Real Estate Trends In Central Ohio 2014

Real Estate Trends in Central Ohio 2014
Urban Land Institute
1025 Thomas Jefferson Street, NW
Suite 500 West
Washington, DC 20007-5201
www.uli.org
ULI Columbus
1196 Hope Avenue
Columbus, OH 43212
http://columbus.uli.org
Cover Image Source: Daimler Group,
Kaufman Development and NBBJ
© 2013 Urban Land Institute
Real Estate Trends in Central Ohio 2014
TABLE OF CONTENTS
Background
Survey Respondent Characteristics General Business Prospects Real Estate Sectors Capital Markets Central Ohio Submarkets 1
1
2
3
9
11
How Does Central Ohio Compare? Public-Private Partnerships
13
16
A PUBLICATION FROM:
BACKGROUND
Real Estate Trends in Central Ohio takes a pulse of the region's real estate market, including capital markets, various sectors,
and area submarkets. This survey complements the national Urban Land Institute's Emerging Trends in Real Estate, adding an
in-depth local perspective to the national survey's insights on the U.S. economy and real estate markets.
In late September, ULI Columbus distributed a link to an online survey to its full e-mail list, from which 74 responses were
collected from September 23 to November 1. Additionally, 15 interviews were conducted throughout October with key local
experts from the private and public sectors across a range of professional developments, in particular real estate development,
management, finance, and planning.
The information presented in this report comprise quantitative data from the survey and quotes from the interviews as well as the
comment sections in the survey.
SURVEY RESPONDENT CHARACTERISTICS
Professional service firms represent the largest share of
survey respondents at 33 percent, followed by private
developers (20 percent) and government (12 percent).
More than a quarter (28 percent) of survey respondents
are at the director or manager level at their firms.
Generally, respondents range across different levels
from CEO to Associate.
Nearly half of the respondents are involved in the rental
housing sector (46 percent) and office (46 percent),
followed by retail (44 percent).
Respondents by field
University Other
1%
3%
Government
12%
Builder
4%
Private
Developer
20%
REIT
1%
Lender
11%
Professional
Service Firm
33%
Brokerage
10%
Property
Management
5%
Other responses: property owner association, trade association.
Respondents by sector (multiple selections allowed)
0%
20%
40%
Industrial
60%
30%
Office
46%
Retail
44%
Hospitality
Land
Institution/public
100%
Other
11%
President/CEO
12%
46%
20%
34%
23%
Owner
17%
Associate
13%
11%
Residential - rental
Residential - for sale
80%
Respondents by position
Director/Manager
28%
EVP/COO/CFO
3%
Vice President
16%
Other responses: administration of capital improvements, sales & leasing agent,
planner, partner, marketing, business development, attorney, senior designer.
1
GENERAL BUSINESS PROSPECTS
Expected profitability of own business in 2013 vs. 2014
Survey respondents expect their own business to do
slightly better in 2014 compared to 2013. Eighty-three
percent of survey respondents expect profitability to be
good or excellent in 2014, compared to 79 percent in
2013. These percentages are significantly higher than the
73 and 51 percent, respectively, from a year ago.
Excellent
Good
Abysmal
0
and achievable." Public-sector interviewees see more
activity on permits and approvals. However, there is still a
need "to be careful because the housing market is
fragile."
Business prospects for industry areas in Central Ohio
1.00
Poor
Fair
2.00
3.00
3.76
3.44
Financing as a lender
Commercial new
development
2.94
3.48
Multifamily new
development
Land development
Homebuilding
Real estate services
General construction
5.00
3.89
3.52
Real estate investment
4.22
4.25
3.46
3.00
3.00
3.53
4.00
3.52
3.81
3.35
10
20
30
40
Among real estate industries, multifamily new
development has the highest prospects in
Central Ohio for 2014. The average rating of
4.22 (between Good and Excellent) is similar to
last year.
Good Excellent
4.00
2013
Poor
After years of strengthening existing portfolios,
interviewees note better prospects across a broader
range of sectors. "The hope is back. Opportunity is visible
Abysmal
2014
Fair
2014
2013
Business prospects are higher across nearly all
industry areas. "There's strength everywhere.
Real construction activity is coming. In 2008, we
stopped dead in our tracks. We're finally getting
back to business."
Real estate services have the second highest
average rating at 4.00, 0.48 points higher than
last year. Commercial development and
homebuilding have the greatest gains at +0.54
points and +0.53 points, respectively.
