A rough start to 2022. That’s the best way to describe the first three months of the year for Cincinnati’s office market.
According to JLL’s first quarter 2022 Cincinnati Office Outlook, vacancies rose and absorption levels fell in the office market during the beginning of the year in this Ohio market. That’s not surprising: The same happened in most major cities across the United States.
The big challenges in Cincinnati’s office market, though, had to do with companies vacating large chunks of office space in the beginning of the year. JLL pointed to Deloitte leaving its 80,000 square feet of space in Columbia Plaza in Cincinnati’s CBD and Divisions and Comprehensive Medical vacating their offices at Riverfront Place in Northern Kentucky.
Then there was Anthem Blue Cross, which put 223,533 square feet up for sublease as the company shrinks its footprint in the Blue Ash/Montgomery submarket in Ohio.
This has all lead to a lot of empty office space entering the Cincinnati market during a time in which companies still aren’t sure how much of this space they’ll need. No one yet knows when, or if, a full return to the office will happen.
Thanks largely to this uncertainty, the Cincinnati office market saw a negative 101,734 square feet of absorption during the first quarter of 2022. At the same time, the market’s total office vacancy rate rose to 24.4%.
Direct asking rents remained mostly level at an average or $20.60 a square foot, while the average sublease asking rent fell a bit to $17.92 a square foot.
A total of 626,571 square feet of office space was under construction as of the first quarter.
If there is any good news, it’s that office space leasing volumes have remained moderate in the Cincinnati market. JLL reported that leasing deal velocity during the quarter was anchored by Deloitte occupying its new 32,027-square-foot space at the Foundry in the CBD.
Other large leases included Wood Herron Evans’ lease for 22,394 square feet at 600 Vine and Baxters North America’s 15,202-square-foot lease at The Strietman Center.
Another trend? JLL reported that several office spaces are being bought and converted into residential developments. This includes 134 and 144 Merchant being bought for $2.5 million and the old Macy’s headquarters building selling for $10 million.
Is there any reason for optimism in the Cincinnati office market? JLL thinks so. Researchers wrote that as companies gradually bring their employees back to the office during 2022, activity in the market will gain traction. And as COVID continues to fade — hopefully — companies will finally begin making firm plans on how much office space they will need.