The Columbus area commercial retail market finished the fourth quarter of 2015 with a positive absorption of 267,887 square feet and year-to-date observed 506,700 square feet, according to the fourth quarter report from the Central Ohio Commercial Information Exchange (COCIE).
“Net absorption activity is driven by tenants and companies either moving into the market or moving out of the market,” said Kimberly Begley, director of analytics for Xceligent. “Positive net absorption for the fourth quarter contributed to some of the following transactions: Big Sandy leasing almost 110,000 square-feet at 6825 Dublin Center Drive – this space has been vacant for several years; Furniture Bank leased almost 50,000 square-feet at 2165 Morse Road; Pat Catan leased over 31,000 square feet in the Delaware Shopping Center; Planet Fitness leased almost 16,000 square feet at Hunters Ridge Shopping Center; and Party City leased 16,000 square feet at 6655-6665 Sawmill Road.”
Columbus REALTORS® 2016 President John Royer of Kohr, Royer, Griffith said the fourth quarter is always the best quarter for retailers given the holiday shopping season.
“The retail market has stabilized some and there is a limited supply for new construction,” Royer said.
The overall market vacancy rate decreased from 7.99 percent the previous quarter to 7.7 percent the fourth quarter.
Begley explained that the vacancy rate had a slight decrease due to the positive net absorption that occurred during the quarter.
“It’s forecasted that the retail vacancy rate will continue to decrease slightly,” Begley said.
The fourth quarter regional vacancy rate declined to 7.7 percent from the 8.3 percent reported during the third quarter of 2015. This decline was influenced by tenants expanding and new leasing activity that caused positive net absorption.
In the overall market, the Anchored Strip Center subset performed the best during the fourth quarter with a positive net absorption of 201,740 square feet and a vacancy rate of 7.2 percent. Anchor Strip Centers are shopping centers with at least one anchor tenant that are not enclosed and have entrances that typically face the parking lot. Particularly responsible for this activity is Big Sandy’s deciding to lease space in the Dublin Village Center, as well as Party City leasing space in the strip center in front of the Dublin Village Center.
Begley said current trends in commercial real estate include some of the big box users announcing store closings in the national and some in the global markets.
“Walmart, Kmart, Target, Sears, Macys have all announced some store closings,” Begley said. “However we are continuing to see fitness and grocery stores expand in the market such as Fresh Thyme Farmer’s Market Natural, organic grocery stores, new Kroger stores and gyms such as Planet Fitness.”
Royer said he is also seeing similar trends emerge in commercial real estate.
“There are many new food uses coming into play and that appears to be the category that new developments are developing the most in,” Royer said. “There appears to be a shakeout in the apparel industry.”
A top transaction during the fourth quarter was located at 9669 Sawmill Parkway, a 14,748 square foot building, and it traded for $7,500,000. This particular space is for a Walgreens, which was built-to suit at this address with no prior tenant.
The Columbus retail market has currently over 1,179,000 square feet under construction with the largest square footage observed in the Northwest submarket totaling 566,000 square feet.
Begley said one of the largest under construction projects in the Northwest market is the Bridge Park project.
“There has been a recent announcement that RAM Restaurant & Brewery and Mesh Fitness will be locating in this project, “Begley said.
Over 70 leases totaling more than 320,000 SF of retail space were leased in the tracked data set in the fourth quarter. The Columbus tracked data set consists of an inventory of buildings considered to be competitive within the brokerage community.
Begley predicts that the vacancy rate will continue to decline slightly and construction activity will remain steady into the first quarter of 2016.
Royer said he foresees the commercial retail marketing continuing stabilize and will ultimately boil down to the usual ‘location, location, location.’
“The market locations that are expanding will continue to grow and marginal locations will sit vacant longer,” Royer said. “Building owners may need to find reuses for those sites.”