The Sky’s The Limit: Real Estate Report Examines Top Local Skylines

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By: Robert Kramp, Vice President and Director in the Midwest and Great Lakes Region at JLL

skyline-sketchEvery city’s skyline tells a story. Some might say that its character starts with the shape of its skyline. How has your city’s skyline evolved during 2013?

Each year, JLL’s research team takes inventory of the top skylines across the U.S. to uncover the highest-profile commercial buildings and office towers in our local cities. We have officially released this year’s Skyline Review, an annual wrap-up report of the best and most desired spaces across the country.

What is this year’s Skyline saying about your city? All local market Skylines were developed so that CRE professionals can easily assess their cities’ top statistics, compared to surrounding areas. Following are highlights from the Cincinnati, Cleveland, Columbus, Detroit and Pittsburgh Skyline Reviews, with links to download the complete research.

The Cincinnati Skyline

By: Cody Brooks, Research Analyst at JLL  

The Cincinnati Skyline showcases 18 of the metropolitan area’s premier office buildings.  Various industries drove demand throughout 2013, ranging from law firms and financial services to technology and healthcare companies. Leasing activity remained modest, but capital markets activity did see an upturn thanks to Convergys, which sold Atrium One to Smith / Hallemann Partners for $43.4 million.

2013 concluded with total vacancy at 25.3% in direct result of space give-backs, a trend that carried forward from 2012. Above average vacancy also led to increased concessions. In fact, the average number of months of free rent on a 10-year lease increased from four to six months.

Looking Ahead: Cincinnati is moving into landlord favorable territory. Overall, the Cincinnati market continues to slowly improve, characterized by plentiful Class A space options for those seeking space.

Cincinnati Skyline Statistics (as of year-end 2013):  

    • Direct vacancy: 23.5%
    • 2013 sales volume (s.f.): 565, 509
    • 2013 net absorption as % of inventory: -4.4%
    • % direct asking rent change: -1.6%

Download the complete Cincinnati Skyline Review.

The Cleveland Skyline

By: Andrew Batson, Senior Research Analyst at JLL

Some of the largest tenants in Cleveland’s Skyline made dramatic real estate decisions in 2013. During the first quarter, Eaton made the move from its space at 1111 Superior Ave. (300,000 square feet) to its new headquarters in the suburbs. But, shortly after, the Cleveland Metropolitan School District claimed 88,000 square feet of the vacancy left behind by Eaton. In the second quarter, KeyCorp signed a 15-year lease at Key Tower effective in 2015, dropping down to 487,000 square feet from the nearly 700,000 square feet that Key had leased since the early-1990s. But, a similar story, within months Baker Hostetler law firm leased 115,000 square feet of the space.

On top of the lively leasing activity downtown, the new 450,000-square-foot Ernst & Young Tower became the first new multi-tenant office building constructed in the Cleveland area in two decades. Today, the tower is more than 90% leased, with a tenant on every floor.

Looking Ahead: It was a dynamic, busy year on the Cleveland Skyline. With such leasing success at the new Ernst & Young tower, there is rumor of another tower soon to be constructed on Cleveland’s skyline. 

Cleveland Skyline Statistics (as of year-end 2013): 

    • Direct vacancy: 19.9%
    • 2013 sales volume (s.f.): 0
    • 2013 net absorption as % of inventory: 2.0%
    • % direct asking rent change: -0.1%

Download the complete Cleveland Skyline Review.

The Columbus Skyline

By: Cody Brooks, Research Analyst at JLL  

Absorption saw a slight hiccup in 2013 at -59,000 square feet. JLL expanded the Skyline set by four buildings, three existing properties (175 on the Park, Moline Plow 200 Civic Center Drive) and one under construction (250 S. High) to indicate a number of future available options following significant leasing activity. Speculative construction developments and lease transactions were major contenders for Columbus this past year. Rents fell just slightly, by 1.2%, signaling the end of three consecutive years of Skyline rent growth.

Investment sales also saw positive activity during 2013. In fact, two Skyline properties were involved in transactions during 2013, including Two Miranova Place and Columbia Gas’ former headquarters at 200 Civic Center Drive.

Looking Ahead: Following a busy year for commercial real estate, it’s clear that new demand for quality space is driving skyline construction, and will continue to do so.

Columbus Skyline Statistics (as of year-end 2013): 

    • Direct vacancy: 15.2%
    • 2013 sales volume (s.f.): 483,079
    • 2013 net absorption as % of inventory: -1.0%
    • % direct asking rent change: -1.2%

Download the complete Columbus Skyline Review

The Detroit Skyline

By: Andrew Batson, Senior Research Analyst at JLL

In the past 18 months, Detroit’s Skyline has transformed. New tenants moving downtown absorbed almost 1.5 million square feet. With the addition of four buildings, the Detroit Skyline now includes 20 buildings totaling 10 million square feet.

Thanks to Dan Gilbert, who has now purchased more than 3 million square feet of commercial real estate in the CBD, total vacancy dropped by nearly 14.5% (from 26% in Q4 2010 to 11.5% currently). New demand and growth also stems from suburban tenants seeking to relocate to downtown spaces. Big businesses moved to the CBD during the past year, including Title Source, Quicken Loans and Lowe Campbell Ewald.

Looking Ahead: Detroit made JLL’s national list of top 5 (secondary) cities with the “sharpest drops in vacancy.” We expect the upward trend to continue through 2014, as well as increased interest in the city itself.

Detroit Skyline Statistics (as of year-end 2013): 

    • Direct vacancy: 11%
    • 2013 sales volume (s.f.): 0
    • 2013 net absorption as % of inventory: 4.2%
    • % direct asking rent change: 7.8%

Download the complete Detroit Skyline Review.

The Pittsburgh Skyline

By: Andrew Batson, Senior Research Analyst at JLL

There is a 4.5% direct vacancy in the Pittsburgh Skyline, making it one of the tightest office markets in the country. Consequently, landlords have a firm control over negotiations, driving rents to increase by 11.5% over the past two years. The tightened vacancy has, however, sparked some office construction downtown, like The Gardens at Market Square (new to the Skyline Review this year). Mixed-use development at The Gardens, forecasted to be complete in 2015, will include Class A office space, a parking garage, retail and restaurant space, and a Hilton Garden Inn.

For the third consecutive year, we observed a transaction within the Skyline set. Starwood Capital Group purchased the 27-story Liberty Center, a mixed-use hotel and office complex.

Looking Ahead: Landlords in Pittsburgh have negotiating leverage in this tight market. But, with new construction on the horizon, those seeking space will have new options in the near future.

Pittsburgh Skyline Statistics (as of year-end 2013): 

    • Direct vacancy: 4.5%
    • 2013 sales volume (s.f.): 526,000
    • 2013 net absorption as % of inventory: 0.2%
    • % direct asking rent change: 5.6%

Download the complete Pittsburgh Skyline Review.

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About the Author

robert_kramppAs Vice President and Director in the Midwest and Great Lakes Region at JLL, Robert has experience in the industrial, retail, multifamily and land sectors. Read up on Robert’s experience or connect with him on LinkedIn.

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