Though leasing activity for office space in the Toledo area remained sporadic in 2013, vacancy rates continued trending downward, hitting the lowest level since mid-2006, according to a report from a Toledo commercial real estate firm.
In its year-end report, the Reichle Klein Group said the area’s total vacancy rate for office space was 15.4 percent in December, down from 16.1 percent in December, 2012.
Though the improvement was small, Mike Poulos, principal and senior vice president with the firm, said the market continues to move in the right direction.
“Everything’s getting a little better,” he said in an interview Thursday. “It’s Toledo, Ohio, and this is the way our real estate market moves. Things trickle down slowly and trickle back up slowly.”
The strongest demand continues to be for space in higher-quality buildings. And while vacancy rates remain lowest in Toledo’s southern and western suburbs, Mr. Poulos said there was considerable improvement in the central business cistrict in 2013.
Overall vacancy in the CBD, which includes downtown Toledo, was 21.3 percent at the end of the year. Reichle Klein does not include downtown buildings such as the Fiberglas Tower or the recently vacant Spitzer Building as part of the inventory because they are not able to be immediately occupied.
The CBD rate was down from 23.2 percent midyear, and flat from the end of 2012.
But the company says it sees improvement.
“We see existing businesses expanding. We’re seeing some very small new businesses coming into the downtown,” Mr. Poulos said. “A lot of this is just pent-up demand. People have waited and waited to move forward until they are convinced the economy is in an upswing.”
The lowest vacancy rate to close out 2013 was in the Perrysburg/Northwood market, which sat at 9.7 percent. The second lowest was the West Toledo/Sylvania market, at 11.7 percent.
The highest vacancy rate was in Toledo’s north/east region, where 36.1 of office space sat vacant. Still, that improved significantly from 2012, when the vacancy rate was 42.1 percent.
Reichle Klein said the average rental asking rate for the entire market was $15.04 a square foot. That’s lower than it was midyear, though Mr. Poulos said that’s more a function of how the availability is balanced.
Because more top-end space has been rented, a larger percentage of available space is in Class B or Class C buildings.
Reichle Klein’s report said rents at the top of the market have increased across most submarkets.
Still, the price isn’t high enough to justify new construction for office space.
In the downtown market, Mr. Poulos said some tenants are specifically looking to be there, while others are finding a fit because of low rates and larger blocks of open space.
“What’s of concern is we’re absorbing this space downtown, and parking is becoming somewhat limited,” he said.
Mr. Poulos said parking could accommodate someone coming in with 250 to 300 new jobs downtown, but anything more than that would be reaching a tipping point.
“We’re going to be in a world of hurt if we have somebody who wants to be here, and we have to scramble to find them parking, somehow, some way,” he said.
Finding a large space in the suburbs has become very difficult, he said.
The year’s top transaction was an $8 million sale of nearly 130,000 square feet on Indian Wood Circle in Maumee by Arrowhead Toledo Realty LP.
Two of the other top six transactions for the year were also in Arrowhead Park.
Contact Tyrel Linkhorn at firstname.lastname@example.org or 419-724-6134.