Interviewees have mixed sentiments on the
pending comeback of single-family housing
versus its long-term outlook. "Strengthening in
traditional single-family may be the most
significant" among all sectors. However, "ten
years out, the relative number of buyers to
sellers gets less favorable. Baby boomers will
be selling in mass numbers." "The long-term
rate of homeownership will come down."
2
REAL ESTATE SECTORS
Industrial
Bulk/distribution space and general industrial
are now well in the recovery phase, whereas
last year they were predominantly considered
to have bottomed out. "Projects have
commenced in 2013 and the pipeline for
coming years looks positive." "If the economy
stays strong, we'll see industrial warehouse on
the manufacturing side."
Current stage of real estate cycle: INDUSTRIAL
25
20
15
10
5
0
Bulk/distribution
space
General industrial
Self-storage
Real estate cycle
Office
In commercial real estate, medical office is
shifting more toward the growth phase of the
real estate cycle. As the Affordable Care Act is
implemented, "the example we see from
Massachusetts is that it produces millions of
square feet in real estate need."
Downtown office is in the recovery phase, but
suburban office lags behind. "Companies are
cognizant of profitability. They are starting to
hire more but are mindful of keeping overhead
low." Build-to-suit opportunities will arise, but
speculative development may be done for the
long haul. "I don’t think we’ll ever do office
again unless it’s part of a downtown, mixeduse project."
Current stage of real estate cycle: OFFICE
25
20
15
10
5
0
CBD office
Suburban office
Medical office
Real estate cycle
The suburban office market, continuing to
shake out, is "the only asset class that’s not
trading very well, even at low prices." "It’s a
matter of stabilizing what we have, taking the
bottom properties off and improving the quality
level."
3
Current stage of real estate cycle: RETAIL
25
Retail
Regional malls
20
15
Power centers
10
5
Neighborhood/
community
shopping centers
Real estate cycle
0
Current stage of real estate cycle: HOSPITALITY
25
20
Full service hotels
15
10
5
0
Limited-service
hotels
Real estate cycle
Compared to last year's survey, neighborhood
and community shopping centers have made a
large shift toward to recovery. "Groceryanchored centers have done best, holding up
through the recession."
Assessments of regional malls and power
centers remain about the same as last year,
with most responses split between bottomed out
and recovery. "Online sales are still replacing
brick-and-mortar sales. Retail is not stable yet."
With relatively little mall development, portfolios
have "a chance to rotate our tenancy and pick
up more rent."
In response to e-commerce, part of the new
tenant mix is to "make shopping an experience,
with restaurants, movie theaters, residential,
office. More of a gathering place rather than
commodity shopping." Health and wellness may
become part of the experience, as "health
systems begin to think like retailers, locating
centers in high-income suburban markets."
"Big boxes are starting to come back in the
market - Target in Powell, Wal-Mart in
Westerville." But certain traditional anchors
such as Sears and JC Penney present
concerns.
Hospitality
Both full service and limited service hotels have
shifted from bottomed out to recovery. A handful
of survey responses place these sectors in the
growth phase.
4
Rental housing
Current stage of real estate cycle: RESIDENTAL - RENTAL
Rental housing is clearly in a growth phase, as it
was last year. "We are in a boom, with high
demand for apartment living in various parts of
the city."
25
However, more respondents than last year are
seeing the market peak and perhaps enter the
early phases of decline. "Multifamily development
continues to develop at a record breaking phase.
It will have to slow." Developers "who are getting
into apartments now could be late."
0
Any slowdown may be a minor speed bump from
a broader perspective. "You may see overbuilding
of multifamily rental in the short term, but in the
long term that’s where the sweet spot is." "The
growth of one-person households is changing
demand."
Multiple interviewees note senior housing as a
growth opportunity. "The market has not fully
addressed seniors who do not want to own a
home, who want flexibility."
Luxury apartments
20
15
Moderate
apartments
Tax credit
apartments
Student housing
10
5
Real estate cycle
Current stage of real estate cycle: RESIDENTIAL - FOR SALE
25
20
15
10
5
0
Single family lot
development
Single family
homebuilding
Townhome/
condo
construction
Real estate cycle
For-sale housing
Single-family housing has moved into the
recovery phase of the real estate cycle. Twothirds of respondents (67 percent) place singlefamily lot development in the recovery phase,
compared to 30 percent last year. For singlefamily homebuilding, the figures are 77 percent
and 39 percent, respectively.
