Q1 2025 INDUSTRIAL & OFFICE MARKET UPDATE
- Colliers | Columbus
- Apr 8
- 6 min read
Written by: Collin Fitzgerald & Stephanie Morris
Collin and Stephanie specialize in research capabilities, providing support for the Colliers Columbus Office, Industrial and Retail groups. They are responsible for executing data reports, maintaining a commercial property database, reporting quarterly trends, performing data analysis and utilizing statistical information to predict future behavior in the market. Keep reading for their take on market trends in the Columbus office and industrial sectors.
Industrial Market Update
The Columbus industrial market rebounded in Q1, as vacancy rates dropped, driven by strong leasing activity and owner-user sales.
Quarter in Review
Lease transaction volume increased in the first quarter, particularly in high-demand submarkets like Southeast and Licking County. New leases will likely remain the dominant share of activity, reflecting ongoing demand.
Absorption is expected to remain positive as the Cardinal Health build-to-suit project comes online next quarter and as tenants that signed leases this quarter move in.
Vacancy rates are expected to remain stable or decline slightly as the market absorbs recently completed supply. Vacancy rates decreased across all building sizes in Q1, with the most significant declines occurring in buildings between 400,000 and 600,000 square feet, indicating increased demand in this size range.
Rent growth is stabilizing, with modern bulk distribution facilities continuing to command a premium over general industrial space.
Last quarter, speculative construction activity reached its lowest level since 2012, reflecting a more cautious development environment. However, three speculative projects ranging from 100,000 to 250,000 square feet broke ground this quarter, indicating renewed developer confidence and steady tenant interest in buildings of that size.
Forecast
Manufacturing users may be increasingly drawn to Columbus following the Anduril Arsenal-1 announcement, contributing to the broader trend of onshoring and the growth of advanced manufacturing in Ohio. This could drive additional investment and industrial demand. Speculative bulk construction is expected to remain limited until early 2026 unless cap rates compress or rent growth accelerates. However, strong demand for 50,000 to 200,000 square foot spaces is fueling mid-sized speculative projects, with developments in the 100,000 to 300,000 square foot range expected to deliver in late 2025. While rental rates in key submarkets like Licking County may continue to rise, overall growth is expected to moderate as the market adjusts to current conditions.
Absorption & Leasing
The Columbus industrial market recorded 7.0 million square feet of leasing activity in the first quarter of 2025, with seven transactions exceeding 500,000 square feet each. New leases accounted for 75% of total transaction volume, highlighting strong demand for industrial space. The Southeast, Licking, and Fairfield submarkets recorded the most activity, accounting for 55% of total transaction volume. Manufacturing users signed the two largest leases of the first quarter.
Net absorption totaled 3.6 million square feet, reflecting strong tenant demand. The 3.6 million square feet does not include 1.8 million square feet of leases signed in Q1 with future occupancy dates, suggesting sustained momentum for the market. The largest move in of the quarter was a confidential user occupying 946,000 square feet at 7409 Mink Street SW in Licking County. The largest move out of the quarter was Black & Decker vacating 509,275 square feet at 3780 Tradeport Court.
Vacancy & Market Rents
For the first time in three quarters, demand outpaced new supply, causing the vacancy rate to decline. The total market vacancy rate fell by 0.95% quarter-over-quarter but remains 2.30% higher year-over-year. This quarter, transaction activity had a greater impact on vacancy than in previous periods. In prior quarters, an influx of speculative deliveries without pre-leasing contributed to rising vacancy. The 3.8 million-square-foot Big Lots vacancy at 300-550 Phillipi Road continues to weigh on the market—excluding this space, the market’s vacancy rate would stand at 7.35%.
Rent growth is stabilizing, increasing $0.11 quarter-over-quarter. The Licking County submarket commands the highest average asking rent at $8.31 per square foot, driven by 40% supply growth over the past three years. Modern bulk distribution facilities continue to command rents 9.2% higher than general industrial space.
