By James Flick, Vice President of Research and Marketing
Over the past 12 months the Dayton unemployment rate has improved 80 basis points from 5.1% to 4.3%. The lowering unemployment rate is not necessarily a sign of the health of the local economy as there were only 4,000 jobs added during that time period meaning there are likely not as many entrants into the labor market.
Another sign of the slow economic growth in Greater Dayton came in the latest release from the Bureau of Economic Analysis regarding local GDP growth. The Dayton regional mustered just 0.3% growth in 2014. This figure was well below the national average of 2.3%.
A positive take away from the Bureau’s report was that the professional and business service was the strongest driver of GDP growth in the Dayton market (0.37%). Additional growth could prove to have positive implications for the local office market.
Looking ahead Dayton’s location and associated attractiveness to logistics companies will hopefully fuel additional economic growth moving forward.
Office Market Overview
In the Fourth Quarter of 2015, the Dayton market experienced -13,407 square feet of absorption. However, there was 68,235 square feet of positive absorption for the year. Overall, the positive activity in 2015, has helped push the vacancy rate down 40 basis points from 25.5% to 25.1%.
The strongest driver of demand during the fourth quarter was the Central Business District with 34,115 square feet of positive absorption. This was spurred by numerous transactions that took place in Kettering Tower including leases by Westminster Financial (5,838 square feet), Eagle Registration (5,303 square feet), and Wells Fargo (5,071 square feet). Additional activity in the Central Business District came in Tech Town Building III, which saw CH2M Hill take 7,818 square feet.
While rental rates have been flat for the last year, lowering vacancies and additional positive absorption should help fuel rent growth in the future.
Unlike the third quarter, construction deliveries in Greater Dayton were not as robust in the fourth quarter. 4 projects totaling 123,500 square feet were completed this quarter, the largest of which was a 90,000 square foot warehouse addition to its Stroop Road manufacturing plant. In total, over 850,000 square feet of space was delivered to the market in 2015 and 715,900 square feet of space is currently under construction across the region.
Overall vacancy has fallen in Greater Dayton for eleven consecutive quarters, and currently stands at 9.34%. By comparison, vacancy was 14.77% just two years ago (Q4 2013). Net absorption in fourth quarter of 2015 was 362,436 square feet, and was positive in all six Dayton-area submarkets. Full-year 2015 absorption was over 1.5 million square feet.
The largest lease of the fourth quarter was Masonite Corp. renewal of 102,400 square feet at the Airport Industrial Building on Old Springfield Road in Vandalia. Further north in Tipp City, Union Corrugating leased 82,221 square feet at 531 North Fourth Street. In Middletown, Tube City IMS took 32,470 square feet at the Midd Cities Industrial Park.
Six building sales of over $1 million took place in the fourth quarter. Boston-based investor STAG Industrial was involved in the two largest sales. STAG purchased the 204,800 square foot Moraine Logistics Center for $9.175 million ($45/SF). The building is fully leased by DMAX Ltd. STAG then sold the 179,506 square foot building at 805 Liberty Lane in West Carrollton to medical device manufacturer NuVasive for $3.85 million ($21/SF).
Looking ahead to 2016, vacancy rates should continue to tighten all across product types, which may prompt another round of new construction.
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 market