Current stage of real estate cycle: LAND
25
15
Land for
development
10
Farm ground
20
5
0
Real estate cycle
Multifamily for-sale housing has not fully entered
recovery, but a number of interviewees noted the
beginnings of a shift from rental to condominiums,
especially product geared towards empty nesters.
Land
Reflecting the recovery of land-intensive sectors
such as new single-family housing and industrial,
land for development and farm ground have also
entered the recovery phase of the cycle.
Nevertheless, it may be "a better time to be a land
aggregator than a land developer."
5
Level of construction activity expected in 2014 for institutional/public real estate
Very low
Low
Fair
1.00
2.00
3.00
Education K-12
Moderate
4.00
2.92
Higher Education
State-funded development or
redevelopment projects
3.72
3.00
Locally-funded development or
redevelopment projects
3.26
High
5.00
Institutional/public
The expected level of activity for
institutional and public real estate is similar
to last year. Development for the public
sector looks "flat to negative, maybe some
projects in 2015-2016."
"Hospitals and the university have probably
been responsible for 80 percent of the
major construction projects in town in the
last decade. We’re going to have to see
businesses take more of that burden."
Will employers follow urban housing?
Preference for urban living, especially among
Millennials, has yielded housing growth in and near
downtowns across the U.S. One of the survey
questions focused on recent corporate location
decisions in favor of downtowns, where proximity to
young talent was a major factor.
Two-thirds of survey respondents feel that the
location decisions by firms such as UBS and Coca
Cola represent a real trend. While only 29 percent
believe that this has occurred in downtown Columbus,
63 percent think that it could occur within the next five
years, "once additional downtown housing options
become available." Perhaps smaller firms are already
following talent: "We recently leased 60,000 square
feet of office to various tenants, all coming from the
suburbs. They noted that their younger workforce
wants to live and work downtown."
The relatively short commutes in Columbus (74
percent of respondents) and downtown parking (67
percent) may inhibit a move downtown. However,
management preferences could be closer to the truth.
"Despite positive talk about our downtown, the
political and business leadership haven't chosen, nor
been challenged, to support this urban effort."
Central Ohio employers may not view an urban
location as imperative to attracting talent (73 percent),
and the fact that many senior executives do not
reside downtown may be a deterrent (82 percent).
With greater interest in urban living across the U.S., other cities are
seeing major employers follow their potential workforce and talent pool
to locate in downtown (e.g. UBS in New York, Coca Cola in Atlanta,
Amazon in Seattle, Zappos in Las Vegas). Please select whether you
agree or disagree with the following statements.:
Agree
Disagree
0%
25%
50%
75% 100%
Major employers have followed talent
downtown in Columbus.
This trend will happen in Columbus within
the next 5 years.
The above examples are exceptions to
the rule, not a real trend.
The traffic and commute here aren't bad
enough for suburban employers to locate
closer to talent.
Parking is an obstacle for employers to
consider locating downtown.
Real estate downtown is too expensive,
difficult to assemble, etc.
Employers don't view a central urban
location as imperative to attracting talent.
Employers prefer the controlled
environment of a suburban location.
Senior executives do not live downtown,
affecting location decisions in favor of
suburbs.
6
Capitalization rates
Cap rate trends in 2013 vs. 2014: INDUSTRIAL
2013
Capitalization rates for most sectors are
considered to have remained stable over the
past year, with average scores slightly below
or above 3.00 (remaining stable). Compared
to last year's survey, however, more sectors
lean toward falling cap rates: industrial, retail,
hospitality, rental housing.
Last year's survey had anticipated a modest
cap rate increase across sectors. Similar to
last year, stability is expected for the year
ahead but with the possibility of a modest
increase.
Industrial sectors have the highest gaps
between 2014 and 2013 scores. Bulk and
distribution space has an increase of 0.63
points. Self-storage and general industrial
have increases of 0.52 and 0.38,
respectively.
As anticipated in last year's survey, cap rates
for office sectors remained stable compared
to 2012. However, respondents see rate
growth resuming for 2014.
