By: Andrew Batson, research analyst, Great Lakes Region, Jones Lang LaSalle
2013 will be a transitional year for commercial real estate, slowly leading the market along the path to recovery. Nationally, Q1 began the year with elevated touring activity in more than 40% of markets studied by Jones Lang LaSalle. Leasing activity also increased 15.9% when compared to Q4.
Wins and losses in our region varied by market; however, each Great Lakes city saw increased activity in two or more sectors during Q1.
Chiquita Brands moved its offices out of its 113,000 square feet at the Chiquita Center, and several months later, the owner (250 AZ LLC) filed for bankruptcy reorganization. The Chiquita Center, a Class A space, was recently appraised at $33 million.
The recently vacated space remains empty; however, several other distressed downtown properties were sold during Q1, including the former Enquirer building, the former Cincinnati post building and the 580 building.
Q1 Market Activity
Leasing volume went up during the first quarter. Keating, Muething & Klekamp renewed their lease at One East Fourth, where they have leased space since 1960. They currently occupy 90,000 square feet.
Several businesses entered the Cincinnati market. Apex Industrial Technologies is seeking space to expand. Apex was granted a job creation tax credit (if they decide to grow their Ohio presence). Aside from the search in Cincinnati, Apex is also exploring alternatives in Kentucky and Indiana. P.L. Marketing is also in the market for approximately 60,000 square feet of space.
Sales volume increased, construction deliveries went down and construction starts went up. The $100 million mixed-use development project at DunhumbyUSA’s new headquarters broke ground in Q1 at the corner of Fifth and Race Streets. The new headquarters will include a parking garage, as well as retail and office space. DunnhumbyUSA hopes that it will be complete by next year. Paycor Inc. also continued construction on its new 136,000-square-foot office building, forecasted to open for business next spring.
Eaton Corporation has vacated its downtown headquarters location, moving to a 600,000-square-foot building in Beachwood, causing vacancy rates to increase by 200 basis points during Q1. This may lower rent rates downtown; however, the building is a positive addition to downtown on-the-market space.
In other Cleveland news, the long-anticipated Ernst & Young Tower at 950 Main Avenue is forecasted to be complete in May. The 450,000-square-foot space is the premier multi-tenant CBD office building built in the more than 20 years.
Q1 Market Activity
Leasing volume decreased in Q1, but Cleveland did experience several significant leasing transactions. Cuyahoga County officially signed a lease for a building (yet to be constructed) at the corner of Prospect Ave. and East 9th street.
The Cleveland Metropolitan School District entered the market in Q1 for downtown space, seeking 90,000 square feet with plans to relocate in the fall. A global company, Alexander Mann Solutions Corp., is also seeking up to 50,000 square feet of office space for a new location in Cleveland.
During Q1, sales volume and construction activities increased. Construction starts, however, remained flat. The Ameritrust complex sold for $27 million to Geis Companies. The complex spans five buildings and 865,000 square feet, and a portion of the complex will be demolished to make space for the new Cuyahoga County headquarters.
During Q1, Verizon announced that it will leave its Dublin headquarters, creating 200,000 square feet of vacant space. Verizon’s new location in Hilliard is 429,000 square feet and will house 1,500 employees. Verizon also hopes to add 500 jobs. As a result, experts predict that Hilliard will experience an $18 million dollar increase in income taxes during the next decade.
Q1 Market Activity
Leasing activity went up. In an effort to expand, Buckeye Health signed a lease at Easton Way Two. Buckeye Health will move from its current downtown space to the 31,000-square-foot building. In other leasing news, two large companies renewed downtown leases during Q1 including Porter Wright and Kegler Brown.
Chase Bank may be scaling down nationally, but it has entered the Columbus real estate market seeking 160,000 square feet of space. The Scientific Expert Analysis (SEA) and the Columbus Bar Association also entered the market in Q1.
Sales volume remained flat and construction deliveries went down; however, construction starts did increase during Q1. Molina Healthcare purchased a 155,000-square-foot building in Westerville at 3000 Corporate Exchange for $8.5 million. In Worthington, the Community Corporate Center sold for $20.5 million. On the construction scene, Columbia Gas broke ground at their new headquarters in the Arena District. The 286,000-square-foot project is estimated to cost $50 million.
Rock Ventures now owns 2.9 million square feet of space in Detroit. The founder and chairman of Rock Ventures and Quicken Loans, Dan Gilbert, bought a downtown building at 1001 Woodward during Q1. Gilbert’s newest building spans 283,000 square feet; however, other recent purchases in the Detroit area far surpass this purchase.
During the last two years, Gilbert purchased the 800,000 square foot First National Building, the 505,000 square foot Chase Tower, and the 416,000 square foot Chrysler House, among other urban Detroit properties.
Q1 Market Activity
Leasing volume went up during the first quarter. The ad agency, Campbell Ewald, will relocate 600 employees to its newly leased downtown space at Ford Field. Health Alliance Plan also signed a new lease at Tower 14 for 193,000 square feet.
Several significant businesses are now in the market for Detroit space following Q1. The law firm, Brooks Kushman, has not relocated since 1990; but, they are now in the market for 64,000 square feet of space, as is Morgan Stanley Smith Barney.
Sales volume went up, construction deliveries remained flat and construction starts went up. In transactional news, ONP Owner LLC bought the 238,000-square-foot building at One Northwestern Plaza for $19.3 million. On the construction forefront, the David Whitney Building project broke ground downtown during Q1. The final product, which will include apartments, retail, and a hotel, is forecasted to cost $82.5 million.
The Pittsburgh office market continued to flourish in Q1. Occupancy levels hit an astounding 91.2% in Q1, one of the strongest occupancy levels in the U.S.
Pittsburgh Class A office space is generally occupied by law firms, healthcare and professional and business services; however, Pittsburgh saw an increase in technology and energy businesses entering the CBD space during Q1.
Q1 Market Activity
Leasing volume increased in Q1. Leech Tishman, Schneider Downs, HDS Marketing, NCS Services and Emerson Electrical signed new leases. RedPath Integrated Pathology Inc. and the Ayco Company both renewed their Pittsburgh leases for 20,000 square feet and 18,000 square feet, consecutively.
Direct Energy is in the Pittsburgh market for a new 60,000-square-foot office, with hopes to relocate by the end of 2014. Edgar Snyder & Associates is also seeking office space.
Sales volume, construction deliveries and construction starts all remained flat. The Clark Building on Liberty Avenue sold for $7 million to PMC Property Group. The property group plans to renovate the building to create apartment units.
The 800,000-square-foot tower at PNC Plaza located downtown is under construction, with an estimated cost is $240 million. Two office buildings at Pittsburgh International Business Park are also currently being constructed.
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