Friday Morning Bites - Weighing In

Experts from Columbus’ largest real estate brokerages say the Columbus commercial real estate market is faring better than headlines may allude. In light of the recent news that two KeyBank Building anchor tenants have decided to terminate their leases - and with the persistence of challenges surrounding remote and hybrid work - some are wondering what the future holds, particularly for downtown. “I think there’s a misperception that the suburbs are doing way better than downtown,” said Matt Gregory, executive managing director at NAI Ohio Equities. Gregory added that during the pandemic the suburbs were stronger because they offered shorter commutes and direct access. “Flash forward, and we’re past all that,” he said. Gregory added that you need to look at the office market not by submarket, but on a building-to-building basis. “The buildings that are brand-new in every market are, in general, doing better than the ones that are a little older and a little tired,” Gregory said, “unless you have renovated them.”

KeyBank Tower is headed for receivership. The lender, Atlanta-based Ardent Cos., has filed a complaint against the owner of the tower, New York-based Zamir Equities, seeking repayment of its loan and the appointment of a receiver to manage the property and ultimately sell it. The court docket shows that the motion to appoint a receiver has been approved. Zamir purchased the building in 2022 for about $12 million. In a document filed with the Franklin County Common Pleas Court, Michelle Fowler, a managing director with Ardent, called the current state of the building “abysmal,” adding that Zamir Equities has mismanaged the property. She goes on to say that the lender only receives “sporadic and incomplete information from the borrower, who has demonstrated repeatedly, its disinterest in properly caring for the property.” The filings also show that Ardent has grounds to believe the loan balance likely exceeds the property’s value. Ardent originally made an $11.8 million loan to Zamir, which owes Ardent about $9.3 million.?

Last week, Kaufman’s Gravity 2.0 development was unexpectedly listed for sale. The announcement followed an earlier announcement that the developer was also selling its property adjacent to Gravity, the Idea Foundry and Gravity Experience Park. The developer cited “nationwide challenges” related to the office market, but declined to comment beyond the initial statement as to what prompted the sale of the properties. Local experts say the development’s listing isn’t necessarily a bad thing for the market. Scott Hrabcak of Hanna Commercial Real Estate said that with the flight to quality trend persisting, the new Class A office building may be attractive to not only companies leasing space but an owner-occupant. The market is picking up, with more users seeking a larger footprint in the market. That could make it an opportune time to list the property, he added, noting that this could be more of a play to expose themselves to other players.?

What Amazon does, many times, serves as a predictor of the market at-large. When Amazon ceased its acquisition of industrial warehouse space following the pandemic, it wasn’t long after that the industrial market softened. Now, Amazon appears to have begun to restart its expansion of industrial real estate holdings. The first quarter of this year brought the sixth consecutive three-month period of declining net absorption, with vacancy also continuing to rise nationally. However, Amazon leased about 15 million square feet of warehouse space nationally so far this year. Amazon’s active U.S. facilities are projected to grow by 43 million square feet this year, up from growth of less than 30 million square feet last year, say experts. Overall, experts believe the advanced manufacturing segment of the industrial market will lead the next cycle of growth for the sector with mega projects driving demand.?

The Franklin Park Conservatory and Botanical Gardens want to be a premier destination and have a plan to do so. The 129-year-old Conservatory is laying out its plans which call for 15 changes to the Columbus landmark. The master plan calls for a new entrance, a new visitor’s center building, new underground parking and a full renovation of the John F. Wolfe Palm House. The glass dome of the Palm House was built in 1895, and renovations to this space could include replacing the glass and floors, improving ventilation, and making the structure more accessible. Under the master plan, the entrance would move to the intersection of E. Broad Street and Woodland Avenue, which has a stoplight. The new master plan replaces a master plan adopted in 2000. “The thing we’re really lacking is world-class botanical gardens,” said CEO Bruce Harkey. “When we build these new gardens, people will be blown away,” he added.