Dayton, OH

 If you think downtown Dayton is feeling a bit emptier these days, you’re right.

A new study shows roughly a third of the 4.9 million square feet of office space in Dayton’s central business district is vacant.

 
Since 2004, the vacancy rate in downtown Dayton has climbed from 17.9 percent to 31.3 percent, a 75 percent increase, according to the Gem Real Estate Group Inc.’s 2008 Office Market Study.

Doug Harnish, president and principal of Dayton-based Gem Public Sector Services, expected the jump in vacancies and thinks the region will continue to see more of the same.

“Users are shedding headcount and office space,” Harnish said.

Experts cite a number of factors leading to the increasing vacancy rate in downtown Dayton. Aging buildings, too much space, not enough convenient parking, competition from the suburbs and a general decrease in demand all play a role in the emptying of Dayton’s core.

One of the sectors downsizing downtown space has been the finance industry, which has reduced staff and office needs in recent years. For example, KeyBank downsized by 40,000 square feet last year when it moved to the new KeyBank Tower.

Real estate brokers also said in general, companies are using less space per person. The trend is to use more open and efficient floorplans, with few individual offices.

But downtown Dayton isn’t the only area feeling pain from rising office vacancy rates.

The overall Dayton area office market saw vacancy rates increase from 18.2 percent in 2007 to 21.3 percent last year. The overall market consists of 338 buildings with a total of 14.9 million square feet, 3.2 million of which is vacant.

The downtown area, however, remains the most visible and has seen the biggest decline. Compared to major cities in Ohio, downtown Dayton has fared the worst.

Columbus and Cincinnati’s central business districts have vacancy rates about half of Dayton’s, 15.1 percent and 16 percent, respectively.

Tony Witt, vice president of the Dayton office of Colliers Turley Martin Tucker, said Dayton has been a victim of businesses consolidating and relocating out of the market. Reynolds and Reynolds Co. left about 120,000 square feet of space in Courthouse Crossing last year, consolidating its downtown office to its Kettering headquarters.

Too much space
Local real estate insiders report there is too much space in Dayton and some of it is too old to be filled as it is today.

Paul Hutchins, owner of Dayton-based Hutchins Commercial Realty Ltd., said filling downtown office space has been rough for many landlords, no matter how much they discount their rates.

Hutchins, who also owns a 60,000-square-foot office building on East Third Street, said he has cut his lease rates aggressively.

The solution, brokers said, is something landlords don’t want to hear: tear down the older, less desirable space for parking, green space or land banking.

But old properties aren’t the only problem in downtown Dayton. Downtown’s class A space has a vacancy rate of 32 percent, up from just 13 percent in 2004.

There is no exact definition between A, B and C office space. Generally, the newer a building is and the better mechanical systems and services it provides, the higher it is classified.

Mark Fornes, owner of Centerville-based Mark Fornes Realty, said there is a huge difference between A space and B/C space downtown. He said class A buildings can lower lease rates and capture tenants, but there are a number of buildings that are “virtually impossible to lease.”

About Colliers International

Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 10,092 employees span the world in 267 offices in 57 countries. On a worldwide basis, Colliers manages 672,945,918 square feet, and has revenue of $US 1,620,958,349.

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