Columbus has been the shining star of the industrial real estate market over the last five years, and for the eighth straight quarter, it has more than 5 million square feet under construction. This year is on track for more than 10 million square feet, with half of that already absorbed in the first part of the year.
A question I always get is, “Why Columbus?” The answer (and the sell) is quite simple — location and population. Columbus is a 10-hour drive within 46 percent of the country’s population and manufacturing base. Incentives play a large role in the process as well, which enables developers to be competitive and drives tenants to the markets.
Labor is always a factor in site selection, but now more than ever it tops the list as one of the most vital components of the decision-making process of choosing a site. With the Columbus region ranking No. 1 in the Midwest for population, jobs and GDP growth, it’s natural for developers to be highly attracted to the area.
Columbus has three major industrial submarkets: West Jefferson, Rickenbacker and Etna Township. The West Jefferson submarket is home to Amazon, Target, Restoration Hardware and JoAnn Fabric. Rickenbacker, home of the Rickenbacker International Airport, is the largest submarket in Columbus. Rickenbacker continues to see demand with all the new developments, and currently has a vacancy rate of 2.7 percent. Etna Township sits on I-70 on the east side of town. It is an up-and-coming industrial submarket mostly due to its labor pool and access to multiple major thoroughfares.
Etna Township is becoming a major distribution spot. The last two years we have seen Amazon add 1 million square feet up the road from an existing 1 million square feet. Kohl’s recently moved into a 1.2 million-square-foot building and Ashley Furniture is building a 1 million-square-foot project. Future development continues in Etna Township, with Scannell Properties planning to break ground on a 675,000-square-foot building by the end of the year.
All the factors that make Columbus a great industrial market have caught the eye of tenants, developers and investors from all over the world. Rental rates have not only increased due to construction prices, but to demand as well. Columbus has become a spec-to-suit market; tenants need the space now and can’t wait 12 to 16 months for a build-to-suit.
We are now seeing fully leased buildings hitting the market and transacting in the mid- to low-4 percent cap rates. Not sure we can call this the post-pandemic world at this moment, however, in the last 14 months, cap rates have dropped 100 to 150 basis points in the Columbus market.
The state’s economic development team, JobsOhio, and the city’s OneColumbus, do a great job selling Columbus to companies from all the over the world. Leasing and development activity will continue to thrive in Columbus and with the land, infrastructure and most importantly, its labor market, expect Columbus to be the hot spot for the foreseeable future.
Tom Miles is industrial agency leasing and land development specialist with Avison Young. This article originally appeared in the October 2021 issue of Heartland Real Estate Business magazine.