Fall
1.00
2014
Stable
2.00
Increase
3.00
4.00
Bulk/Distribution space
2.79
General industrial
2.84
Self-storage
2.81
5.00
3.42
3.22
3.33
Cap rate trends in 2013 vs. 2014: OFFICE
Fall
1.00
Stable
2.00
Increase
3.00
4.00
5.00
3.14
3.33
CBD office
Suburban office
2.95
3.17
Medical office
3.14
3.52
Cap rate trends in 2013 vs. 2014: RETAIL
Fall
1.00
Stable
2.00
3.00
Regional malls
2.75
2.95
Power centers
2.90
3.00
Neighborhood/community
shopping centers
2.70
2.96
Increase
4.00
5.00
Cap rate trends in 2013 vs. 2014: HOSPITALITY
Fall
1.00
Full service hotels
Limited-service hotels
Stable
2.00
3.00
Increase
4.00
5.00
2.69
2.92
2.86
3.00
7
Cap rate trends in 2013 vs. 2014: RESIDENTIAL - RENTAL
2013
2014
Fall
1.00
Stable
2.00
Increase
3.00
4.00
Luxury apartments
2.82
3.17
Moderate apartments
2.89
3.19
2.80
Tax credit apartments
2.70
Student housing
5.00
3.17
3.11
Cap rate trends in 2013 vs. 2014: RESIDENTIAL - FOR SALE
Fall
1.00
Stable
2.00
3.00
Increase
4.00
Single family lot development
3.39
3.53
Single family homebuilding
3.38
3.50
Townhome/condominium
construction
5.00
Survey respondents saw 2013 cap rate
increases in single-family housing and in land
development, more so than in other sectors,
with additional increases expected for 2014.
These figures contrast with last year's survey
results, where cap rates for single-family and
land were considered stable.
Relatively low cap rate growth is anticipated
for rental housing. But for both the current
year and the year ahead, rental housing cap
rate scores are lower in this year's survey
compared to last year's. "The cap rates are
now between 5 and 6. We recently sold a
project in Charlotte and the offers were at
sub-5."
2.81
2.87
Cap rate trends in 2013 vs. 2014: LAND
Fall
1.00
Stable
2.00
3.00
Increase
4.00
Land for development
3.30
3.45
Farm ground
3.37
3.42
5.00
8
CAPITAL MARKETS
Inflation and interest rates
Compared to last year, survey respondents and interviewees see somewhat higher odds of increases in inflation and interest
rates in 2014 and beyond. In the short term, "we see banks keeping rates down to remain competitive." "The spreads between
what people are borrowing at to acquire or build projects and interest rates are still healthy." A greater threat in the near future
may be ongoing federal budget battles: "Mistakes by the federal government could hurt business."
In the long term, "concern on where rates are going will drive a lot of investment now." For example, one interviewee noted that
they "are applying conservative leveraging and locking in rates for 10 years wherever we can."
Low rates may be concealing other issues in the development area, such as rising costs. "As we get more projects going on,
it’s more difficult to keep costs under control. Everyone I’m talking to is up 10, 15, 20 percent. It looks decent with 3-4 percent
interest. When you put in 8-9 percent, it changes dramatically."
Besides providing cheaper financing, low rates have also made real estate a more attractive investment option. "Everyone out
there is chasing yield right now, and real estate is one of the areas where you can get real return." "Interest rates and bond
rates are so low. Where else can you put your money to get a decent return?"
Expected change in inflation and interest rates in 2014 and beyond
Fall
Substantially
Fall
Moderately
Remain
Stable
Increase
Moderately
Increase
Substantially
1.00
2.00
3.00
4.00
5.00
Inflation in 2014
3.51
Inflation over the next five years
4.03
Short term interest rates in 2014
3.51
Short term interest rates over the next five years
4.08
Long term interest rates in 2014
3.68
Long term interest rates over the next five years
Underwriting standards
Underwriting standards for both real estate
development and acquisition are expected to stay
about the same or become somewhat less
stringent. Compared to last year though,
expectations lean toward more stringency. In last
year's survey, 28 percent saw underwriting
standards becoming less stringent for real estate
development, and 27 percent for real estate
acquisition. In this year's survey, the figures are 17
percent and 20 percent, respectively.
4.17
Expected change in underwriting standards in next 18 months
Much less stringent
Somewhat less stringent
for real estate
development
About the same
for real estate
acquisition
Somewhat more stringent
Much more stringent
0
10
20
30
40
50
Multifamily is of particular concern with regard to underwriting standards. "On the apartment side, things have gotten loose and
there is plenty of money. With a few banks, I'm seeing some silliness happen. Memories are short." At the same time, other
"bank lenders are looking at how heavily invested they are in rental housing." On the other hand, "the condo market’s got a
ways to go. It’s difficult to get buyers financed for condos. Underwriting standards for condos are more difficult than for single
family." In commercial sectors, "underwriting standards are still diligent," with "attention to other activity that the developer has
going on."
