Susan Branscome, senior vice president/managing director of the Cincinnati office of NorthMarq, knows the ins and outs of the Cincinnati commercial real estate market. Because of this, Midwest Real Estate News asked her three key questions about the strength of the Cincinnati CRE market and the health of its commercial sectors.
Here is what Susan had to say:
This is a big, broad question, but how busy is the Cincinnati commercial real estate market today? Are you seeing a lot of activity when compared to last year or five years ago? And if the market is busy – or even if it’s just solidly steady – what do you think are some of the reasons for the strong activity?
Susan Branscome: The job growth has been strong in the Cincinnati market plus there is a strong focus on more growth and keeping jobs. With the investment by Amazon near the airport, there has been a tremendous amount of industrial development. Industrial is starting to become the “new retail” with online purchases growing. One of the challenges is that the employment market is so tight, with nearly full employment, that it’s been hard for companies to find good people.
The market is definitely more active than five years ago in terms of growth. As far as sales, there is a disconnect between the returns required and prices most investors are willing to pay and the prices being paid by out of town buyers with different return expectations.
When looking at the main commercial sectors, which ones are performing especially well in the Cincinnati area today? Which ones are struggling?
Branscome: The fundamentals in all CRE sectors are very good. Demand, supply and vacancies are strong in all sectors with development being controlled by judicious development decisions and more conservative financing, with lenders requiring more equity in projects.
The exception is Class-B office downtown, which has a higher vacancy. Some of these buildings are being transitioned to multi-family to meet the growing housing demand downtown. The delivery of many new Class-A apartments may increase the vacancy and concessions as absorption may not keep up with the new supply.
A lot of the cities we cover are seeing a boom in their down-towns, from retailers setting up shop to new apartments rising and companies opening or filling office space in the center of town. Are you seeing this in downtown Cincinnati, too? And if so, what do you think is fueling the downtown activity?
Branscome: The growth of the Over-The-Rhine market has been extraordinary. The amount of investment by the public and private has spurred a tremendous amount of housing and retail in this market north of downtown Cincinnati. The downtown center has grown, too, especially when it comes to multifamily development and the re-development of older office buildings.
Retail has struggled a bit with the closings of Macy’s and Tiffany’s, yet this is a national trend, too, and represents the lifecycle of commercial real estate. The highest and best use can change over time.