Mid-Year Market Report Cincinnati, Ohio 2010
Total Page:16
File Type:pdf, Size:1020Kb
Mid-Year Market Report Cincinnati, Ohio 2010 Dear Colleagues, We are Cassidy Turley….we are Cincinnati. As residents and business people, we are dedicated to our region. We don’t just work in our community; we actively belong to the community. Our associates are actively involved in many charitable and civic organizations including The FreeStore Foodbank, United Cerebral Palsy of Cincinnati, United Way and the Cincinnati Museum Center at Union Terminal. We meet regularly with key business and community leaders and are involved in many professional organizations, just a few of them include the Urban Land Institute (ULI),The Society for Industrial and Office Realtors (SIOR), NAIOP Commercial Real Estate Development Association, CCIM Institute, Building and Owners Management Association (BOMA) and the University of Cincinnati Real Estate Roundtable. We look for meaningful ways to promote Cincinnati as a region of opportunity and growth. Our commitment to the community is the foundation for how we conduct business. We believe in face-to-face relationships and hands-on problem solving. Whether you are a Contents firm seeking space or an owner looking to fill space, we have the strategies and skills to assist you. You can also rely on Cassidy Turley to help manage your properties according Letter 2 to your individual goals and priorities. Office Market 3 You don’t simply have to take our word for it. Midwest Real Estate News in its annual “Best of the Best” rankings recently rated Cassidy Turley the #1 Property Management Industrial Market 8 firm and the #3 Brokerage firm in the Midwest. Retail Market 14 These rankings reflect our deep commitment to providing best in class services. Investment 21 We recognize the importance of focusing on the long-term success of our clients by consistently being their advocate. Our combination of market intelligence and experience honed over many years enables us to deliver the integrated, tailored solutions our clients are seeking. Beyond Cincinnati, Cassidy Turley can be found in 57 other U.S. locations and globally through our partnership with GVA Grimley. We look forward to talking with you about our full-range of services spanning Capital Markets to Corporate Services to Project & Development Services, as well as, Leasing & Tenant Representation. In the following pages, we share our independent research and findings about the Cincinnati market and a forecast of what we believe the future holds. Sincerely, James A. DonlDonlinin Managing Principal, Cincinnati/Dayton 2 | Cassidy Turley Office Market TTreadingreading Water at Midpoint of 2010 outpatient sites and its facilities on the A sense of uncertainty about the speed Mount Auburn campus. and depth of the economic recovery At the end of the second quarter process pervades the midpoint of 2010. 2010, the overall vacancy rate for the The Dow Jones Industrial Average Cincinnati market is 21.3%, a slight rollercoasted from 10,857 at the end increase from the previous quarter’s of Q1 to a high in April of 11,205 21.0% and above the 19.4% seen a and ended Q2 at 9,774. The national year ago. The overall net absorption unemployment rate dipped to 9.5% in for the quarter is negative 122,000 SF June from a high of 10.1% in October and year-to-date is negative 304,700 2009 according to the Bureau of Labor SF. Available sublease space remains Statistics. However, the June rate is the high at 611,000 SF. Taken together with same seen in June 2009 and more than direct vacancy the availability rate is twice the 4.6% in June 2007. Over 8 23.2%. There are 31 existing buildings million (non-farm) jobs were lost in this period of recession with only about 10% in the market offering 50,000 SF and more of contiguous space for a large Market Indicators regained since the beginning of the year. user. A significant portion of these large Q2 2010 Q3 2010 Forecast For the local Cincinnati MSA there blocks of space, 1.5 million SF, is in the is some good news. The preliminary CBD market. That will increase by over unemployment rate for May is estimated 400,000 SF in 2011 when the Great at 9.7%, a noticeable decrease American Tower at Queen City Square is from the high of 10.9% recorded in completed and begins to draw tenants February. Private sector payrolls are out of other CBD buildings. Add to that (Available for Lease) the permanent jobs driving demand for the 170,000 SF that remains to be filled commercial real estate. They increased in the new building if no other preleasing approximately 21,000 since January. takes place. However, 70,000 more jobs would Renewals and