Columbus Retail Investment Forecast
Columbus Metro Area, 2018 Outlook
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Steady Economic Growth Attracts Innovative Retailers to Columbus
Creative food and shopping concepts keep vacancy low. The large student population and healthy economic growth have turned the metro into a testing ground for many retailers. New restaurant concepts, like Chipotle’s hamburger chain, and fashion brands are being brought to the market, and if successful, will be launched nationwide. As consumers turn to experience-oriented shopping, Columbus’ retail vacancy has benefited from the testing of these concepts, many of which fill empty spaces left by department store closures. In addition to national brands testing new ideas, local mom-and-pop shops and eateries are absorbing smaller available spaces. Healthy demand, aided by these new retailers, outstrips supply additions in 2018, holding vacancy below the national average for a fifth consecutive year. Limited completions will reinforce a moderate increase in the average asking rent as the limited availability of quality space allows owners to market higher rental rates.
Pool of multi-tenant buyers grows amid limited net-lease listings. First-year returns roughly 100 basis points higher than gateway markets attract a deep pool of investors to Columbus retail properties. Buyers are particularly attracted to assets in northern inner-ring suburbs and higher-density areas near Interstate 270 where vacancy remains below 3 and above-average rent growth persists. Here, first-year returns in the high-6 to low-7 percent range can be found compared with metrowide cap rates in the mid-7 percent span. Quick-service establishments and casual dining restaurants garner significant attention though a dwindling pool of listings have pushed up property values considerably. Overall, a lack of single-tenant listings has inspired some investors to widen acquisition criteria to include multi-tenant assets. Stable neighborhood and community centers with national or regionally known tenants can trade with cap rates in the mid-7 percent area.