Q3 2024 Ohio Industrial Market Report

 

Ohio

Market Overview

Ohio’s industrial market is booming on both the supply and demand sides, driven by major global corporations expanding operations across the state. Located strategically between major East Coast metro areas, Midwest markets, and growing Sunbelt cities, Ohio is an appealing location for logistics and manufacturing companies. The state’s highly regarded academic institutions also provide a steady supply of skilled workers, making it even more attractive for firms to set up operations in the Buckeye State. These factors have contributed to Ohio’s rank as 4th in manufacturing product value and 3rd in manufacturing employment among U.S. states, despite being only 7th in population size.

 

Two major announcements in the manufacturing sector are likely to further boost demand and production in Ohio. Intel’s $20 billion facility in Licking County is progressing, though its opening date has been pushed past 2025. When completed, the factory will occupy 2.5 million square feet of industrial space. Meanwhile, Abbott is building a $536 million production facility in Bowling Green to meet the growing demand for baby formula. Both projects will drive industrial space demand, both directly and indirectly, with demand for additional distribution space expected to rise sharply as goods begin to flow from these new facilities.

 

Ohio By the Numbers

• Vacancy Rate: 4.4%
• Net Absorption in SF: 8.2M
• New Construction in SF: 19.1M
• Space Under Construction in SF: 12.5M
• Rent per SF: $6.56
• Annual Rent Growth: +6.2%
• Average Cap Rate: 10.0%
• Average Price per SF: $54
• Transaction Volume: $2.1B | Source: CoStar Group

 

Columbus

Market Overview

While manufacturing and logistics employment grew significantly in 2021 and 2022, industrial-related employment growth in Ohio has begun to cool, even showing slight declines. The Columbus metro remains aligned with national trends in unemployment rates and wage growth, which helps sustain consumer demand for goods in the area.

 

Two major corporation are set to boost Columbus’s employment outlook over the coming years. Intel’s new factories in New Albany are expected to create 3,000 direct jobs, while Honda’s $237 million investment will establish Ohio as its main production hub for North American operations. The construction of Intel and Honda facilities has driven construction employment to grow at the fastest pace of any sector in the city over the past year.

 

Rapid population growth is further increasing demand for last-mile delivery and logistics space in Columbus. The city’s population growth has accelerated to 1.2% annually, far exceeding the national average of 0.6%. More residents in Columbus means more online spending, creating a high pace of goods movement into and out of the city, supported by one of the nation’s most active cargo airports. This thriving commerce and trade environment fuels demand for industrial facilities of various sizes and types across the region.

 

Columbus By the Numbers

• Vacancy Rate: 7.7%
• Net Absorption in SF: 2.4M
• New Construction in SF: 9.6M
• Space Under Construction in SF: 6.0M
• Rent per SF: $8.17
• Annual Rent Growth: +7.3%
• Average Cap Rate: 7.8%
• Average Price per SF: $77
• Transaction Volume: $581M | Source: CoStar Group

 

Market Performance

Vacancy in Columbus has been rising due to a historic wave of new supply entering the market in 2023 and 2024. The overall metro figures are influenced significantly by manufacturing growth in Licking County, where developer activity has been especially high. Vacancy in Licking County currently stands at 9.2%, primarily due to a wave of support facilities anticipated to serve Intel’s future production. The outlook is promising, as the new Intel and Honda facilities are expected to attract supplementary businesses and industries that will quickly absorb surrounding space. This is especially likely given the slowdown in new industrial construction starts in the city, with only 1.6 million square feet of space breaking ground in the first three quarters of 2024— the lowest level in over a decade.

 

In other parts of the metro, performance trends are stronger, with areas in and just north of downtown showing near 1% vacancy rates. The metro’s densest industrial area, located around and just north of Rickenbacker International Airport, saw vacancy fall by 140 basis points to 5.6% between Q1 and Q3 of 2024. The Airport’s volume is expected to increase as the city’s manufacturing sector expands, particularly with the support of a recently expanded intermodal terminal adjacent to the airport.