9
Capital availability
As they did last year, survey respondents again expect to see both equity and debt capital to be more available in the
upcoming year. Equity investors "feel they can dictate terms, and the return hurdles are high. While we’re saying 'the market’s
moving, you’re missing the boat.' We’re going to start seeing equity terms go in favor of the developers, because people are
having a hard time finding good opportunities."
Equity maintains an edge over debt in terms of availability. "There are REITs and other sources of capital that are anxious to
see further development." But the gap between equity and debt is closing, with "more competition to invest and finance
projects. We have a tremendous amount of interest from banks and insurance companies."
For most sources of debt capital, especially securitized lenders and insurance companies, availability is expected to increase in
2014 as much as it is for equity. "Institutional capital is readily available, but it’s a bit more expensive with more strings
attached." Meanwhile, debt capital from mezzanine lenders and government-sponsored sources continue to lag.
Expected change in equity capital availability in 2014
Large
decline
1.00
Some
decline
No
change
Some
increase
Large
increase
2.00
3.00
4.00
5.00
All sources
3.71
Public companies and REITs
3.68
Private companies
3.75
Expected change in debt capital availability in 2014
Large
decline
Some
decline
No
change
Some
increase
Large
increase
1.00
2.00
3.00
4.00
5.00
Commercial banks
3.63
Securitized lenders/CMBS
3.67
Insurance companies
3.69
Non-bank financial institutions
Government-sponsored sources
Mezzanine lenders
3.62
2.85
3.46
10
CENTRAL OHIO SUBMARKETS
Best prospects for 2014 and beyond
For the second year in a row, New
Albany has the best prospects in the
region for real estate activity in the year
ahead, with a rating of 4.39. Dublin,
Easton, Polaris, and downtown
Columbus also achieve good-toexcellent ratings.
Several interviewees highlighted the arc
of suburbs from northwest to northeast,
between "10 and 2" on the clock dial.
"Dublin has the Crawford Hoying project
and two other large mixed-use projects the transformational quality is equivalent
to Muirfield." In contrast to overall
sentiments on the sector, Dublin is
"starting to see more office interest."
Prospects for Central Ohio Submarkets in 2014 (vs. last year's prospects for 2013)
Abysmal
1.00
Poor
Fair
2.00
Good
Excellent
4.00
5.00
3.00
New Albany
Dublin
3.94
Polaris
3.79
3.64
3.70
Columbus -North
3.73
3.22
Hilliard
3.40
3.67
3.61
3.46
3.57
North Delaware
3.51
Westerville
3.48
3.55
3.52
Worthington
3.41
3.30
Grove City
3.17
3.15
2.98
2.97
Groveport/ Obetz
2.76
Licking
2.74
Fairfield
2.71
Columbus -West
2.70
2.85
2.82
2.74
2.72
Columbus -East
2.57
2.70
Reynoldsburg
2.51
2.61
Madison
Pickaway
Columbus -South
3.98
3.88
Powell
Union
4.20
3.94
UA/Grandview
"Easton is intriguing because you have a
strong developer with product that’s
really good, and everybody forgets
they’ve only built out half the office
space. They’re not going to sit still.
There’s a lot of potential."
4.23
4.04
Downtown Columbus
Gahanna/ Airport
4.28
3.85
Easton
Consensus is emerging that "downtown
is past the tipping point. All the initial
efforts will start to pay off and snowball."
"We’re getting to that point where
downtown is not just a niche. It’s going to
become a fully grown up neighborhood,
not just alternative living."
