Like many other cities, Columbus’s office space market is in a period of instability due to rising interest rates and corporate downsizing.
The mainstreaming of remote work means many large, long-term clients are terminating leases, and leasing velocity has significantly slowed. Despite these negative indicators, construction remains relatively active, and preleasing rates are decent.
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Columbus is the largest city in Ohio, with a population of 941,364 as of 2023.
The median age is 32, and the median household income is $54,902. The young population and relatively high median income drive a diverse economy and cultural scene.
Columbus has a humid subtropical climate, with wet summers and dry winters. Like most of the Midwest, Columbus is subject to extreme weather events, such as rain storms, hail, and tornados.
Columbus has a large economy with significant activity in education, banking, fashion, healthcare, and energy. Columbus’s diverse economy shielded it from the worst effects of the 2008 recession, and it is home to several Fortune 500 companies, such as Alliance Data, Nationwide Insurance, AEP, and Cardinal Health.
The Columbus office space market shrunk this quarter with 740,000 square feet of negative absorption, bringing YTD absorption to 315,568 negative square feet.
Q4 2022 saw the lowest absorption since the onset of the COVID-19 pandemic. Negative absorption is due to companies shedding unnecessary office space for hybrid work environments.
Average vacancy rates increased to 20.8%, with the highest vacancies in the East I-70 Corridor (52.8%), Hilliard (36.5%), and Westerville (34.8%). Some of the largest companies that vacated space include CenturyLink, Cardinal Health, BMW Financial Services, and Molina Healthcare.
Average asking rates for office space in Columbus fell slightly to $21.65 per square foot, despite relatively high leasing activity.
Rental declines were not consistent across the entire market as average rents for Class A properties rose to $23.44 per square foot. Average rents for Class B properties fell to $19.86 per square foot, while average Class C rents trailed behind at $16.09.
The submarkets with the highest average asking rates in Q4 2022 were Pen West, Arlington, Easton, and River South at $27.75, $24.60, $24.51, and $23.83 per square foot, respectively. Rental decreases were largely a result of several large employers vacating leases.
Leasing activity fell this quarter to 292,193 square feet compared to 649,950 square feet in Q3 2022. The average lease size also fell from 5,963 square feet in Q3 2022 to 4,126 in Q4 2022. Subleasing rates also significantly jumped as corporate tenants rightsize portfolios.
Over 85% of all lease transactions this quarter were new leases, indicating stable tenant demand, despite negative absorption and average rent reductions. About 60% of all leasing activity was in the suburbs—specifically the Arlington, Westerville, and Dublin submarkets.
Some of the more notable Q4 2022 transactions in Columbus included:
The majority of these noteworthy transactions were in the Downtown and Arlington submarkets.
Even though leasing velocity has slowed and large tenants are vacating space, the Columbus office space construction pipeline is active. Columbus delivered about 360,000 square feet of new inventory in Q4 2022, bringing YTD deliveries to 759,999 square feet.
Columbus has over 700,000 square feet of space in development across downtown and suburban areas, with a significant amount of preleased inventory. Submarkets with the most amounts of construction planned include Pen West (144,000 square feet) and Arlington (134,375 square feet). Virtually all planned construction is for Class A office space.
Below is a table showing notable constructions and their expected delivery dates. Note that rising interest rates and high development costs might cause construction delays.
| Building Address | Square Footage | Submarket | Est. Delivery |
| 429 W Broad | 167,000 | Downtown | Q1 2023 |
| 477 S Front | 218,000 | Downtown | Q1 2025 |
| 600 Nationwide Blvd | 144,000 | Downtown | Q2 2024 |
| 1325 W Lane Ave | 134,375 | Arlington | Q3 2023 |
The Columbus office space market is still in the throes of pandemic downturns, with little sign of relief in the near future. As employers continue to grapple with remote and hybrid work cultures, absorption will remain low and overall rental growth might stagnate.
The upshot is the Columbus construction pipeline has several projects Class A projects underway. Class A office space had lower vacancy rates and higher direct asking rates, so the market might be split between high-quality Class A amenities with higher rates and subpar Class B and lower office space with low rents.
Columbus’s office space real estate market is showing signs of a recession, so investors should maintain a defensive position.
As tenants continue to leave, landlords should be open to subleasing space to offset rental losses. Additionally, investing in capital improvements to update office space can push it into high-quality levels that can fetch a premium rate.
As always, stay vigilant, do your research, and happy investing.
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