CINCINNATI—User demand has tightened up both the industrial and office markets in the Cincinnati metro region, according to DTZ, which just published its year-end report on both sectors. Vacancy rates have sunk especially low in the region's industrial properties and could accelerate new construction in the coming year.
In the fourth quarter, the region saw users absorb 704,877-square-feet of industrial space, a particularly impressive number considering the already-low vacancy rate. The Greater Cincinnati industrial market has now seen 14 consecutive quarters of positive net absorption, DTZ says.
Furthermore, it was the fourth straight year that the office market has seen positive absorption. During the fourth quarter, it had 59,876-square-feet of net absorption. This pushed the 2014 total to 23,630-square-feet.
“Despite overall vacancy at just 5.31%, the industrial market saw nearly 5-million-square-feet of positive absorption for the second consecutive year,” says James Flick, vice president, research and marketing, in DTZ's Cincinnati and Dayton offices. “In addition, the CBD was the office market's main driver of demand in 2014. In total, the submarket saw 298,761-square-feet of positive absorption, the largest amount since 2007.”
Quarter-to-quarter vacancy rates among industrials fell from 5.53% in the third quarter, to just 5.31% in the fourth. Users have been gobbling up class A bulk warehouse space in particular, and have pushed down that vacancy rate to only 2.4%. And in Northern Kentucky, class A bulk vacancy has sunk nearly to zero, with only 42,700-square-feet vacant and available for lease.
“To serve a severely under-supplied market, additional speculative bulk construction will begin in 2015 to supplement the current 1.6 million-square-feet currently under construction,” DTZ says. “With few large contiguous space options available, many of the largest transactions of the coming year will involve sizeable tenants renewing and/or expanding their current leases for multi-year terms.”
As reported in GlobeSt.com, Opus Development Co. has just started two speculative industrial buildings at Port Union Commerce Park in suburban Fairfield and West Chester that will total more than 800,000-square-feet of space.
And although the vacancy rate in the office sector at the end of the year was 19.5%, that was 250 bps better than the first quarter and the lowest since 2011.
The region's strongest submarkets in the fourth quarter were: Mason with 57,298-square-feet of net absorption; the CBD with 35,436-square-feet; Tri-County with 20,915-square-feet; Northern Kentucky with 20,792-square-feet; East with 12,656-square-feet; and Kenwood with 2,213-square-feet.
“Additional positive activity in the office market will spur actual rent growth in 2015,” DTZ says. “Long term, sustainable office-using job growth will translate into increased demand for office space.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