Sales Activity
Sales volume increased and is approaching 2023 levels, with sale prices per square foot reaching a two-year high, reflecting continued demand for well-located, modern industrial properties. Sales volume totaled $253 million in Q1 2025, with an average price of $101.58 per square foot. The largest transaction of the quarter was 9850 Innovation Campus Way, which sold for $51.9 million. Additionally, Cabot Properties acquired 3210 Horizon Court and 3450 Horizon Court for a combined total of $77.1 million. These trends highlight ongoing demand for quality industrial assets and indicate sustained investor interest in the market.
Check out the full Q1 2025 Industrial Trends report here!
Office Market Update
In the first quarter of 2025, the Columbus, Ohio, office market is witnessing a notable shift as governmental and corporate entities implement return-to-office mandates. This movement is generating increased interest in office space and stimulating regional investment activity. Rather than lowering rents in response to shifting market conditions, landlords have opted to increase concessions or offer generous TI allowances to maintain face rents. As a result, the market currently favors tenants. As more companies return to the office, this dynamic may shift back to landlords, potentially leading to a reduction in concessions.
Despite ongoing occupancy challenges in the office sector, vacancy and absorption in Columbus will likely remain flat over the next 12 to 18 months. The construction pipeline is at the lowest level in over a decade.
Columbus was ranked the second-fastest growing U.S. city in 2024, according to a report by the Bank of America Institute. The Columbus MSA population grew by nearly 1.5% year-over-year in the third and fourth quarters of 2024. The growth was driven by strong job creation, a relatively low cost of living, and increasing migration fueled by business investments and population trends.
Looking ahead, increased demand for office space is expected to attract investors seeking opportunities in the Columbus market. Developers are focusing on creating amenity-rich office environments to meet tenants' evolving preferences. However, challenges persist, including balancing hybrid work models and addressing potential shortages of modern office spaces. Overall, the Columbus office market is poised for growth, driven by the ongoing return-to-office trends and strategic investments in the region's commercial real estate sector.
Absorption & Leasing
A confidential tenant signed a new lease, which was the most significant lease totaling 16,190 square feet at 1105 Schrock Road in the Worthington submarket. Net absorption will flatten over the near term as office attendance stabilizes and in-office job growth continues to expand. Over 200,000 square feet of new deals were signed this quarter, many with mid-2025 commencement dates. Suburban net absorption was impacted by Express Scripts and Eqip vacating 5151 Blazer Memorial Parkway, contributing to negative absorption in Dublin. However, strong leasing activity in Polaris and Worthington helped offset some of these losses. Newer developments, including Arlington Gateway, 330 Rush Alley at the Peninsula, and 6620 Mooney Street at Bridge Park, have all benefited from strong occupancy rates ranging from mid-80% to high 90%.
Vacancy & Market Rents
The Columbus office market experienced a slight drop in rental rates to $21.93 alongside a minor uptick in vacancy to 19.02%, reflecting ongoing transition as companies reassess their office space needs. Despite these short-term fluctuations, the market is poised for a turnaround, driven by the wave of return-to-office initiatives from both the public and private sectors. As demand increases, landlords are expected to invest in upgrades to make their buildings more attractive, incorporating modern amenities, flexible workspaces, and enhanced on-site services to appeal to companies bringing employees back in more significant numbers. This shift will likely stabilize vacancy rates and put upward pressure on rents as competition for high-quality office spaces intensifies.
Sales Activity
Capital is returning to the Columbus office market, with Q1 2025 marking the strongest sales quarter in two years. Private investors continue to drive activity, targeting Class A properties with modern amenities. There is growing investor interest in well-located Class B and B- assets, as buyers look to reposition properties at a discount. The overall sales market remains cautious, with buyers seeking value opportunities and sellers adjusting expectations to align with current market dynamics. Sales volume reached $104 million due to the sale of several prominent buildings in the downtown area, including 2 Miranova, Gravity II, and Huntington Plaza at 37 W. Broad St. 37 W Broad St was purchased by Downtown Columbus, Inc., and will be renovated to accommodate 350 Department of Public Utilities employees, signaling renewed confidence in the downtown office market.
Check out the full Q1 2025 Office Trends report here!