After a couple of tough years, the Cleveland real estate market began to stabilize in 2010. Although the manufacturing and banking/finance segments are still sorting through the dramatic economic shift that has occurred since 2007, job losses have stemmed and activity levels have showed signs of increasing. This has translated into a small but growing number of tenant activity across much of the office and industrial sectors.
Despite some significant corporate consolidations over the past few years, the central business district remained relatively healthy. The overall vacancy rate was just over 20 percent, with the Class A market hovering around 11 percent. The next couple years will be critical to the office market, not only downtown but across the region. Two much-anticipated public/private CBD developments will move off the drawing board and into reality – a medical mart and convention center, expected to be completed in 2012, and a new casino, expected to be completed in 2013. It is hoped that the economic impact generated by this pair of projects will spur the entire region. Aside from these two projects, private development remained scarce. But this void was easily filled by robust medical and educational sectors, which collectively had nearly $1 billion in developments either completed or underway during the year. These included multiple projects by the Cleveland Clinic, University Hospitals and Cleveland State University, among others.
Buoyed by a renewed sense of optimism, the industrial segment stabilized, with static vacancy, firming rents and a turn toward positive leasing velocity. These factors were well balanced by a lack of new development, due to an overall tentativeness among businesses coupled with a continued lack of liquidity within the lending market. The retail segment remained a bit behind the pace set by the industrial and office segments and was characterized by soft rents and a negative leasing velocity. However, the string of retail tenant bankruptcies dramatically slowed as the segment began to reposition itself toward a much-anticipated recovery. Investment sales among all three segments remained scarce but the much-ballyhooed crash in the commercial sector failed to materialize.
Looking forward to 2011, expect acceleration in activity among all three sectors. This will most likely be led by the industrial segment, as the increase in consumer confidence will be met by a corresponding increase in output. The office sector will also benefit, as the financial markets should finally be sorted out, allowing both improvement within this segment as well as much-needed liquidity across all of the sectors. The retail sector will likely be the last to return, as its recovery will be hinged to an increase in job creation and consumer spending, both of which are not expected to occur in earnest until mid-2011.
Do you still have questions about the Cleveland Commercial Real Estate Market and what you should do with your property?
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