small leases need to be regained to reach the high predominated this quarter’s office employment levels seen in 2007. The transactions. Tenants are gaining Cincinnati Office Market Vacancy By Education and Health Services sector concessions on free rent and tenant Submarket Second Quarter 2010 had a preliminary employment figure improvements from landlords struggling in May of 149,200, the highest yet to maintain occupancy. With no major seen. The ongoing expansion of health business closings foreseen, the vacancy facilities are positively contributing to rate should remain fairly stable. The the local economy. The 45,000 SF Good challenge for the Greater Cincinnati Samaritan Medical Center-Western Ridge market is attracting out-of-the-area is opening in fall 2010 and a 67,000 SF users needing large spaces. The low medical office building is planned for cost of living, the vibrant arts scene and the Good Samaritan Hospital Campus on Dixmyth Avenue. Christ Hospital excellent universities and hospitals are positive inducements. The decline in the is seeking to expand its number of number of domestic and international www.cassidyturley.com | 3 Building fell through. Then it went dark when Duke Energy unplugged the electrical supply forcing the few remaining tenants to relocate. Fifth Third Bank is deciding whether to proceed with foreclosure. The lack of upkeep and aging mechanics of the physical structure are viewed as detriments to a quick turn-around for tenant occupancy. The 122,000 SF 14-story Fourth & Race Tower, former home of the Federal Reserve, won $2.5 million in Ohio Historic Preservation Tax Credits to offset part of the $20.2 million cost to convert the nine upper floors to 88 residential apartments. Ashley Development is negotiating with the owner to purchase flights in and out of Cincinnati/Northern 22nd floor in the Chiquita Center at 250 Kentucky International Airport and the East Fifth Street. Northcreek Mezzanine the building.Taken together this may loss of major hub status is considered Fund I LP subleased 3,700 SF on the bring some relief to other Class B a negative factor by large businesses. 30th floor in the 528,000 SF Chemed property owners and tighten the market for this subset of properties. However, in the face of a struggling Center at 255 East Fifth Street. national economy many companies are The CBD market, and particularly the Burke, Inc. relocated out of 52,000 SF putting large real estate decisions on Class A submarket will experience a in the 183,000 SF Centennial Plaza II the back burner until a clearer picture major shift when the 825,000 SF Great at 805-813 Central Avenue to its new emerges. headquarters at 500 West Seventh American Tower at Queen City Square on Sycamore and East Fourth Street is Street. The City of Cincinnati Fire CBD Market The overall midyear vacancy rate for completed in 2011. This will become Department plans to move into 24,000 the newest and tallest building in the SF of that space. Veterans Affairs-The the CBD market is 16.4%, up from downtown Cincinnati skyline. Great Offices of Quality & Safety took 7,000 the 15.8% seen at the end of the first SF in the 235,000 SF Textile Building at American Insurance will vacate its offices quarter and 15.9% a year ago. The 205-209 West Fourth Street. in the 525 Vine and 580 Buildings into vacancy rate for Class A properties is 540,000 SF, leaving over 400,000 SF of 13.6% relatively unchanged from the Renovations were finally completed vacant space in the CBD market. Frost previous quarter but above the 12.9% of on the 36,000 SF former ST Media Brown Todd preleased 100,000 SF and a year ago. The vacancy rate for Class B building at 700 Broadway. KZF will add significant availability to the properties jumped to 18.9% from 17.9% Design purchased the building in PNC Center building when it relocates in at the end of the first quarter and is November 2008 and moved into its new 2011. above 18.4% seen a year ago. headquarters in June. The amount of available Class B Porter Wright Morris & Arthur LLP expanded to 20,000 SF from 16,700 SF downtown product may be shrinking. Plans to sell the 232,000 SF Bartlett and renewed its lease on space on the 4 | Cassidy Turley Suburban Market Currently the overall vacancy rate for the Total ClassA ClassB Suburban office market is 24.5%, close to the 24.2% in the previous quarter but significantly higher than the 21.7% a year ago. The vacancy rate for Class A buildings remained flat at 22.9% while Class B buildings edged higher to 27.2% from the previous quarter’s 26.5%. The second quarter contributed a negative 48,000 SF to the total year-to-date net absorption of negative 189,000 SF.