Brighter signs are beginning to mount for downtown landlords with increased leasing activity along the Washington Street corridor and rental rates ticking slightly higher, real estate professionals say.
Independent appraisals of available commercial space and several real estate brokers who market downtown properties say there has been an increase in demand in the past six to nine months, although some vacancies remain.
“There has been a noticeable improvement, and I believe we’re seeing pent-up demand in the business sector,” said Mark A. Pratt, a commercial broker with Breeden Inc., whose own office sits at 700 Washington St.
“Leasing activity is still progressing slowly, but more people are feeling this economy is going to sustain itself,” he said.
Laura DeDomenic, a Realtor with F.C. Tucker/Scott Lynch Group, said buildings in good condition are leasing fairly quickly.
“I see a lot of positive momentum downtown,” said DeDomenic, who recently represented Jordy McTaggart’s Grill & Pub in leasing vacant space that fronts Washington Street in the Commons Building.
Pratt said the recent opening of Columbus Regional Hospital’s WellConnect Clinic at Third and Washington, as well as the prospect of McTaggart’s opening by mid-March after signing a lease with the city, are among recent positive developments.
“Activity breeds more activity,” Pratt said, adding that another deal likely will close soon on the sale of a two-story commercial building at 525 Washington St. That building has about 5,800 square feet of commercial space available split equally between two ground-floor suites.
There also are a pair of apartments on the second floor with federal tax credits potentially available for the reworking of that building.
Pratt said investors who plan to buy the building don’t have a finished plan of how to renovate and re-use it yet, but that will come later.
Recent evaluations of the downtown commercial market done during the city’s negotiations with Jordy McTaggart’s Grill & Pub show a slight uptick in rental rates downtown.
Rents in the downtown corridor have increased during the past three to five years because of the new infrastructure along Fourth Street, one appraisal by Appraisers Inc. of Columbus stated last summer.
The study compared lease rates of commercial space in the Washington Street corridor from First to 11th streets, and the extent to which landlords had to offer rent concessions to attract new tenants.
Leases signed for downtown properties in 2008 were more likely to have rental rates of $11 to $12 per square foot at best, with landlords required to offer generous concessions via several months’ free rent or a lump sum to build out the space as tenants wished.
More recent leases, such as those signed in August and September 2013 along Fourth Street between Jackson and Washington streets, were estimated to have effective rents of $17 to $19 per square foot, according to Appraisers Inc. and Valbridge Property Advisors of Indianapolis.
Both firms evaluated the downtown real estate scene for the Columbus Redevelopment Commission within the past eight months.
Rent concessions possible
DeDomenic said downtown landlords still might provide some rent concessions when tenants move in, but the extent of such benefits aren’t as generous as they once were.
Some deals signed four or five years ago offered anywhere from four to 12 months of free rent or generous lump-sum payments to help build out the space.
The bottom line is that “rents have increased in downtown Columbus as the area has become a more established destination,” Valbridge Property Advisors said in its market report last June.
The extent to which a landlord is willing to offer rent concessions can affect a smaller business’ choice of location.
A small-business owner might not have $50,000 to build out new space without the landlord agreeing to bear some of that cost, Pratt said.
Pratt said restaurants are among the best prospective tenants for downtown space at this point, and several recent deals have highlighted that trend.
For instance, at 423 Washington St., chef Gethin Thomas is in the final stages of renovating a vacant storefront into what will become an 80-seat restaurant scheduled to open by early spring. Thomas, a former executive chef at Cummins Inc., plans to open Henry Social Club at that location after completing a remodel based on designs by Indianapolis-based Level Interior Architecture.
Yats, a New Orleans-style quick dining restaurant, recently moved into a 1,724-square-foot space on fourth between Jackson and Washington streets, paying an estimated $19 per square foot in rent, Appraisers Inc. said. And Taku Japanese Steakhouse is moving into space at Fourth and Jackson for an effective rent of $17 per square foot, Valbridge said.
“The downtown Columbus area has experienced significant development in the past two years,” Valbridge’s report said.
“The Cummins office building added a total of 233,000 square feet of mixed-used space to the downtown market in 2012-13. And construction of The Cole Apartments was completed in 2013, which added 70,000 square feet of apartment and street-level retail space,” the study pointed out.
Pratt said perceived parking issues remain a concern downtown, and that could deter some small-business owners from giving the area a closer look compared to sites elsewhere in town.
In fact, parking is one of the major reasons the Hilliard Lyons investment firm is moving out of downtown for the first time since 1960.
“We’re moving our office to Tipton Park Plaza, hopefully at the end of April,” said Andrew B. Simms, branch manager of the Hilliard Lyons office at 436 Washington St. “We really do enjoy being downtown, but our business model requires changes to our physical space that were difficult to accomplish at our current location.
“On top of that was the parking issue. I’d say the biggest complaint from our clients has been the lack of convenient parking. Many times we hear comments like: ‘They’ve built three parking garages and I still have to hunt for a spot.’ Our older clients find it particularly frustrating, especially if they have mobility issues,” Simms said. “In addition, with the exception of those of us who lease parking in the Jackson Street garage, our employees generally have to walk several blocks ... to the office. Not pleasant if it’s minus 8 degrees outside.”
The investment firm has been on the corner of Washington and Fifth streets for 16 years, and it has had four separate offices on Washington Street covering the better part of six decades.
Simms said the new Hilliard Lyons location will have the major benefit of 14 parking spots near its front door as well as separate employee parking.