Over the past decade, Cincinnati has successfully positioned itself as a formidable Midwestern city, hungry for growth and innovation. Whether you’re a startup or a Fortune 500 company, the city (and its surrounding suburbs) can provide an attractive backdrop.
The Cincinnati office market largely reflects this momentum. Demand in some areas has slowed, but the office market remains steady. In fact, the office market has experienced a flurry of activity in 2019 and is awash in new lease transactions and announcements of proposed new development.
The first quarter of 2019 recorded a 1 percent drop in the entire market vacancy to 14.2 percent, according to Colliers International. The central business district (CBD)’s 12.2 percent vacancy is expected to drop another percentage point, as several pending leases are soon to be announced.
John Schenk, Colliers International
I-71 North dominates
The most active area is the I-71 North submarket, where five lease transactions came to fruition. Eversana leased 78,000 square feet at 8990 Duke Blvd., filling the former Express Scripts building just months after it went vacant. Worldpay took down 50,000 square feet at 8845 Governor’s Hill Drive across the street from its headquarters. Smith/Halleman Partners, the owner of the multi-building Governors Pointe, attracted Resurgent Capital Services to 20,000 square feet and also completed an expansion by Ensemble Health Partners of 25,000 square feet. Trew Inc., a newly formed venture in automated conveyor systems, leased 30,000 square feet in Deerfield Crossing.
Altogether, these leases totaling 203,000 square feet are expected to reduce vacancy in the submarket to about 12 percent.
Healthcare innovation district
A new hub for office development is underway at the Cincinnati Innovation District located along Martin Luther King Drive in the area’s medical and scientific research center. Kicking off office development in early 2018 was the 1819 Innovation Hub building, which is now fully occupied. This was followed in August 2018 by the University of Cincinnati’s “digital futures” building, encompassing 180,000 square feet intended for the university’s use.
Recently, Neyer Properties and Kulkarni Properties announced The Node, a 144,000-square-foot building designed by BHDP Architects. This proposed office structure is accompanied by a 158-room hotel projected to open in 2021. Anchoring the west end of the office corridor will be the new National Institute for Safety and Health’s 235,000-square-foot building slated for completion in 2021.
On the northern end of I-75, two new leases were announced. Jacobs Engineering is moving 400 employees into 68,000 square feet at Two Crowne Point in Sharonville, providing them interstate visibility in a revitalized project owned by locally based Neyer Properties. At the Centre Pointe development owned by Hines and Oaktree Capital, Pilot Chemical is taking 35,000 square feet for a new corporate headquarters. This lease brings Centre Point’s occupancy to about 87 percent, and moves it closer to its historical occupancy level of 95 percent in this highly desirable office destination.
CBD continues to evolve
In downtown Cincinnati, Ernst & Young is moving to Atrium Two, taking 21,000 square feet on floors 29 and 30, the building’s top two floors. On the heels of the E&Y announcement, Stifel committed to 8,000 square feet on floor 28. These two leases bring Atrium Two to 99 percent occupancy. Atrium Two’s owners, Acabay and IMC Real Estate, acquired the building in November 2018 for $75.5 million ($113 per square foot) and quickly found success with high-profile tenants. Columbia Plaza garnered Lewis Brisbois, a law firm, and Mondelez Brands, both in the 8,000-square-foot range.
Cincinnati Center City Development Corp. (3CDC) acquired the former Macy’s department store building on Fountain Square in 2018 for about $35 per square foot. The organization has hinted that an office tenant is working on plans to occupy two of three floors of this 230,000-square-foot building. Speculation is flying that one of the major downtown corporations is planning a new technology division for this prime location.
On the perimeter of downtown, a wave of leasing hit the Sawyer Point Building with three new tenants: The Greater Cincinnati Foundation with 22,000 square feet, Tempoe with 19,000 square feet, and WA Architects with 7,000 square feet. At another nearby perimeter building, One Gateway Place, Bottom Line System leased 19,000 square feet. Laser Spine Institute vacated 36,000 square feet in its high-profile building on I-71. This newer ambulatory surgical center provides the medical market with a very visible and easily accessed new alternative.
Suburban opportunities
Large occupiers needing up to 200,000 square feet of suburban office space will find just three existing building alternatives: Toyota’s former North American headquarters (200,000 square feet) in Erlanger, Kentucky; Humana’s former regional office (240,000 square feet) on the outskirts of the CBD; and International Paper’s facility (200,000 square feet) at Wards Corner Road in Miami Township.
Desirable locations with quality office space experienced a leasing spike in early 2019. Office occupants are finding a dwindling number of alternatives as the prime submarkets tighten. The most desirable submarkets are short on space, such as Kenwood at 7.8 percent vacancy and Midtown at 5.7 percent. Tenants looking for a live-work-play environment supported by local amenities and proactive local government should find Blue Ash as an attractive choice.
— By John Schenk, Brokerage Senior Vice President, Principal, Colliers International | Greater Cincinnati. This article originally appeared in the July 2019 issue of Heartland Real Estate Business magazine.