There’s a lot of empty outdated office space in Dayton, particularly in downtown where the vacancy rate remains one of the highest in the country, according to a national real estate firm.
The downtown Dayton office vacancy rate — typically higher than the overall metro — was 26.8 percent as of September, which was higher than the downtown office vacancy of any other U.S. city measured by real estate firm Colliers International.
The overall office vacancy rate the Dayton region was 20.3 percent.
“That’s very high compared to most of the country right now, unfortunately,” Loren M. DeFilippo, Ohio Director of Research for Colliers International.
While the population of the Dayton metro has held steady, and companies have gotten more efficient with their office space, the amount of office real estate in the area has continued to climb.
The region has about 16 million square feet of office space, up 4 million square feet from 1995 and up 10 million square feet from 1980, according to reports by the city of Dayton with Miller-Valentine Group data.
Trends like jobs shifting from blue collar to white collar have helped absorb new office, but the Dayton region’s office vacancy rate remains high for the state and for comparative cities in the country.
The office market is more directly tied to the health of the jobs market and recovers more slowly than other real estate like industrial or retail.
Companies are also don’t need as much space as they did 10 years ago.
Trends like more employees working from home and office “hoteling” where employees don’t have an assigned specific desk have all let offices have a smaller footprint, said Dave Dickerson, Dayton market president of Miller-Valentine Group.
“We’ve seen companies trying to be more efficient. They’re trying to do more with less space,” he said.
When a company is looking for its next office, there might be exisiting office space physically available in the Dayton area, but the outdated buildings might have odd configurations, lots of columns or smaller floor plans that require companies to spread employees across multiple floors.
Companies like the ease of new space and in some cases its less expensive to build new then rehab what’s already here.
“There’s a lot of functionally obsolete stuff out there that doesn’t meet people’s needs,” DeFilippo said.
As the amount of office has expanded in the region, the suburbs have more quickly absorbed the space while downtown vacancies have grown. However, its easier to renovate surplus downtown office into other kinds of space like apartments, compared to suburban office which is more difficult to find other purposes for.
“Who wants to live in some suburban office park?” said DeFilippo.
It’s hit or miss whether landlords of Dayton buildings are willing and financially able to put in the money to rehab a building into a usable office space, and the price of construction for office renovations has been going up the last few years.
“We have a lot of landlords that are not frankly long term investors and they don’t see a return in putting that kind of money into buildings,” Dickerson said.
One strategy to help downtown Dayton is a new, multi-million-dollar fund that will help businesses and entrepreneurs improve office spaces to grow jobs and reuse struggling properties.
The new and expanded financial tools through the fund will help renovate office buildings, according to CityWide Development.
In downtown Dayton, the owners of the 111 Building signed a lease for Taylor Communications to take eight floors and the building was significantly renovated into a modern open office for the new tenant. The renovation was financed with the help of $1 million between the city of Dayton and Montgomery County.
Dickerson said it takes landlords willing to investment to attract tenants.
“Landlords are having to think outside of the box and come up with unique strategies,” he said.