchor tenant for a 45,000 square foot building at 4343 All seasons drive in Hilliard; while central Ohio primary care began construction on its 22,500 square foot buiding at 4895 Olentangy river road in the Arlington/Grandview submarket.

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 19,343,367 2,193,852 11.3% 155,103 155,103 280,000 $19.48 $16.80

ArLinGTOn/GrAndVieW 4,853,288 462,112 9.5% 29,872 29,872 22,500 $22.88 $16.71

dUBLin 9,325,430 1,369,476 14.6% (150,992) (150,992) $19.02 $15.93

eAsT 3,869,477 508,453 13.1% 15,450 15,450 103,000 $15.65 $12.85

eAsTOn 2,705,095 224,450 8.3% 2,007 2,007 $20.28 $18.00

GAHAnnA/AirpOrT 1,235,246 82,687 6.6% (8,653) (8,653) $18.33 $16.24

HiLLiArd 2,361,083 390,593 16.5% 52,163 52,163 56,000 $20.00 $16.37

neW ALBAnY 1,880,057 188,793 10.0% 42,000 42,000 160,000 $18.30

nOrTH cenTrAL 1,147,668 123,723 10.7% (30,414) (30,414) $12.98

pOLAris 4,405,927 316,730 7.1% (9,137) (9,137) $19.44 $19.39

pOWeLL 273,589 32,244 11.7% (1,888) (1,888) $16.42

sOUTHeAsT 434,658 62,290 14.3% - -

sOUTHWesT 219,119 15,770 7.2% 1,374 1,374 $15.32

WesTerViLLe 4,383,103 553,177 12.6% 65,786 65,786 $19.37 $15.70

WOrTHinGTOn 6,240,847 862,269 13.8% 30 30 $18.64 $15.01

sUBUrBAn TOTAL 43,345,289 5,192,767 11.9% 7,598 340,193 238,500 103,000 $19.17 $15.50

TOTAL 62,688,656 7,386,619 11.7% 162,701 162,701 518,500 103,000 $19.27 $15.91


property type total sF vacant sF vacancy % Current Quarter year-to-date Current Completions by product typecLAss A 26,589,427 3,135,327 11.7% 53,114 53,114 507,500 103,000 $19.27

cLAss B 22,401,293 2,864,800 12.7% 102,530 102,530 11,000 - $15.91

cLAss c 13,697,936 1,386,492 10.1% 7,057 7,057 - - $13.40

TOTALs 62,688,656 7,386,619 11.7% 162,701 162,701 518,500 103,000 $17.20

Quarterly Comparison and totals


Quarter, year total sF vacant sF vacancy % Current Quarter year-to-date Current Completions by product typeQ4, 2012 63,192,662 7,143,523 11.7 93,462 350,209 391,000 395,000 $18.90 $15.93

Q3, 2012 63,051,662 7,188,414 11.8 246,232 174,114 457,000 - $19.16 $15.60

Q2, 2012 63,051,662 7,566,097 12.0 32,745 8,037 301,000 - $19.05 $15.67

Q1, 2012 63,040,960 7,598,842 12.1 (22,230) (22,230) 301,000 140,000 $18.79 $15.57


Colliers international | p. 3

Central business distriCtThe cBd incurred 155,103 square feet of positive absorption. The vacancy rate now stands at 11.3 percent, and should continue to trend downward as prime downtown space continues to be in high demand. The 188,000 square feet of space that was filled by nationwide Mutual insurance in their new building at 10 West nationwide Blvd was enough to prevent a downturn this quarter. casto leased 37,075 square feet of class A space at Bicentennial plaza, located at 250 civic center drive. downtown columbus continues to see a considerable amount of transition as state Auto recently moved out of 40,533 square feet of space at 580 fourth st., and relocated into 53,719 square feet of space at 175 south Third st. The fBi vacated 24,690 square feet of space at 500 south front, and now occupies 44,478 square feet of the 51,000 square foot class A building recently completed at 425 West nationwide Blvd. regus expanded into an additional 7,936 square feet of space at the Galleria, located at 20 south Third st.

