Regional Spotlight: Columbus, Ohio
In Uncertain Times, the Columbus Market Holds Steady
Just a few short months ago, at the end of 2019, real estate investors talking about Columbus, Ohio, would likely have mentioned the city’s Top 20 ranking as a business-friendly environment, its highly educated workforce, a local government dedicated to public-private partnerships and development, and the many parks, bike paths, restaurants, museums and community gathering places found in “The Biggest Small Town in America.”
Today, thanks to the worldwide spread of COVID-19, Columbus is more likely to make headlines as the first city in Ohio to have a confirmed coronavirus-related death: that of a 76-year-old attorney who had recently traveled to California.
Despite the uncertainty and ongoing economic and financial volatility catalyzed by the coronavirus, Columbus remains one of the strongest housing markets in the country. That’s thanks to a sound geographic position, diverse economy and jobs market, and a real estate environment that encouraged investors to place their capital in projects that would not just cash flow, but also offer some degree of equity.
“The inventory in Columbus has been and continues to be very low. That has created a built-to-rent investing strategy in the area that has led to new construction coming into more areas of the market,” said Brandon Guzman, president and CEO of MFS Supply, a provider of preservation and renovation supplies with a major branch located in the area. “We are seeing more and higher-end rentals enter the market these days, which increases competition throughout the market.”
Guzman recommended being “cost-conscious with upgrades” when renovating existing properties for rent or resale because of the additional new-construction dimension in the single-family sector. However, the multifamily sector in Columbus is also booming both inside the city proper and in the suburbs.
“From a cost standpoint, there were a lot of banks willing to finance multifamily developments,
and that led to a lot of multifamily growth in areas that had previously been primary single-
family,” Guzman said.
Fortunately for those developers, there have been plenty of new Columbus residents moving into the area over the past decade. Those new residents have happily purchased and rented homes across the spectrum.
Bryan Blankenship, CEO and founder of Columbus-based Venture Real Estate Group, has worked in the area for more than a decade. His company specializes in a wide assortment of properties ranging from single-family turnkey rentals to multiunit properties to historic homes.
The COVID-19 crisis did not slow Venture Real Estate’s acquisitions pace. Midway through the “15 Days to Slow the Spread” initiative, Blankenship continued to conduct transactions in the Columbus area, albeit virtually instead of in person.
“We acquired a nice, large historic home with a $400,000 ARV that I’ll be passing on to a DIY buyer to do the rehab themselves and a small condo with a $140,000 ARV,” Blankenship said.
The company failed to make the closing deadline on a duplex it already owns, but Blankenship was not worried.
“The condo will be a 12-day rehab and then go back on the market. The historic home is super-hot and should list and sell immediately. When the duplex does close, it is pre-sold to a cash buyer still committed to keeping it as a rental,” he said.
Community Attracts and Retains Talent
Since 2010, Columbus has periodically made headlines for attracting large-scale, foreign investments to the area. Those investments have occasionally also spurred conspiracy theories and instigated bouts of hyperactive investing by investors hoping to “follow the money” to the next big boom.
At the height of the EB-5 visa program, Chinese investors poured capital into the Midwest, focusing on Columbus and Toledo, particularly. Those funds have ebbed since the program’s peak in 2014, but they left a lasting legacy of infrastructure, development and momentum that has continued to build, thanks to incoming capital from American investors, large corporations and even public funds.
“This is a community with amenities and attractions that both draw in and retain talented citizens,” said Harding Easley, an account executive with Yardi Matrix and managing director of The Harding Group, a consulting firm for real estate investors and small businesses.
“This community has everything: open parks, walkways, bike paths, restaurants, museums, an 18-hour mixed-use district that boasts 1,700 residential units and hundreds of thousands of office, retail and restaurant space, an incredibly pro-business and pro-investor environment offering state and city tax-credit incentive packages to help expand your operations, and an educated workforce stemming, in large part, from the five universities located in the Columbus area,” Easley said.
