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Diverse CRE Market Growth Continues in Ohio

Demand for specific markets varies across the state, yet remains strong as a whole moving into the rest of 2017 and into 2018.

The commercial real estate market in Ohio continues to show signs of steady growth, buoyed by demand for retail, multi-purpose industrial space, and multifamily housing into the second quarter of 2017. Demand for specific markets varies across the state, yet remains strong as a whole moving into the rest of 2017 and into 2018. The Cincinnati CRE market has shown a strong demand for industrial space, largely reversing the record-high 2016 vacancy rates from construction completed on new speculative projects. Commercial development and repurposing of industrial space grew in rust belt towns like Akron and Cleveland, while Columbus continues to see a rise in commercial and residential development commensurate to robust economic growth.

Industrial is Hot in Cincinnati

Since 2016, over 3 million square feet of industrial space in and around Cincinnati have been absorbed, dropping the vacancy rates to a record low of 3.5%. Steady demand is reducing the availability of properties on both sides of the Ohio River, including Southwest Ohio and Northern Kentucky, home to the Cincinnati/Northern Kentucky International Airport (CVG). Amazon’s announcement of a $1.5B worldwide air cargo hub headquartered at CVG will have an echo effect for square-footage needs of their suppliers and contractors. Adding to the Amazon project will be 4 million square feet of speculative warehouse and/or distribution space anticipated to be built in 2017 for UPS, Kroger’s headquarters, and Hayneedle.

In addition, with significant funding from the US Department of Housing and Urban Development (HUD), planning for the $40M multi-purpose residential and retail Avondale Town Center is underway, which includes over 15,000 square feet devoted to access to healthy and fresh food choices in one of Ohio’s largest food deserts.

Making Over Downtown Akron

Akron is undergoing a total makeover of downtown and Main Street, with all projects preserving historic buildings slated for completion by September 2018. Most of the old industrial warehouses had been vacant and in disrepair for a decade or more. The funding is a part of a more wide scale Ohio Historic Preservation Tax Credit Program providing $35M in tax credits targeting the overhaul of 36 neglected buildings in 13 Ohio communities.

One such building being repurposed is Akron’s Old Firestone building, along with adjacent acreage, which were put up for sale by the city.

In an industrial market that is tighter than at any time since World War II, demand for vacant industrial land in mid-size Rust Belt cities across Northeast Ohio is sky high due to the short supply of available space.

Historic Housing Demand Across Ohio

Part of this demand comes from the multifamily housing boom across Ohio, where the housing market as a whole experienced its best May since at least 1998, when real estate data started getting tracked. A limited supply of properties has resulted in competitive turnaround times for sales, providing an immense opportunity for new multifamily CRE. Homes purchased in May typically had been on the market for 27 days, the shortest window since the national Realtors started monitoring listing times six years ago.

Growth Fueling MF Demand in Cleveland

Particularly in demand is the multifamily housing sector in Cleveland, where a combination of economic growth, tax incentives, and availability of more attractive office space and conversion of previously obsolete downtown buildings is fueling a housing boom, particularly in lofts and condominiums. The city hopes to sustain this momentum long into the future by attracting an international population of talented professionals who will infuse property ownership and business and retail development to the rapidly changing downtown waterfront.

Rural Areas Benefitting

The hot Ohio multifamily housing market has resulted in spillover into rural areas, which presents lenders and developers with opportunities to further grow and expand these exurb communities. For example, developers in Warren County are planning a $1.5B mixed-use center comprised of homes, commercial, retail, sports, and business projects. The long-term goal is to attract enough people to create communities and significantly grow several existing townships in the county, located conveniently between Dayton and Cincinnati.

Mixing Work / Life / Play in Columbus

Unprecedented multipurpose development is burgeoning in downtown Columbus across all sectors. Maximizing land use through developments that combine work/live/play space continue to be a high priority. A 22-acre area on the Scioto Peninsula — the largest new development in the city in decades – will combine around 1,500 residential units, two hotels, 800,000 square feet of office space and a variety of retail, dining, and entertainment options. The unusually robust economic growth in Columbus is driving the proliferation of urban civil engineering development (walking areas, bike paths, parks, etc.) as more people visit and work in downtown.

Capitalizing on Opportunities

Looking ahead, developers and lenders should emphasize out-of-the box development ideas for industrial real estate space, particularly in depressed rural areas and abandoned sites. For example, Ohio is one of the Rust Belt states that has been offering incentives to breweries, an economically blossoming but capital-intensive industry. Retrofitting sites to include a taproom, a factory floor for enormous equipment and possible storage areas for consumable commodities requires a lot of space and very particular building requirements.

Smooth expedition of projects such as these, along with aforementioned urban development, will require meticulous engineering consulting, zoning, environmental site assessments, construction risk management, and possible remediation technology. Partner Engineering and Science, Inc. has been proud to support Ohio’s growing and revitalizing markets with market-leading due diligence expertise across all retail, industrial, and multifamily housing markets. A few recent projects we were honored to be a part of include the new @580 renovation and Oakley Station.

Multifamily housing in Cincinnati included the new @580 renovation, a 250-unit apartment property financed by NorthMarq Capital, and the rebuild of the 1920s Grand Baldwin Building into a reuse, converted apartment complex. Partner engaged in the @580 build in after it lost its biggest tenant and fell into foreclosure. In the process of redevelopment of the 43-year-old office space building, Partner was engaged to provide comprehensive environmental and engineering due diligence assessment of the property, including a Phase I Environmental Site Assessment, Property Condition Assessment (PCA), radon screening, construction risk management, document and cost reviews, and construction progress monitoring.

Partner also pleased to provide a range of environmental and engineering due diligence for a transaction involving the purchase and renovation of Key Tower, Cleveland’s tallest building.

A recent consult for a new mixed-use 74-acre lot in Cincinnati, Oakley Station, included zoning reports, Phase I environmental site and property condition assessments. Oakley Station is home to retail chains, a multifamily housing complex, office spaces, and a movie theater.