Commercial Real Estate Global Spotlight – Cleveland, Ohio
Cleveland looks to healthcare sector, convention center for future growth.
Although activity in the investment market has fallen with the capital markets, the underlying market fundamentals in the Cleveland real estate market overall have remained solid with stable vacancy rates and slow but steady net absorption across most property types.
The CBD Office market continues to be the most active, with several large tenants in play that will likely result in the first new office construction downtown in nearly 20 years. This, in conjunction with the recent completion of a $200 million downtown transportation project, the Euclid Corridor, as well as the pending development of a new Medical Mart and Convention Center, should provide a catalyst for growth in the CBD in coming years.
The suburban Office markets are less active and, although vacancy rates were held in check, overall leasing velocity has waned. While new multi-tenant construction is limited, the Chagrin Highlands development in the eastern suburbs is a hot-bed, with the commencement of a $230 million medical center for University Hospitals as well as a $15 million Lifetime Fitness.
After six straight quarters of positive net absorption, the Cleveland Industrial market saw absorption go negative during the latter half of 2008. A primary cause was the fact that nearly 1 million square feet of space came online, mostly in the southeastern submarket, but only 100,000 was absorbed.
The Retail segment has seen the most dramatic change. The Plaza at Southpark in Strongsville (312,000 SF) is a new power center in development – featuring Costco, Bed Bath and Beyond and Best Buy. The majority of the retail activity has been with well-capitalized owners and in-fill locations.
Looking forward, investment activity will remain slow and limited to high-credit investors and stabilized properties. New construction will be limited to the projects previously mentioned. The wildcard is leasing velocity but this will be shaped by global influences and less by local factors.