 

Despite rising vacancies, rent growth has remained well above pre-pandemic levels throughout 2024, largely driven by the opening of facilities with modern technology and premium features. Although rental rates align with regional averages, Columbus continues to represent a cost-effective option for tenants seeking a central hub or expanded U.S. operations.

 

Following a sharp increase in pricing and transaction volumes immediately after the pandemic, Columbus has felt the impact of interest rate hikes and a national market slowdown more acutely. While transaction activity remained elevated in 2023, fewer deals have closed in 2024. Deal volume in each of the first three quarters of the year ranks among the three lowest for the metro since Q4 2018, with the area on track to record its smallest annual deal volume in over a decade in 2024.

 

To offset higher borrowing costs, the average cap rate in Columbus has risen substantially since 2022, even climbing 20 basis points above the pre-pandemic average. Much of this increase is due to strong rent growth, with per-square-foot pricing remaining 45% above 2019 levels, despite leveling off around $145 per square foot from 2022 through Q3 2024. With a pause in sales price growth and reduced buyer competition ahead of Intel and Honda’s operations becoming fully active, this may be an opportune time for investors to consider adding Columbus industrial assets to their portfolios.

 

Cleveland

Market Overview

Once a major industrial hub in the United States, Cleveland has seen industrial growth shift over the last few decades to central and southern Ohio. In the 20th century, over 25% of the city’s workforce was employed in steel manufacturing, but employment in this sector declined significantly with the rise of global supply chains. Steel manufacturing remains a presence in Cleveland, along with Sherwin-Williams, which employs over 10,000 workers in the metro. $374M These operations contribute stable demand for the city’s manufacturing spaces.

 

Cleveland’s workforce is still roughly 2% below pre-pandemic levels; however, the city has made strides in diversifying its economy. Expanding medical and financial sectors are expected to support future employment growth, providing residents with increased spending power. This trend bodes well for Cleveland’s distribution space, as e-commerce sales are likely to rise in tandem with high-income employment growth.

 

Cleveland By the Numbers

• Vacancy Rate: 3.5%
• Net Absorption in SF: 277,000
• New Construction in SF: 606,000
• Space Under Construction in SF: 2.0M
• Rent per SF: $6.64
• Annual Rent Growth: +7.3%
• Average Cap Rate: 10.8%
• Average Price per SF: $48
• Transaction Volume: $374M | Source: CoStar Group

 

Market Performance

Unlike other Ohio markets, developers in Cleveland did not significantly increase activity during 2021 and 2022, keeping annual completions in line with pre-pandemic levels. This cautious approach has helped maintain stable vacancy rates amid a slowdown in leasing activity during 2023 and the first half of 2024. Despite a downturn in new lease signings, rent growth has risen over the last two quarters, driven by strong competition for spaces with modern technology and features. This trend could accelerate if leasing activity picks up; with Q3 2024 leasing reaching its highest level since Q4 2022, Cleveland’s industrial market appears positioned for tight conditions and potential undersupply in 2025 and 2026.

 

The competition for modern, up-to-date industrial space is increasingly evident in submarket performance data, with the most active construction areas also recording the highest rents and strongest rent growth. The close-in southern suburbs, from the airport and Linndale to Brooklyn Heights, have performed exceptionally well, with vacancy rates around 2.5% and annual rent growth exceeding 5%. Meanwhile, Cleveland’s lower-cost submarkets show diverging trends: older inventory along Lake Erie in East Downtown has vacancy rates over 7%, while new developments in similarly priced Avon/Lorain are helping to keep vacancy below 4%.

 

Entry costs for investors in Cleveland remain among the lowest in major U.S. cities, attracting a diverse range of players. Per-square-foot pricing averages around $50 in Cleveland, with prices ranging from roughly $30 per square foot in East Downtown to nearly $70 per square foot in the high-performing southern suburbs. Low vacancy rates, strong rent growth, and relatively low entry costs have pushed average cap rates for industrial properties above 10% in 2024.