At the start of 2020, Columbus boasted a population of more than 892,000, and that population has been rising steadily since the 1830s. In fact, Columbus has not experienced negative growth rate, overall, since the U.S. Census started tracking its data in 1830.Its lowest per-decade growth rate on record is between 1850 and 1860, when the population rose only 0.37%. These days, the area’s population growth is hovering between 1.5 and 1.8% annually, mainly due to the presence of powerhouse employers in the aviation, banking and finance, national defense, medical research, technology and energy, and fashion sectors (see sidebar). Columbus is also home to five insurance companies, including Fortune 500 Nationwide insurance, as well as Safe Auto and State Auto.
Global Shocks and Aftershocks
Even before the coronavirus hit the U.S. in force, Columbus was dealing with issues related to U.S.-China tensions. Tariff and trade tensions had a clear impact on the area.
“We saw materials shortages cause a direct increase on plumbing, lighting and cabinets across the board,” Guzman said.
Chinese cabinets had been the leading factor in fix-and-flippers’ ability to make a house look beautiful on a budget.
Guzman noted that “prudent” investors had started finding ways to fix their costs, such as making spec lists of materials for their investments and, in particular, addressing changes in how cabinet materials are priced.
He said that in addition to the coronavirus, dumping lawsuits and tariffs will affect the availability of materials for five or six months after those manufacturers get back online.
Now that many areas of the country have enacted strict rules regarding how and when groups gather outside the home, the housing conversation is about far more than just the appeal of a set of cabinets. Most analysts agree, however, that housing is one of the most stable assets an investor can hold at this time. Real estate investors around the country will likely benefit from their property holdings in the coming months, particularly in areas of the country with the kind of economic diversity and stability that Columbus offers.
Lawrence Yun, chief economist for the National Association of Realtors (NAR), observed toward the end of the first quarter of 2020 that “housing wealth is still rising and will continue to be a comfort for the vast number of middle class familiar. We are not back to the 2008 scenario.”
Yun predicted that home prices and demand for housing would continue to rise throughout the crisis. However, investors should also note that areas of the country that are heavily reliant on the hospitality and travel industries to the exclusion of other economic sectors will likely experience far more severe downturns than those with more diversified and, by extension, insulated economies.
Withstanding 2020’s Strain
Because of the vast uncertainty associated with the U.S.’s ongoing battle with COVID-19, it is hard to make housing predictions on a national level. Fortunately for investors interested in the Columbus area, the city has a longstanding history of withstanding historic events in the market. The Midwest as a whole and Columbus, in particular, is showing once again that this area of the country will likely withstand the worst of these viral shocks. Highly favorable cost-of-living metrics and plenty of room for growth exist due largely to delayed market recoveries in the wake of the housing crash and the Great Recession.
Steve Gaenzler, Radian Group Inc. senior vice president of data and analytics, wrote March 19, 2020: “Perhaps one of the largest reasons for growth…is the relative affordability of Midwestern markets combined with solid employment numbers.”
Genzler cited Columbus as a prime example because of its strong jobs market and a broad base of financial and nonfinancial corporate employers.
He also noted: “Limited on-market supply has pushed up housing prices in recent years. However, the city’s low cost of living helps attract and keep residents.” As we move into the second half of 2020, Columbus will continue to attract residents and investors reassured by steady growth, a steady population and an economy that seems tailor-made to withstand most of the global shocks that have hit it in recent months. As Guzman put it, “The market is growing everywhere in Columbus, and we want to be here for it.”
Sidebar: Major Columbus Employers
- Ohio State University
- OhioHealth
- State of Ohio
- JPMorgan Chase & Co.
- Nationwide Insurance*
- Honda
- L Brands* (formerly known as The Limited, Inc., parent company of Victoria’s Secret and Bath & Body Works)
- Cardinal Health
- Huntington (financial services*, software development & data center)
- Amazon
- American Electric Power Company (utilities*, research & development, smart grid technology, transmissions, data center)
- Alliance Data (corporate and card services unit*, transactions processing, data center)
- Abercrombie & Fitch*
- DHL (Americas Headquarters)
*headquarters
