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The American Financial Group is moving over 2,000 staff to the newest office space skyscraper in the central business district and analysts are expecting this switch to have a wide-ranging impact on local commercial property markets.
With office space vacancy rates in Cincinnati already at relatively high levels, the AFG move is expected to leave the owners of office buildings struggling to fill their floors.
But what might not be good news for owners of commercial office space in Cincinnati could offer occupiers a chance to get better quality office space for their dollars or to renegotiate a more favourable rent price on their current premises.
“It’s almost impossible to gauge where rates will settle,” Chuck Male from CB Richard Ellis told Cincinnati.com.
“There’s been an erosion of rates that started more than a year ago. I think that will continue for a while, but where they land is anybody’s guess.”
Discussing the large-scale move into new office space by AFG, Mr Male is quoted as saying: “It will drive effective rental rates lower in all building classes. A lot of B-Class building tenants will look hard to consider a step up to Class A buildings.”
Editor’s notes: In Q1 of 2023, total vacancy rates were at 21.4 per cent which was around 5 per cent higher than the national U.S. average.
However, this is a 0.7 per cent reduction quarter-on-quarter following high office leasing activity in the first quarter including 183,318 square feet of positive absorption in the suburbs such as Northern Kentucky and Kenwood.
This contributed to the total of 406,000 square feet of space transacted across the Greater Cincinnati office market in the first quarter of the year.
The average direct asking rent across all Cincinnati submarkets stood at $22.17 per square foot per year in the same period.