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As senior vice president of Cleveland’s NAI Daus, Alec Pacella knows the commercial real estate market in Cleveland. He recently spoke with Midwest Real Estate News about the changing fortunes in this key Midwest city.
Midwest Real Estate News: This is a broad question, but are you seeing more commercial real estate activity in Cleveland today?
Alec Pacella: Commercial real estate is performing better. We’re at the point where the rubber is meeting the road and deals are getting done. A lot of it is attitude and optimism. People today seem to have a pretty buoyant outlook on the economy. The phones are ringing. Is stuff really happening, though, or is it just people talking? The good news is that there are deals getting done. Before, no one was even talking about deals. Very few deals were getting done. I’d say we’re all cautiously optimistic today.
MWREN: What are some of the reasons for this better performance?
Pacella: There has been a clear manufacturing up-tick. I look every month at the hiring numbers, the unemployment numbers and the production numbers. Across the board, we are seeing improvements in these numbers. Cleveland is a manufacturing town. Its roots are invested in manufacturing, no matter how many people want to say otherwise. The fact that manufacturing has picked up has been good for the local economy. Steel production has really picked up. Auto production is better. The third-party suppliers are busier, too. This has been one of the big prime fundamental shifts as compared to two or three years ago.
MWREN: Has lending picked up in the city, too?
Pacella: There is more access to capital. The lenders are slowly loosening their belts. They are willing to lend a little more freely than in the past. Businesses can get the money they need for expansions. That’s helped here, too.
MWREN: How about in downtown Cleveland? There’s a little development going on in the city’s downtown now, too. How important has that been?
Pacella: We’re all excited about what’s going on downtown. It’s been three of four years coming, and now the efforts to revitalize downtown are starting to bear some fruit. The leaves are budding. The casino will be the first downtown project to open in the beginning of May. In 2013, the Medical Mart will open. Then later that year, the first downtown multi-office building in 20 years will open. Those three projects represent over $1billion in infrastructure development. This is certainly a benefit for downtown. Now you are starting to see more interest in downtown housing and in multi-family housing downtown. Downtown is an exciting place to be. It’s nice to see construction activity there.
MWREN: What do you see in the near future for Cleveland?
Pacella: I think the momentum will remain. We are not at a sprint right now. We are at a walk working toward a brisk walk. But I think that the pace will continue to quicken. I think that in the second half of this year and the first half of 2013, a lot of companies that have put off moving or expanding will be surprised at the lack of quality space they’ll find. The good inventory is still out there, but it is slowly drying up. The good industrial buildings are drying up, too. That quality space is slowly but surely dwindling as companies expand and as companies move. Cleveland has never been a spec market like Columbus or Chicago. That’s not Cleveland. You don’t have the building going on in the front end. As a result, your inventory has to decrease when demand goes up. Space will be getting tighter. That’s the big thing going forward.