4.39
4.00
2.63
2.47
2.49
2.36
2.22
11
Prospects for Central Ohio Submarkets in 2014 (with change in score from 2013 prospects)
North Delaware
3.57 (+0.06)
Union
3.15 (+0.17)
Powell
3.88 (+0.18)
Dublin
4.28 (+0.43)
Worthington
3.52 (+0.11)
Westerville
3.55 (+0.07)
New Albany
4.39 (+0.39)
Cbus North
3.73 (+0.51)
Easton
4.23 (+0.29)
Gahanna/CMH
3.61 (+0.15)
UA/Grandview
3.98 (+0.34)
Hilliard
3.67 (+0.27)
Licking
2.85 (+0.11)
Polaris
4.20 (+0.41)
Cbus West
2.74 (+0..04)
Downtown
4.04 (+0.10)
Cbus East
2.72 (+0.15)
Reynoldsburg
2.70 (+0.19)
Cbus South
2.36 (+0.14)
Madison
2.61 (-0.02)
Grove City
3.30 (+0.13)
Groveport/Obetz
2.97 (+0.21)
Fairfield
2.82 (+0.11)
Pickaway
2.47 (-0.02)
Prospects elsewhere in Central Ohio
The north side of Columbus is the biggest gainer over last year with a 0.51 point gain in prospect ratings, reflecting the potential
of infill development. "Being inside 270 and going to these suburbs that are landlocked, that’s where real opportunities are going
to be made." "Suburbs are trying to adapt to what they see as an emerging urban form of development." "The most
economically viable multifamily projects will be those located in the urban core or older subdivisions with good school districts."
"The level of interest in denser, mixed-use development has grown dramatically, stuff that people five years ago wouldn’t
propose in most places in Central Ohio."
The success of downtown and surrounding neighborhoods such as the Short North and German Village will push out the
development frontier. In the Short North, "pricing on the High Street corridor makes it hard for certain types of projects. Things
are starting to move to Summit and 4th streets. When Wagenbrenner’s project [in Italian Village] comes online, that will be
powerful." "Folks have already jumped on the prime sites. For more pioneering folks, it may be Weinland Park." Or perhaps
Franklinton, where "someone has to have the courage or the foolishness to take the plunge." With rental housing for instance,
"instead of the $1.60-1.70 [per square foot per month] rents up in Columbus Commons, it may be closer to $1.15-1.20" for
newly emerging areas like Franklinton.
12
HOW DOES CENTRAL OHIO COMPARE?
Industry areas
Survey respondents on average feel that Central Ohio is doing as well as, if not better than, most other markets. Real estate
services rates the highest (3.75), followed by multifamily new development (3.69) and homebuilding (3.58). Real estate services,
commercial new development, homebuilding, and land development have higher scores this year than they did last year.
Multifamily new development and lender financing have lower scores.
Respondents who are active in markets outside Ohio are more critical than those active only in the state or in Central Ohio.
Residential-focused sectors - homebuilding, land, and multifamily - have the largest perception gaps between the two
respondent groups, at 0.82, 0.54, and 0.52 points, respectively.
Compared to Sunbelt markets,
"Columbus has always been a
moderate-growth city. Most of our
growth is organic. The Phoenix
market has more growth from the
outside." "New development is in
markets with better tax
structures, growth, climate."
Central Ohio compared to other U.S. markets by industry area
Much
worse
1.00
Somewhat
worse
2.00
About the Somewhat
same
better
3.00
4.00
Much
better
5.00
3.51
3.63
Real estate investment
Financing as a lender
3.40
3.56
Commercial new development
3.50
3.23
Real estate services
3.75
3.48
General construction
3.58
3.50
Other opinions are more positive.
"Any time we have an investor
come in this market and start
understanding it, they’re
pleasantly surprised." "Markets
such as Texas and Florida are
recovering much quicker, but we
are doing well."
About the
same
Somewhat
better
Ultimately, rather than "being
good enough," Columbus will
"need to be able to compete on a
world stage and not just an Ohio
stage."
3.00
4.00
2014
3.69
3.95
Multi-family new development
2013
3.43
3.24
Land development
3.59
3.33
Homebuilding
Central Ohio compared to other U.S. markets by industry area
(respondents active in markets outside Ohio vs. not active)
Much
worse
1.00
Real estate investment
Financing as a lender
Somewhat
worse
2.00
3.17
3.65
3.38
3.64
Multi-family new development
3.43
Land development
3.17
Homebuilding
3.18
General construction
5.00
3.36
3.68
Commercial new development
Real estate services
Much
better
Active in markets
outside Ohio
3.95
Not active
3.71
4.00
3.65
3.85
3.43
3.75
13
Sectors
Central Ohio is seen as a relatively good place to do business across real estate sectors. Rental housing leads the pack with an
average rating of 3.69, although this is down from the sector's 4.08 score last year. This reduced score relative to other U.S.
markets, with the sector entering the peak phase of the real estate cycle and seeing lower capitalization rates, indicates that
local opportunities for apartment development may not be as "easy" as it has been the past couple of years.
