President's Perspective

Our commercial market has significant impact on our residential market

By Greg Hrabcak
President

Roughly 90 percent of our 7,400+ CBR members practice residential real estate. However, the activities of our 736 commercial members have a direct and significant impact on the state and future of our residential market. The more commercial growth we can affect, the more jobs are created and consequently, the more homes will be purchased.

Since I practice commercial real estate, I thought I'd share with you current conditions in our commercial market as well as the outlook for 2008. . .

The Columbus Metropolitan Statistical Area (MSA) has a vibrant commercial market comprised of three major sectors -- office, industrial, and retail. Each of these areas is extremely important because as office, industrial, and retail space is filled by our commercial REALTORS®, housing needs increase as employees are added to the central Ohio market.

Office
There is approximately 40 million rentable square feet in the Columbus MSA.

From the 4th quarter 2005 to 4th quarter 2007, office vacancy rates declined from 17.7 percent to 14.4 percent (see graph). Much of the reduction in available office space has taken place in the Central Business District (downtown) and in the suburban office markets.

The significant decline is a positive indicator of the health of the central Ohio office market.

New office construction continues to remain fairly slow, allowing the market to further recover as more existing office space is absorbed.

Office space asking rental rates range from $16.52 - $21.99 per square foot in the Downtown Central Business District. Suburban markets have asking office rental rates ranging from $17.66 - $26.73 per square foot with the higher rate found in the North Central Market.

Overall the outlook for office space is very good as vacancy rates continue to decline.

Industrial
The Columbus MSA consists of over 202 million rentable square feet of industrial space, the majority of which is warehouse and distribution space. These specific property types account for more than 124 million available square feet.

From 2nd quarter 2006 to 4th quarter 2007, vacancy rates declined from 11.3 percent to 10.2 percent (see graph).

A major transaction that took place in the 4th quarter saw Whirlpool Corporation vacating its 509,000 square foot facility and moving into a 624,000 square foot facility in the Rickenbacker Global Logistics Park.

Recent new development includes Kirco Development which broke ground on a 701,808 square foot warehouse and distribution facility in Obetz. Columbus continues to grow as a major Mid West distribution point for many corporations.

Industrial asking rental rates range from $2.52 - $7.16 per square foot in central Ohio with the higher rate in newer Research & Development/Flex space.

The industrial vacancy rate continued to decrease in the 4th quarter of 2007 -- and 2008 looks very encouraging.

Retail
The Columbus MSA has over 58 million square feet of gross leasable retail space.

The vacancy rate in 4th quarter 2007 was 11.1% which was a slight decrease from the 11.6% in the previous quarter (see graph).

We have witnessed explosive growth in our retail markets over the past several years especially in the Polaris, Easton, New Albany and Grove City areas. Neighborhood retailers have helped to stimulate the market vacancy rate as well as power retailers.

Retail asking rental rates range from $8.02 - $21.43 per square foot with the latter in the Northeast area of Columbus.

Overall retail vacancy rates are showing minimal decline but we're optimistic that the promising 4th quarter numbers continue into 2008.

Hopefully this information brings you more up to date with the progress we're seeing in the commercial market as we move forward into 2008.

As I stated earlier, the more office, industrial and retail space that is filled and absorbed, the more jobs are secured and/or created, and therefore more housing will be needed.

My thanks to Richard Schuen with Grubb & Ellis/Adena Realty, and his staff for their contribution in providing much of this statistical information.