Cincinnati's real estate market gets back on track.

Aspate of new retailers, tightening office and industrial space and the rollout of riverboat gambling is rejuvenating Greater Cincinnati's commercial real estate outlook.

F.W. Dodge estimates commercial construction in the seven-county region is up 14% last summer compared with a year ago. The dollar value of those projects is up 16% and the ace under construction is up 35%.

No new downtown office towers are under construction yet. But some suburban office space is being built and most space vacated by such downsizing giants as GE Aircraft Engines is being absorbed.

New restaurants and category-killer stores like Best Buy are driving retail building from the I-71 corridor south into Northern Kentucky. Build-to-suit projects are pumping up industrial absorption with few blocks of more than 40,000 sq. ft. available. After several poor years, the hotel industry also is awakening with a halfdozen hotels being planned along the Northern Kentucky riverfront alone and hoteliers in Indiana readying for riverboat gambling.Warren County's Deerfield Township, located about 20 miles north of Cincinnati, has become the hottest market for office, retail and residential development.

A key impetus for Warren County's growth is Procter & Gamble's $280 million health care research center, which opened in July. Other corporate players there include Entex Information Services, which is bringing 700 jobs to a a new national service center, and Community Mutual, which broke ground last summer for a $27 million headquarters building.

Corporex Cos. is still hopeful of building a second 18-story office tower at Covington's RiverCenter complex contingent upon preleasing. Covington city planners envision building three more office buildings.

One of the few chunks of new office space available is in the suburbs is the $25 million Ohio National Life headquarters in Blue Ash.

Despite such construction activity, office activity has been muted by corporate cutbacks. GE Aircraft Engines, once the city's biggest employer, continues to vacate large chunks of space - most recently, about 274,000 sq. ft. in Tri-County.

Thus, by the numbers, improvement has been incremental in the suburbs and elusive downtown. According to first-quarter 1995 figures by CB, office vacancy in the suburbs had improved to 15.25% from 17% at year-end 1994. In 1992, vacancy topped 21%. Downtown, office vacancy inched above 16% from the year-end 15.5% with more sublease space available.

Developers and brokers in the retail side, meanwhile, have been questioning whether the saturation point has already been breached.

Some 1.4 million sq. ft. of retail space was under construction in 1995, with category killers and new grocery stores leading the way.

Larry Lance, regional president of The Galbreath Co.'s midwest region, says it's all about dedication and a commitment to the growth and future of real estate.

"The Galbreath Co. continues to have a major commitment in Cincinnati," Lance says. "Our existing staff will provide continuity for the next phase of growth we anticipate for."

Strong leasing has tightened retail market conditions throughout the Tristate.

By contrast, the biggest retail project in the Tristate's history is still facing an uncertain future. Forest Fair Mall, the retail mecca built by the former LJ Hooker Co., has been converted from a retail to an entertainment hub on the block.

Industrial activity stayed robust with another 1 million sq. ft. absorbed in 1994. Ostendorf-Morris, in its year-end report, estimated that only 13.7%, or about 2 million sq. ft. was available. A year before that, the vacancy rate was over 19%.

Even "speculative" industrial building is starting to crop up again. Denver-based Security Capital Industrial Trust is building a 316,000 sq. ft. warehouse in Hebron, Ky. Cincinnati United Contractors and Miller-Valentine also have speculative projects in the works.

But build-to,suit is still driving most of the activity. Projects include a new 149,000 sq. ft. office/warehouse and beverage distribution center for H. Dennert Distributing Corp.; a $3 million expansion of The Gap Inc.'s Northern Kentucky warehouse; a $6 million warehouse in Fairfield for MicroAge Computer Centers; and a $20 million distribution center in Sharonville for Andrew Jergens Co.

Ostendorf-Morris quotes lease rates at $2.75 to $3.75 per sq. ft. in the bulk market and, in the office-warehouse category, at up to $8.50per sq. ft. in office and $4 for warehouse.

Next to industrial, the apartment sector is still one of the strongest pieces of the local real estate puzzle. Landlords raised rents in the 5% range last year, industry watchers said, as a tighter market continued to draw investor interest.

Among the latest of several large apartment deals: First Union Real Estate Equity & Mortgage Investments bought the 272-unit Steeplechase Apartments in Cincinnati in July for for $11.9 million.

After years of stagnancy, hotel construction is seeing new life thanks to new convention centers in Sharonville and Northern Kentucky.Corporex Cos. is capitalizing on the new Northern Kentucky convention facility with plans for a Hampton Inn hotel at I-75 and Crescent Avenue and a 326-room hotel between the company's River-Center office tower and the Roebling Suspension Bridge. Corporex also plans a $6 million, extended,stay Residence Inn inside the company's Circleport complex in Boone County.

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