 

As with leasing velocity, deal flow in Q3 may signal a sustained uptick moving into next year. Although transaction activity has declined from its 2021 peak, it remains nearly double the 2019 level. Over $200 million transacted in Q2 and Q3 of this year, marking the strongest six-month stretch since interest rates began rising in 2022. The Lorain/Avon submarket has set new records, with over $40 million in transaction volume in the past 12 months, surpassing the previous submarket record by more than 15%. Deal flow has also been robust in Strongsville, where limited supply pressures and a sub-1.5% vacancy rate are supporting strong demand.

 

Cincinnati

Market Overview

As Ohio’s largest economy, Cincinnati benefits from a strategic position at the crossroads of the Northeast, Midwest, and South. Its proximity to a large share of the U.S. population, along with a shared airport with Louisville, makes Southwestern Ohio and Northern Kentucky a prime location for distributors. This is underscored by Amazon’s significant presence at Cincinnati/Northern Kentucky International Airport, where a major hub completed in 2021 is expected to eventually employ 15,000 people and substantially increase cargo volumes.

 

Cincinnati maintains strong manufacturing, logistics, and raw materials sectors, all of which drive high demand for industrial space. In aerospace manufacturing, GE and Honda are prominent players, while Procter & Gamble supports facilities $505M for consumer goods production, further boosting industrial demand in the region.

 

Cincinnati By the Numbers

• Vacancy Rate: 5.8%
• Net Absorption in SF: 887,000
• New Construction in SF: 6.1M
• Space Under Construction in SF: 1.3M
• Rent per SF: $7.68
• Annual Rent Growth: +8.1%
• Average Cap Rate: 8.8%
• Average Price per SF: $69
• Transaction Volume: $505M | Source: CoStar Group

 

Market Performance

Developers have been active in the Cincinnati metro, especially in the 500,000-square-foot segment. These large-scale properties leased quickly in 2021 and 2022, but since interest rates rose in 2023, tenants have been more cautious about committing to such sizable leases. This has created a bifurcated market, with new large-scale developments finalizing but staying more vacant than the metro average, while sub-500,000-square-foot hubs and smaller spaces are performing well in terms of both vacancy and rent growth. Fortunately for owners of big-box spaces, construction is expected to decline significantly in 2025 and 2026, with vacancy in larger facilities anticipated half by 2027.

 

While leasing velocity slowed slightly in Q3 2024, the quarter was marked by limited moveouts, making it the strongest period for net absorption so far this year. Eastern Cincinnati has seen strong demand for space recently, and with no major projects in the construction pipeline, the submarket is on track to maintain a sub-4% vacancy rate into 2025. The airport submarket remains the most active for developers, with over 600,000 square feet in the pipeline. Despite notable moveouts causing a temporary vacancy spike, rent growth across the metro’s submarkets often exceeds 7%, outpacing both statewide and national averages.

 

Cincinnati’s investment market has diversified significantly in recent years, with private investors, institutions, and REITs all acquiring assets at comparable levels over the past 12 months. This varied buyer pool enhances liquidity for investors but is also expected to increase competition for listings. This robust demand has helped to counteract the general slowdown in transaction activity caused by Federal Reserve rate hikes. Since Q1 2024, average sales pricing has risen by nearly 6.2% following an eight-quarter period during which the average price held around $65 per square foot. Cap rates are also showing the first signs of compression since Q1 2022.

 

Metro-wide deal volume in Cincinnati dropped by more than 60% annually. This is largely due to higher borrowing costs and stable property performance. With strong rent and occupancy figures in properties older than a year or two, owners have little incentive to list well-performing assets at reduced prices. At the same time, elevated interest rates are impacting buyers’ ability to meet the price levels seen in 2021 and 2022, despite the potential for strong returns. Given the robust future demand drivers for industrial space in Cincinnati and Ohio, deal flow is likely to return to prior levels once borrowing costs decrease and buyers regain confidence in meeting sellers’ expectations, enabling deals to close at more favorable terms for both parties.