west marketThe west submarkets are Arlington/Grandview and Hilliard. The Arlington/Grandview submarket experienced another quarter of strong positive absorption as 29,872 square feet of space was filled. Time Warner expanded its operations by an additional 10,000 square feet. notable leases were signed at 2200 fifth Ave (9,031 square feet), 5005 Horizon’s drive (5,000 square feet), and 1175 dublin road (4,390 square feet). Hilliard’s vacancy fell from 17.8 percent to 16.5 percent, 130 basis points, after posting 52,163 square feet of positive absorption. The majority of the absoprtion can be credited to Open Text leasing 33,528 square feet of space in the Mill run Business park at 3651 ridge Mill drive.

nortH Columbus marketThe north submarkets are dublin, powell, polaris, north central, Worthington and Westerville. The first quarter storyline for the north submarket is the immense amount of relocations by fortune 500 firms such as cardinal Health, nationwide Mutual insurance, and Verizon communications.

dublin saw sizable negative absorption of 150,992 square feet which can be attributed to nationwide Mutual insurance vacating 165,000 square feet of space at 5900 parkwood place. The dublin vacancy rate now stands at 14.6 percent, a 180 basis point increase from the previous quarter. Wendy’s corporate offices have moved out of 5555 parkcenter circle after their temporary 28,383 square foot lease expired. cardinal Health’s 61,128 square foot expansion at 6000 parkwood place was the highlight of the quarter. Via Quest leased 11,340 square feet at 525 Metro place.

powell and north central saw slight absorption changes and limited movement on the leasing side as most of the transition came through a series of move outs.Vacancy rates remain stable at 11.7 percent, after a high of 22 percent in the second quarter of 2012.

polaris and Westerville saw sizable changes from the previous quarter as many notable leases transpired. General dynamics, integrated installations, and Willsbros engineers collectively leased 13,434 square feet of space at spectrum commerce center located at 921 eastwind drive. Molina Healthcare purchased 3000 corporate exchange last quarter, and iqor no longer occupies space. Malcolm pirnie moved out of 14,244 square feet of class A space at 1900 polaris parkway, causing 9,137 square feet of negative absorption for the quarter. Westerville was able to manage 65,786 square feet of positive absorption despite multiple smaller vacancies.

Worthington had 30 square feet of positive absorption after clark schaeffer and Brookfield insurance moved out of 27,582 square feet of space at Two crosswoods center located at 150 east campus View Blvd. cT consulants leased 10,274 square feet of space at northwoods i, located at 7965 High street; while Quantum expanded by 9,940 square feet of space at five crosswoods, located at 7450 Huntington park drive. Worthington industries has moved into 30,000 square feet of space at 100 Old Wilson Bridge road.

east marketThe east submarkets are the east side, easton, Gahanna/Airport, and new Albany. These submarkets have historically been among the most active, but recorded a slow first quarter. Absorption in easton was positive as 2,007 square feet of space traded. Mast Global signed a 6,084 square foot lease at 4100 regent st. Gahanna posted 8,653 square feet of negative absorption. As mentioned earlier, new Albany remains the focal point for new construction, as over 160,00 square feet of projects are in progress, and another two hundred thousand are in the pipeline for future quarters. new Albany recorded 42,000 of positive absorption, in large part due to Maximus and Mount Vernon nazarene taking 28,647 square feet of class A space at 5150 dublin Granville road.

vaCanCyThe columbus office market continued recovering in most submarkets across the region in the first quarter of 2013. The central Business district (cBd) office fundamentals tightened materially with vacancy rates dropping from 11.4 percent to 11.34 percent, while the suburban office sector fundamentals tightened even more, with vacancy rates dropping from 12 percent to 11.9 percent.

united states:

Greater columbus regionrichard B. schuen siOr cciMceO | principal | columbusTwo Miranova placesuite 900columbus, Ohio 43215tel +1 614 410 5612

Leslie Hobbsdirector of Marketing | OhioTwo Miranova placesuite 900columbus, Ohio 43215tel +1 614 410 5640

Jonathan schuenresearch AnalystTwo Miranova placesuite 900columbus, Ohio 43215tel +1 614 437 4495

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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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