Commercial Real Estate Trends in the Midwest: Q1

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By: Andrew Batson, Senior Research Analyst, Great Lakes Region, JLL

JLL Q1 Research Q1 is a wrap, and things are looking up.

Market momentum in the national office market accelerated during the first quarter. JLL research found new demand drove significant absorption (8.4 million square feet), construction starts and increased rents for landlords.

Plus, we are seeing big changes in the way businesses use office space, largely thanks to demographics and technology. In fact, the average target density per employee has shrunk to 150 square feet, down from 225 in 2009, says JLL’s U.S. Office Review.

Looking to our local cities, we also saw dynamic, lively activity in the Midwest. Below is a quick recap of Q1 highlights in Cincinnati, Cleveland, Columbus, Detroit and Pittsburgh. Download the full reports for details.

Cincinnati

During Q1, Eagle Realty Group, a subsidiary of Western & Southern Financial Group, announced that it would sell part of its ownership stake in Queen City Square. This property includes more than 1 million-square-feet of downtown office space, and is home to the city’s largest office building, Great American Tower. 

Q1 Market Activity

Tour activity and leasing volume remained stable in Q1. Philadelphia-based CDI Corp. renewed and expanded its lease in the Tri-County submarket at Executive Centre II and III to 54,000 square feet.

The Union Centre Office in West Chester acquired a new tenant in Q1. Front Gate signed a lease for 20,000 square feet.

Sales volume also remained stable during Q1. In the Tri-County submarket, Lone Star Funds purchased three Cincinnati office buildings. CWCapital Asset Management LLC sold the properties, totaling 312,000 square feet, for $104.3 million. In construction news, a group of national and local developers have plans to transform the former U.S. Playing Card property in Norwood into Class A office space. The new space is forecasted for completion in 2015.  

View the full Cincinnati Q1 analysis. (Office Highlights Office Statistics) 

Cleveland

The BakerHostetler law firm leased five floors in Cleveland’s tallest building, Key Tower, during Q1. The law firm will absorb a large portion of the space Key Bank will vacate in 2015.  In conjunction with its 100th anniversary in Cleveland, the firm plans to relocate about 300 employees into the office tower in 2016.

Q1 Market Activity 

Leasing activity remained flat during Q1. In the Rockside Corridor, Travelers Insurance renewed its 50,000-square-foot space at Park Center Plaza II. In other leasing news, Park Place Technologies entered into a new lease in the East submarket for 41,000 square feet.

Sales volume and construction also remained stable. But, Five Mile Capital Partners purchased five office buildings (and 600,000 square feet of space) for $62.4 million from Duke Reality in Independence.  In construction news, American Greetings is moving forward with its new headquarters in Westlake at Crocker Park. The 655,000-square-foot office is expected to cost upwards of $150 million. 

View the full Cleveland Q1 analysis. (Office Highlights Office Statistics) 

Columbus

The city of Columbus underwent (and is undergoing) significant change in Q1. The historic building at 109 N. Front Street will be demolished, and a new, 135,000-square-foot building will be built in its place. The city expects to spend $80 million on the project.  

Q1 Market Activity 

Touring and leasing activity remained stable in the first quarter. During Q1, Diamond Hill Investment Group renewed its lease at its Arena District office at 325 John H. McConnell Boulevard, and expanded by 17,000 square feet. The company now occupies a total of 38,000 square feet of space. 

Sales volume and construction deliveries remained stable, while construction starts increased. The new Columbia Gas headquarters project in the Arena District continued throughout Q1. The 286,000-square-foot project includes a 1,400-car parking garage. Columbia Gas has plans to move during Q4 of 2014, when the $50 million dollar project is forecasted for completion.

View the full Columbus Q1 analysis. (Office Highlights Office Statistics) 

Detroit

601W Companies is in the process of purchasing Southfield Town Center. The deal is expected to close in May. If it does, the sale of the $177.5 million, 2.2-million-square-foot complex will be the biggest office acquisition in Detroit in the last ten years.

601W Companies has big plans to renovate the center. This includes lobby upgrades, new elevators and new parking infrastructure.   

Q1 Market Activity

Leasing volume remained flat during the first quarter. Also in Southfield, Federal Mogul leased 180,000 square feet at the former home of Blue Cross Blue Shield. Another sizable lease: N.S. International intends to relocate about 100 employees (and add new jobs) to its newly leased 111,000-square-foot space on Wilshire Drive in Troy. 

Sales volume and construction remained stable during Q1. Meridian Health Plan is planning to consolidate from two buildings to one. The company plans to relocate to a new, 16-story building in the CBD. If carried out, this building will represent the first major office construction downtown since 2006.

View the full Detroit Q1 analysis. (Office Highlights Office Statistics) 

Pittsburgh

The Davis Companies purchased the century-old Union Trust Building for $14 million in the first quarter. For now, the Union Trust will remain office space. The 517,000-square-foot building is currently 39% leased, with Siemens Corporation leasing 193,000 square feet.

Future plans will be released once the new owner has completed research. 

Q1 Market Activity 

Leasing volume and rents both remained stable during Q1. Noble Energy formally announced that it would lease 139,000 square feet of space at the Town Square Center building in Southpointe, with plans to move in 2015. In other leasing news, Google will expand its square footage at Bakery Square by 66,000 square feet. The tech company will expand into a new building yet to be constructed as part of the Baker Square 2.0 project. 

Sales volume and construction starts remained flat. Construction continued at PNC’s new 33-story headquarters. The $240 million project is expected to be complete next year.  Construction at the Southpoint II development is also ongoing. Two of the three buildings under construction are scheduled to be complete in Q4.

View the full Pittsburgh Q1 analysis. (Office Highlights Office Statistics) 

If you don’t find what you’re looking for in one of these downloadable reports, feel to post a question or comment here and I will promptly respond. 

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About the Author

Andrew BatsonAndrew Batson is Senior Research Analyst for the Michigan and Ohio region of Jones Lang LaSalle and is responsible for the publication of quarterly and annual research. Mr. Batson ensures that our clients receive the most thorough, timely, and strategic market information in a way that guides decision making and identifies risks and opportunities. View Andrew’s bio or connect with Andrew on LinkedIn.