The office real estate market has taken some hefty blows over the past few years. There has been a resounding flight to quality as employers try to entice their employees back into the office. However, the threat of an economic downturn can once again turn the office market on its head. Investors and businesses are treading lightly, but specific markets can remain resilient during a recession. The team at Rockval speaks with, an Associate at JLL's brokerage office in Columbus, Ohio, to get a beat on the office market.
In the event of a downturn, Columbus Development authorities have done an excellent job of not having all their eggs in one basket. As a result, the economy is well-diversified, where no single major industry holds more than 19% of the job market. In addition to the diverse economy, tech giant Intel recently broke ground on its $20 billion semiconductor manufacturing facility. The significance of Intel will last decades, as every job Intel creates will lead to thirteen jobs directly associated with it. Comparatively, Honda has had a corporate office in Columbus for 40 years, totaling $11 billion in investments. Honda also recently announced a JV joint venture with LG Energy Solutions to establish an electric vehicle (EV) battery plant to lead its EV production and retool its existing plants for EV production. This investment will total another $4.2 billion and create 2,500+ new jobs.
Stricker also mentions the strong presence of technology companies, primarily financial technology. Most notable was Ohio's largest initial public offering, the insurance technology company Root. Being centralized within a 10-hour drive of the most prominent universities, it attracts a lot of talent in the technology and healthcare sectors. In addition, it is predicted that the Columbus MSA's population will grow by over one million people over the next decade.
The long-term fundamentals are bright, but vacancies have risen with the troubled economy for 2022. The current vacancy rate is around 20%, and employers are battling the transition back to the office. Stricker says rents have remained relatively flat over the past years, but the flight to quality has sprouted new development for Class A buildings. The new product has contributed to the increased vacancy, though it significantly outperforms older Class B and C products on the market.
Bridge Park, Short North, and Grandview Yard are emerging submarkets with extensive mixed-use development embracing the live, work, play lifestyle. Crawford Hoying is developing Bridge Park, located in the heart of Dublin. Once completed, there will be 600,000 square feet of Class A office space, 231,000 square feet of retail space, and over 1,000 residential apartments and condos. One of Stricker's favorite submarkets is Grandview Yard. Outside downtown is Nationwide Realty's massive development, which also embraces a live, work, play atmosphere. Nationwide plans to develop 1.2 million square feet of commercial office space, several restaurants, and 1,500 residential units. Easton is also a top submarket, with 12 million square feet positioned on a 1,300-acre master planned development. Approximately 35,000 daily employees work on-site, and 30 million people visit annually. The success has brought continued development and more Class A offices, housing, and amenities to the market.
Businesses require amenities to lure workers to their office chairs. Stricker mentions the need for fitness centers, grab-and-go food, and campus-wide Wi-Fi. With the emerging submarkets, Stricker believes the central business district downtown can remain strong. He mentions the importance for landlords to refit dated offices and amenitize their buildings to keep traffic coming to the CBD. Over the long term, Stricker is confident about the growth of Columbus and believes the office market will remain steady.
Developers in Columbus are embracing the live, work, play trend, which has proven successful so far. The well-diversified economy and boost from corporate players have this office market well-positioned for the long haul. Ohio has plenty to offer and will continue to attract businesses, people, and investment.
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