The gaps in scores between respondents who are active in markets outside Ohio versus those active only in the state or in
Central Ohio reveal a significant hometown bias. Respondents active in outside markets rate Central Ohio as slightly below
average for retail and office, in contrast with their counterparts who are active exclusively in state.
Central Ohio compared to other U.S. markets by sector
Much
worse
1.00
Somewhat
worse
2.00
Somewhat
better
About the
same
3.00
4.00
Much
better
5.00
3.52
3.23
Industrial
3.09
2.90
Office
3.32
3.29
2014
3.39
3.26
2013
Retail
Hospitality
3.69
Residential - rental
Residential - for sale
3.53
3.42
Land
3.56
3.43
Institution/public
3.58
3.55
4.08
Central Ohio compared to other U.S. markets by industry area
(respondents active in markets outside Ohio vs. not active)
Much
worse
Somewh
at worse
About the
same
Somewhat
better
Much
better
1.00
2.00
3.00
4.00
5.00
3.40
3.64
Industrial
Office
2.94
Retail
2.94
Hospitality
Residential - rental
Residential - for sale
Land
Institution/public
3.27
3.13
3.75
Active in markets
outside Ohio
3.69
Not active
3.47
3.15
3.94
3.82
3.40
3.68
3.31
3.91
14
Land use and development needs
More than half of the survey respondents (56 percent) believe that more economic growth is the greatest need for the region's
real estate development. "We need economic growth. Columbus has moderate growth, but that’s not enough." "The growth in
Central Ohio tends to be companies already here growing. One of the challenges is making it attractive to outsiders. You just
don’t have the relocations here that you do in other places."
Public transportation is also seen as a major need (30 percent of respondents). "We need more transit options to go with the
growth of businesses and residential units." In central Columbus, "some kind of circulator is needed to integrate from the
university to the county complex." Even on the matter of downtown parking, an interviewee responds that "we have a car
problem. How do we do with less of them? Parking is part of the solution, but the challenge is how to move people more
efficiently."
The issue of development regulations draws mixed
responses. Some are critical: "We need faster
permitting to facilitate risk takers meeting the emerging
markets." Others believe that Central Ohio is neither
more challenging nor easier compared to most other
markets. "Columbus is a good city to work in, with
relatively central decision-making." Downtown receives
kudos for their development policies: "Columbus is
doing an excellent job of promoting development in the
urban core. The downtown commission is the best
planning group we’ve worked with in the country."
On workforce, "construction trade hiring has been a
problem, but more at the beginning of the year than
now." "When you talk to general contractors, there’s a
shortage of good quality subs who are capitalized and
can stay in business. A lot of good subs that we’ve
worked with are no longer in business."
What is Central Ohio's biggest need for land use and development?
Greater
availability of Better
regulations
sites
5%
More 5%
construction/
trades
workforce
4%
Better public
transportation
30%
More economic
growth
56%
The long view
"I try to be in 2050. 2050 is like 1980 to today. It sounds like forever, but it’s the same timespan."
Several interviewees express concern for the region's long-term development. "How the next 400,000 Central Ohioans locate
themselves will have a lot of impact. The region will have to plan for the empty nesters, what one-person households want, what
a diverse population wants." The region needs "transformative infrastructure projects." "There are many different ways
something can be done – density, sustainable energy, water usage, transportation. You have to sit down and think carefully
about what kind of infrastructure development model is the most effective one for economic development."
In addition to regional development and infrastructure, interviewees highlight the issue of urban education. "A community is
going to suffer if it has an inadequate school system. We need to sort out the problem with Columbus City Schools. Without
good schools, you’re not going to get economic development."
Within the real estate industry, it will be interesting to see how these challenges are tackled with "the emergence of the next
generation of developers. You see the old guard kind of adapt, but then you see the newer developers and where things are
heading."
15
PUBLIC-PRIVATE PARTNERSHIPS
Nationwide Children's Hospital has had an active role in their surrounding neighborhood's revitalization. OCLC has been a key
part of Dublin's Bridge Street corridor planning. Columbus Commons and Scioto Mile included significant private investment.
This year's survey asked respondents how these cases might signify the evolving nature of public-private partnerships (PPPs).
The general consensus is that we are seeing more larger PPPs (84 percent) but that site-specific PPPs will remain more
prevalent (93 percent). "More than ever it’s an upfront planning exercise." "Governments are not built to make strategic
investments in real estate without having a private sector partner that has a profit motive and assumes appropriate risk. How do
you close the gap between the market, how far the developer can go, and potential, what the community wants? You can’t think
about development without thinking about public-private partnership."
