By James Flick, Vice President of Research and Marketing
The fourth quarter capped off a great year in the Cincinnati office market. According to our research, over 372,000 sf of space was positively absorbed by area businesses in the fourth quarter, bringing total net absorption for 2015 to over 930,000 sf. This activity dropped the direct vacancy rate 160 basis points over that 12-month span, from 21.3% to 19.7%. Midtown was the strongest driver in demand, both in the fourth quarter and on the year. The submarket saw 183,000 sf of positive absorption for the quarter and 467,000 sf overall in 2015. The activity in Midtown swirled around Norwood.
Multiple new tenants leased space in Rookwood Exchange, including dunnhumby USA (15,674 sf) and Grant Thorton (12,889 sf). In the Central Parke development CDK Global leased a total of 172,152 sf in Office Buildings I and III. The company is will add 1,000 new jobs to the region.
The I-71 corridor is poised to remain the leader in the office market in 2016 as both Kenwood and Midtown will see strong absorption this year. Kenwood Collection recently experienced a wealth of leasing activity, including Hauser Financial (13,000 sf), New York Life Insurance (12,000 sf), and Neace Lukens (32,000 sf). In the Midtown submarket, Oakley Station will see the delivery of its first office building when Anthem opens a 90,000 sf location in late 2016. It is expected to house around 400 employees.
Farther north along I-71, both Blue Ash and Mason have experienced solid absorption, and current vacancy rates (Class A, in particular) are the lowest in over eight years. It has been reported that Summit Woods IV, a 108,000 SF Spec project in Blue Ash, is close to being leased to capacity. With all of the demand and speculative success, we do predict additional new office construction in 2016. Blue Ash and West Chester will see the bulk of that new product.
The Central Business District will see, yet another, building use conversion. The Fourth and Walnut Center is expected to be retrofitted from an office to hotel. Since 2011, five hotels have opened in Cincinnati increasing the hospitality inventory by over 860 rooms. This comes on the heels of the previously announced office to apartment conversion happening at 309 Vine Street. That building is being transformed into 294 apartments and 45,000 square feet of office and retail space.
These two buildings, combined, represent over 500,000 sf of space that is being removed from the office inventory. These changes had/have a significant impact on the vacancy rate of the Central Business District, especially in the Class B sector, which has lagged Class A for years. Previous conversions in the Central Business District, over the last couple of years, have included the Bartlett Building, which is currently the 323-room Renaissance Hotel, the Former Enquirer building, which now houses two hotels (the 144-room Hampton Inn and Suites and a 105-room Homewood Suite), and the 580 Building, which was re-branded AT580 and will deliver 179 luxury apartments in 2016.
James Flick joined the company in 2010. As Vice President, Research and Marketing, he is responsible for overseeing the Marketing and Research activities in our Cincinnati and Dayton offices. This includes the production of presentations, studies, and statistics on topics affecting the regional economy as well as the local office, industrial, retail and multi-family markets.