Here’s how the Dayton-area commercial real estate market is faring, according to local experts
Activity in the commercial real estate market has continued in the Dayton area despite the Covid-19 pandemic, and while some industries are booming as others struggle, local experts say the region has shown it is resilient and poised for a strong recovery.
For a deeper dive into the local CRE market, the Dayton Business Journal convened a panel of experts that included Ed Blake, CEO of Culmen Real Estate Services; Ric Moody, managing broker and auctioneer for Coldwell Banker Commercial Heritage; and Scott Murphy, vice president of economic development for the Downtown Dayton Partnership.
These panelists touched on a variety of topics, including the current demand for CRE space, which sectors are seeing the most demand and which are challenged, how Dayton’s CRE sector fared during the pandemic, and an outlook for the future. Here’s what they had to say.
When assessing demand for CRE space, industry matters. While the hospitality, retail and restaurant industries aren’t seeing as much demand due to Covid-19, other areas are booming.
Moody said the industrial market is “exploding,” with companies snatching up space for warehousing, distribution, manufacturing and assembly like never before. Blake added he’s never seen this much demand for industrial space in the 20 years he’s been in real estate.
“A lot of that is related to e-commerce and just-in-time delivery, but we’re seeing it across other sectors as well,” Blake said. “Industrial is just blistering hot.”
Demand is extremely high for available industrial inventory, in part because there’s a shortage of building materials that is making the cost to build new very high.
“If you can find an existing building at half the price (of building new); those buildings are getting absorbed quickly,” Moody said.
As for Dayton’s logistics boom, Moody said there’s a reason the region is called the “Crossroads of America.” But he said the industrial market in town really took off about six years ago when some national experts toured the area and scored it extremely high for location and price.
“We have the least expensive commercial real estate prices in the country,” he said. “And some of the lowest wages for people.”
Moody said that combination is responsible for the birth of all the development around the Dayton Interantional Airport, including Chewy and Crocs.
“There’s tremendous growth because we’ve finally been discovered, after 100 years of discovering how to fly,” Moody said. “We are now seeing demand come in from Cincinnati and Columbus because of their cost.”
For example, in Dayton the land by the airport has cost around $35,000 per acre. In Cincinnati or Columbus that cost is $150,000 per acre.
In the office sector, Moody said he is confident in a rebound. He said currently Dayton’s office market is 25% vacant (where it was 20% vacant pre-Covid). In comparison, downtown San Francisco is 51% vacant (where it used to be 4% vacant).
“We will see more hybrid schedules (in offices),” Moody said. “Companies need to maintain productivity, and will need more space when people come back to the office.”
Blake said he continues to see office buildings lease up and companies looking for new office developments, but the work-from-home “phenomenon” that occurred because of the pandemic has also created uncertainty. This uncertainty has put many companies in a “wait and see” mode when it comes to lease negotiations and the amount of space they are looking to occupy.
“There’s still a lot to happen in the future and there’s some uncertainty, but I think for the most part we’ve been fortunate,” he said.
Hospitality, retail and restaurants
On the other side of the spectrum, hospitality continues to be hit hard by the pandemic. Blake said the industry is “really struggling,” as evidenced by delays in constructing new facilities such as the AC Hotel by Marriott in downtown Dayton.
Restaurants and retail, particularly mom and pop shops, also continue to struggle, but Blake hopes for “brighter days ahead” as pandemic-related restrictions are relaxed and the threat of Covid-19 is mitigated.
But Moody said he is starting to become encouraged by the rebound in these industries that is starting to take place.
“Retail is starting to come back,” he said. “The mom and pop shops especially are coming back into the marketplace, and that’s great for the region because they’re local.”
In downtown Dayton, Murphy said commercial demand has been “bouncing back and is rebounding still.”
Murphy said within the DDP’s site selection program, interest during quarter one of this year has been on par with a typical pre-Covid level. He’s reassured by that sentiment.
“Entrepreneurs start businesses in tough economic times,” Murphy said. “That’s a huge piece for us. We’ve had several first-floor grand openings during Covid. People are moving forward with their new ventures.”
In 2020, downtown Dayton welcomed 30 new businesses that opened or committed to opening downtown. He said that’s about typical.
“Active first floors are the lifeblood of downtown,” Murphy said. “Having active vibrant storefronts drives the connectivity and walkability.”
In the last decade in downtown Dayton, the number of first-floor storefronts has increased 34% — filling 150,000 square feet of previously vacant commercial space.
Blake added that he believes the urban renewal that was underway in downtown Dayton before the pandemic will continue, as evidenced by a bevy of new projects such as the Fire Blocks District, Dayton Arcade and others that have continued to gain momentum throughout the last year.
“These are momentous for Dayton, and give people the confidence and belief that it can be a viable economic market for developers in the downtown area,” he said. “I think better days are still ahead for downtown Dayton.”