Written by: Simon Offstein, Research Intern
Downtown areas are essential for a city’s growth and prosperity. They serve as a central hub for employers, residents, culture, and tourism. They are the heart and soul of a city. Office buildings attract daily foot traffic, and amenities such as concerts, sporting events, restaurants, and bars at night keep the city bustling with life.
However, during the pandemic, quarantine mandates required employees to complete their work virtually and because of low office attendance and less need for office space, office buildings began selling for pennies on the dollar. In Columbus specifically, office buildings sold for as low as $15/SF. Less foot traffic in the downtown area affected the value of office buildings and heavily impacted the businesses surrounding them. Downtown areas across the United States were struggling.
Only a few years have passed since the pandemic, and the office sector is in the early stages of its recovery. Our Q3 2024 Office Report shows significant growth in leasing transaction volume and tenant demand, with quarterly net absorption coming closer to positive for the first time in two years. Despite these positive signs, demand downtown is still floundering.
In Columbus, class A office space in Easton and new developments such as Bridge Park in Dublin are experiencing the biggest influx of new tenants. Vacancy rates there have dropped by nearly 7% and 5%, sitting at 13.9% and 5.9%, respectively. Meanwhile, vacancy rates in the Central Business District (CBD) only dropped by a negligible .1% from Q2. It’s clear that businesses are choosing suburban office space with nearby lifestyle amenities over a struggling downtown area with antiquated office buildings.
What is Columbus doing to revitalize its downtown?
To attract more foot traffic, mixed-use renovation, beautification projects, and new multifamily construction have been some of the most popular solutions. Development firms such as Edwards Companies are investing hundreds of millions of dollars into the Columbus downtown area. Changes to zoning laws for the first time in 70 years allow for better space optimization. By softening parking requirements and permitting the construction of taller buildings, developers can finally use the often-vacant surface parking lots to build on. Also, recent return-to-office mandates from companies such as Nationwide and Huntington have created a positive sentiment among tenants and landlords regarding future downtown demand.
What steps can Columbus take to continue downtown development and attract future investments from larger corporations?
Speaking with Luke Tiberi and Maddie Mittler from ORG Consulting, they talked about an irreplaceable ecosystem as a major appeal for companies. Characteristics of this ecosystem include business-friendly governance, safer streets, lifestyle amenities, and access to talent. With a lower-than-average cost of living and access to young talent at The Ohio State University, Columbus is in a great position to create an attractive business environment.
Chris Potts, Senior Vice President at Colliers | Columbus, says that Columbus has the desire, but it’s not doing enough. He recommends the city take extra steps towards incentivizing return-to-office mandates for businesses downtown and set an example by having government employees return to the office. Doing so will bolster foot traffic and bring demand back, which is necessary for attracting amenities and more businesses. Additionally, many of the renovation projects taking place downtown have been funded by private companies, and the city could be more active in generating ideas and providing more grants and funding.
Safety is one of the most common concerns among real estate experts. If the goal is to convert downtown into more of a residential area, then citizens need to always feel safe on the street. Chris specifically talked about an expansion of the Special Improvement Districts as a possible solution, given their success in cleaning up the Discovery District located in East Downtown.
Our Take
Overall, Columbus is unquestionably on the right track, as it remains one of the fastest-growing metropolitan areas in the nation. However, one of the keys to sustaining future growth must be focusing on bringing employees back downtown. Recent studies have shown that Gen Z is the generation that most wants to be in the office. Steering this momentum towards the downtown area and away from the suburbs is vital for city development. And as the downtown customer base grows, amenities will follow, which will only attract more people. In addition to business-friendly governance, low cost of living, and access to recent grads from Ohio State, there’s a clear path towards forming an invaluable ecosystem that corporations want to invest in.
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