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Published: Wednesday, 8/28/2013 - Updated: 2 years ago

Local office space gets tighter, report says

Vacancy rate falls; downtown lags

The largest local lease transaction of the first half of 2013 was Libbey Inc.’s renewal on 52,000 square feet in Edison Plaza, 300 Madison Ave. It includes the break room at left. The largest local lease transaction of the first half of 2013 was Libbey Inc.’s renewal on 52,000 square feet in Edison Plaza, 300 Madison Ave. It includes the break room at left.
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At the year’s midpoint, the vacancy rate for the Toledo-area office market had decreased from the end of last year, according to data from a local commercial real estate firm.

In its MarketView report for mid-2013, the Reichle Klein Group said that, as of the end of June, office vacancies were at 15.8 percent, down from 16.1 percent at the end of December.

However, a great disparity remained between vacancies in downtown Toledo and the suburbs. The suburban vacancy rate stood at 11.5 percent, while the central business district rate was 23.2 percent, Reichle Klein said.

Further, the suburban markets rented an additional 64,500 square feet in the first half of the year while in the downtown, an added 63,091 square feet became vacant.

“What it all means is that in the suburbs, generally, space is tight, especially among Class A buildings. User perceptions of the conditions are lagging the reality of the market, and most are at least a bit surprised upon entering the marketplace to find they have far less leverage than they expect to find,” the report stated.

The top leasing transactions in the first six months were Libbey Inc., retaining 52,000 square feet of space in Edison Plaza at 300 Madison Ave., and Paramount Health Care, taking 21,000 square feet in Arrowhead Park in Maumee.

Reichle Klein said the average asking lease rate per square foot at midyear was $15.20, up four cents from $15.16 at the end of 2012.

The firm said that rents are increasing as landlords are providing fewer incentives — improvement dollars or free rent — to get tenants to sign. Also, some landlords are beginning to raise rents on existing tenants, the report said.

The report noted that the high number of buildings for sale throughout the recent recession has dropped significantly. 

Most of the buildings that had been for sale have cleared the market, which could mean that prices for available buildings could rise moving forward.

Overall, according to the report, leasing activity is building positive momentum as new users in the market are taking space and existing users are growing and requiring additional space.

Even in the central business district there were signs of improvements despite the high vacancy rate, Reichle Klein said. Downtown buildings “are beginning to get second looks or looks they have not received in generations. In part, this trend stems from changing perceptions about downtown and [because] tenants can’t find acceptable options in the suburbs,” the report stated.

The one market segment that is not prosperous is Class C office space throughout the Toledo area. Reichle Klein said that many office space users have taken advantage of the tougher market conditions over the last several years to upgrade by relocating to better buildings. Also, the demand for high-quality space has meant that Class C properties are being left behind.

As a result, Reichle Klein said it would not be surprising to see vacancy rates increase for Class C buildings in the near to midterm.

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.

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