In particular, the private sector is expected to take on greater roles in functions that have traditionally been under the public
sector (80 percent) and on a neighborhood- or district-wide scale (76 percent). "PPPs will expand in areas where it hasn’t been
done before." Fewer respondents foresee the public sector take on greater roles in functions that have traditionally been under
the private sector (49 percent). Nevertheless, the public sector will be heavily relied upon for "parking facilities, urban street
patterns, and other amenities" as well as for "financial input on projects to go forth and be maintained."
Perhaps looking further ahead in the future, 59 percent of respondents believe that the private sector will become more active in
other aspects of development such as business incubation, education, entertainment, and the provision of other non-traditional
services. A similar majority believe that the private-sector side of the equation will be more driven by the companies and
institutions tenanting the buildings rather than the developers who build them.
How will PPPs change in the future?
Agree
0%
Disagree
25%
50%
75%
100%
Larger scale PPPs will become a more common
practice.
Site- or project-specific PPPs will remain more prevalent.
Private sector's role will continue to increase in areas
that have traditionally been under public sector.
Public sector's role will continue to increase in areas that
have traditionally been under private sector.
Private sector will take on greater roles at a
neighborhood/district scale.
Private sector will take on greater roles in other aspects
of the neighborhood "ecosystem."
"Tenants" (companies, institutions) will have a more
prominent role than real estate developers in PPPs.
16
REAL ESTATE TRENDS IN CENTRAL OHIO TEAM
Jung Kim *
Columbus 2020
Allison Srail *
Cushman & Wakefield
Derek Ehlers *
American Structurepoint
Ryan Sullivan *
Advoca Capital
Peter Lohman *
RL Property Management
Tom Vetter *
Vorys, Sater, Seymour and
Pease LLP
Abigail Mack *
The Ohio State University
Rachel Headings *
Communications Chair
William Brennan
EVP and CFO
The Pizzuti Companies
John Royer *
President
Kohr Royer Griffith
Tom Caldwell
Executive Vice President of
Finance and Development
Continental Real Estate
Companies
Jim Schimmer *
Director
Franklin County Economic
Development and Planning
Jim Schrim *
President
Wills Creek Capital Management
Brian Ellis
President and COO
Nationwide Realty Investors
Yaromir Steiner *
Founder and CEO
Steiner + Associates
Terry Foegler *
Director of Strategic Initiatives/
Special Projects
City of Dublin
Steven R. Schoeny
Director
Department of Development,
City of Columbus
Brett Kaufman *
Owner
Kaufman Development
Bob White Jr.
President
Daimler
Chad Pinnell
Senior Vice President
Equity
Jonathan Barnes *
Governance Committee Chair
Courtney Clark *
Sponsorship Cochair
INTERVIEWEES
Marshall Loeb President and COO
Glimcher Realty Trust
Joseph Reidy *
Chair
Chuck Basich *
Treasurer
Adam Rich *
RL Property Management
Don Casto, III *
Principal
CASTO
MANAGEMENT COMMITTEE
Melanie Wollenberg *
Executive Vice President
Equity
* ULI MEMBER
Craig Kegg *
Chair for Mission Advancement
Jung Kim *
Programs Cochair
J. Jeffery McNealey *
Programs Cochair
Justin Metzler *
Membership Cochair
Kyle Rooney *
Sponsorship Cochair
Tim Skinner *
Young Leaders Group Chair
Brian Suiter *
Membership Cochair
ULI LEADERSHIP
Peter Rummel
Chairman
Patrick L. Phillips
Chief Executive Officer
ULI DISTRICT COUNCIL LEADERSHIP
David Mayhood
Chair
District Councils
Marilee Utter
Executive Vice President
District Councils
ULI COLUMBUS PROJECT STAFF
Alicia Gaston
District Council Coordinator
SPECIAL THANKS TO:
John Rensink, The Ohio State University, and Rob Vogt, Vogt Santer Inc., for their advisory roles in the initial project design. All
the online survey respondents and individual interviewees. Members of the ULI Columbus Young Leaders Group who conducted
the interviews.
Urban Land Institute
1025 Thomas Jefferson Street, NW
Suite 500 West
Washington, DC 20007-5201
www.uli.org
ULI Columbus
1196 Hope Avenue
Columbus, OH 43212
http://columbus.uli.org