Written by: Collin Fitzgerald
Collin specializes in research capabilities, providing support for the Colliers Columbus Office, Industrial and Retail groups. He is 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 Collin's take on market trends in the Columbus medical office sector.
Key Takeaways
Tightening supply is expected to drive vacancy rates lower and support steady rent growth through 2025.
Developers are increasingly focusing on suburban areas due to high construction costs for urban projects. Limited urban deliveries through 2027.
Columbus remained relatively liquid through 2024 and is spotlighted as a major expansion market for capital.
Regional Summary
The Columbus multifamily market has seen significant shifts throughout 2024, with vacancies tightening to 5.2% due to robust demand and a slowdown in new supply. Vacancy rates reached their peak at 5.9% at the beginning of 2024. Vacancy has continued to trend lower, driven by younger rents and mid-priced units, although an influx of new Class A properties has kept the segment elevated at 11.8% vacant. Rent growth remains steady at 3.37%, with Columbus ranking among the top 10 U.S. markets for rent increases. Persistent inflationary pressures on construction materials and high interest rates have slowed development activity, resulting in a 37% drop in deliveries in 2024 compared to the prior year. Strong economic fundamentals, including Columbus’ affordability, population growth, and investments in advanced manufacturing, continue to bolster the market.
In 2025, the Columbus multifamily sector is poised for further stabilization as deliveries continue to plummet and demand remains robust. Only 4,700 units are expected to be delivered in 2025 but could potentially exceed 13,000 units. However, the projected pipeline is expected to face significant constraints due to the macroeconomic environment. Developers are facing challenges of reigniting inflationary pressures of construction costs and a swath of suburban nimbyism, both of which will provide tailwinds to effective rent growth. Suburban multifamily projects have become the key focus for developers. Meanwhile, the urban core will experience a significant supply shortage by 2026. The market will contend with macroeconomic volatility and new policies from the new administration. However, Columbus remains a top expansion market for capital.
Under Construction
Columbus will grow by over one million residents by 2050, adding approximately 40,000 people annually. As of November 2024, the Columbus MSA has issued 11,833 private housing permits, with multifamily developments crucial in meeting the housing demand. While the multifamily development pipeline has remained resilient post-pandemic, it has faced challenges such as rising labor and material costs. Local developers dominate the market, and Columbus’ relatively affordable rental rates have tempered outside interest. Multifamily housing starts are down nearly 40% in 2023 and 2024, creating a pent-up pipeline with potential for over 13,000 starts in 2025.
Developers have shifted focus to construction efficiency and asset management while delaying most new projects in anticipation of two 25 basis point rate cuts in 2025. Despite improving interest rates, material costs remain high. For instance, lumber prices have risen from $372 per thousand board feet in 2019 to $550 in January 2025, with further inflationary risks looming. Global trade policies, demand spikes, and supply chain disruptions continue to influence costs. Suburban markets are the primary focus for new projects, but nimbyism has shifted projects to Columbus City limits bordering suburban neighborhoods where developers can benefit from the city-wide CRA and a more predictable entitlement process.
Check out the full Q4 2024 Multifamily Trends report here!
Comentários