With a GDP of $532 million a year, Ohio has one of the largest economies in the United States. This Midwestern state is well known for its award-winning business environment and for making important strides in implementing and fostering a 'green economy', becoming a leader in terms of technology innovation, energy efficiency, research, and advocacy. The state also boasts exemplary growth levels and a business-friendly tax system that is particularly attractive to small businesses. More recently, below-average unemployment rates and improved transportation links have helped improve the state's reputation as a great place to do business.
During the past year Ohio has experienced significant job growth in industries that are some of the key occupiers of office space across the state, such as professional and business services and the public sector. Job gains have had a positive effect in the local commercial real estate market, especially in the state's three major cities, namely Columbus, Cleveland, and Cincinnati.
In the state's capital city, Columbus, vacancy rates continue their downward trend and are at a new record low since 2010, averaging 12.9 per cent for properties in the metro area. Higher absorption levels and rental value growth in this area are being mainly driven by the financial and insurance sectors, which have been behind some of the key transactions of the past 12 months. Average asking prices for offices in Columbus are $18 / sq ft / year. At the higher end of the scale, we find Class A properties in the CBD ($18.40) and in East Columbus ($19.71), whereas the lowest rents can be found in Northeast Columbus ($16.03). The CBD, Westerville, and New Albany sub-markets are experiencing substantial expansion, and they are expected to gain 600,000 square feet of space during 2015 thanks to the delivery of several new developments.
In Cleveland, office vacancy rates have followed a similar pattern, experiencing a sustained decline for the past three years and dropping to 11.5 per cent during the first quarter of 2015. This is an exceptionally active market characterized by a bullish outlook and by rising absorption levels. Direct asking rents have been increasing for five consecutive quarters and now average $16.70 / sq ft / year. Rents are at their highest in Chagrin, East, and Lander ($19.03), Rockside and South ($18.38), and the southeastern districts ($17.72). Rental values are below average in Midtown and Lorain County, where they stand at $13.63 and $12.68 respectively.
Positive absorption and a significant amount of speculative developments characterize the Cincinnati office market. Here, vacancy rates are down from 23.1 per cent to 20.8 per cent, and rents average $18.36 / sq ft / year. In the CBD, average rents can reach $25 (e.g. in Kenwood). Availability is particularly limited in Eastern Cincinnati, Blue Ash/Montgomery, and West Chester. Click here for office space in Cleveland, Cincinnati and Columbus
A 2015 Colliers International report shows that the retail market in Columbus is performing well. Growth is mostly driven by the hospitality sector and by businesses involved in the night-time economy. The increasing presence of high-end retailers has also contributed to the positive outlook of this market, although at 8 per cent, vacancy rates are slightly higher than in other markets.
The Cleveland market is becoming increasingly attractive to national and foreign investors and to tenants in the life sciences, pharmaceutical, and leisure industries. A similar situation is evident in the Cincinnati retail market, where leasing activity is driven by the pharma, medical, and distribution sectors, with substantial support from independent retailers and the hospitality sector. Retail vacancy rates are down in both cities and currently average 7.6 and 7.5 per cent respectively. Average rental rates for retail properties in Columbus are $11.41 / sq ft; $10.27 in Cleveland; and $11.76 in Cincinnati.
Tax Breaks and Incentives
In 2009, the Small Business & Entrepreneurship Council listed Ohio as having one of the top ten most business friendly tax structures in the United States. This achievement is the result of a series of tax breaks and incentives implemented at state and county level, including:
- The Conversion Facilities Tax Exemption, which offers commercial real estate tax exemptions to businesses engaged in energy-efficient practices
- The Ohio Enterprise Zone Program, available to businesses that create jobs and relocate into new properties
- Research & Development Tax Credits, which amounts to 7 per cent of R&D-related expenses
- The Technology Investment Tax Credit Program, which can reduce the amount of payable state taxes by up to 30 per cent
Further information on other incentives and business support programs can be obtained from the Ohio Development Services Agency.