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Office Sector

Changes in how firms are using office space as a result of the pandemic is  resulting in a structural shift in the office sector. While jobs are recovering, office demand continues to fall flat. Net absorption in Akron sits in negative territory over the trailing 12-month period. Limited deliveries in the market have helped cap the rise in vacancy, however, which sits at just 7.1%, well below the national benchmark of 13.2%.

Annual leasing volume remained tepid in Akron last year and just under 265,000 SF of space was leased, less than half of the annual average in the three years leading up to the pandemic. Renewals represented several of the top leases signed over the past year. Law firm Lewis Brisbois renewed its lease for 14,000 SF at GOJO Plaza on a seven-year term. The top leased signed year to date sits well above the average lease size signed in recent quarters. Driverge Vehicle Innovations expanded by adding a new headquarters in Akron. The firm leased 150,000 SF at Chapel Hill Business Park.

Office space in Akron rents for less than half the national average and sit slightly below neighboring Cleveland, at just $16.00/SF. Similar to national trends, rent growth in Akron accelerated over the past year and is holding steady at 1.8%, slightly ahead of the national average.

Sales volume in Akron held steady in recent years and totals $70.7 million over the trailing 12-month period. However, volume will likely moderate over the coming months as interest rates remain elevated.

Industrial Sector

Akron is the largest of Ohio’s secondary industrial markets, with 117 million SF of space and total asset value of $6.5 billion. Consistent with the Cleveland industrial market, the proportion of logistics and flex space sits below the U.S. average, while manufacturing is well above.

Akron’s industrial market is on solid footing moving into 2023. While demand has not reached record levels as seen in other distribution-heavy markets in the region, annual net absorption is still strong and totals 2.1 million SF, or 62% above the prior five-year average. One of the largest move-ins recorded in the last year came from DSV Global Transport and Logistics. The firm leased nearly 370,000 SF in Streetsboro and took occupancy of 9780 Mopar Dr. in 22Q3. Also in 22Q3, LaserShip occupied 107,000-SF at 120 Cole Avenue Extension. The property delivered in 2020.

Over 4 million SF of industrial space has delivered since 2015, with logistics representing the overwhelming majority. Around 70% of this new space is  located in the Twinsburg/Aurora submarket. The development pipeline is accelerating with 1.6 million SF, or 1.3% of existing inventory, are under construction. The largest project underway is Turnpike Commerce Center in Portage County. The project is slated to add more than 1 million SF of distribution space to the market in mid-2023.

Similar to the national trend, industrial rent growth in Akron is decelerating and annual growth averages 6.4%, still near an all-time high for the market. Manufacturing space is supporting rent growth in Akron, with gains of 5.7%, reflecting tight vacancies and strong demand for modern manufacturing space.

Investment volume is healthy in Akron with $144 million trading hands over the trailing 12-month period. However, pressure from high interest rates is weighing on activity and just $10 million traded hands in 22Q4, which is among the lowest quarterly totals in recent years.

Retail Sector

Retail demand is healthy in Akron and net absorption totals 78,000 SF over the trailing 12-month period, 63% above the prior five-year average. Leasing activity remains on solid footing and totals around 450,000 SF over the past year, slightly below the annual average in the three years leading up to the pandemic.

Similar to national trends, discount retailers are driving leasing activity in the market. One of the largest leases signed over the past year comes from HomeGoods which occupied 23,500 SF at Stow Community Center in 22Q3. Home improvement retailers are also active, with a 15,200-SF leased signed by Future Floors in Chapel Hill. The retailer took occupancy of the space in 22Q2. Also in 22Q2, Ace Hardware leased 11,000 SF at Barrington Town Center in Aurora.

Unlike broader sector trends, rent growth in Akron accelerated swiftly over the past year and hit a peak in mid-2022 of 8.3%. This rate of growth is well above typical levels for the market and a swift  deceleration is expected over the coming quarters. Rent growth falls back to typical levels by mid-2023.

Akron is a fairly active transaction market and sales volume over the past year totals $101 million, slightly below the five-year average. While sales volume quarter to date has accelerated, investor activity could moderate in the months ahead as high interest rates widen the gap between buyer and seller expectations on property values.