One of the hardest-hit real estate segments, both in Cleveland and across the nation, has been the retail sector. A dramatic reduction in consumer spending over the past four years has caused significantly lower retail sales and resulted in a long list of bankrupt retailers and struggling retail centers. While the pullback by the consumer has ultimately led to numerous instances of shuttered stores and bank-owned retail centers across the region, there have also been some noticeable trends that illustrate the underlying resiliency and strength of this segment. Digging in the dirt Although the pace of retail development has been at a near standstill for the past few years, some projects have begun to take shape. The furthest along is a new 86,000-square-foot Giant Eagle in Broadview Heights, which is under construction with an early 2012 opening planned. The South Euclid/Cleveland Heights area has also emerged as a favored development location with two large-scale projects. The long-planned expansion and renovation to the northern half of Cedar Center began in the spring with the construction of a new GFS Marketplace. When fully completed in late 2012, this project is expected to contain approximately 60,000 square feet of total retail as well …
Midwest Market Reports
Southeastern Wisconsin’s industrial market absorbed nearly 1.28 million square feet in the third quarter — the fifth consecutive quarter of positive absorption — and 2.87 million square feet of absorption year-to-date. The vacancy rate registered 7.6 percent in the third quarter, down from 9.2 percent a year ago, according to Xceligent/CARW. Leasing activity in Milwaukee and Waukesha counties has accounted for 80 percent of the 2.87 million square feet absorbed year-to-date. Kenosha and Racine counties both experienced positive absorption of 81,527 square feet and 486,832 square feet in the third quarter, respectively. While impressive, this data is less substantial than previous quarters that we have analyzed. Traditionally, Racine and Kenosha counties compete for tenants crossing over the border from Illinois. These two counties will likely attract the next speculative or build-to-suit developments in Southeastern Wisconsin. With leasing and sales activity continuing to be on the rise late into the third quarter, we expect these positive trends to carry over into the final quarter of 2011. Quality industrial space is being depleted in many of the more popular submarkets south of I-94 and west of I-45. Natural tensions between quality supply and increasing demand are causing a stabilization of lease rates …
As we approach the end of the 2011, there are clear indications of an improving economy. Although the rate of commercial property foreclosure is still high, the rate of absorption of foreclosed properties has risen appreciably. These properties are not sitting on the market like they did the previous 24 months. One may say that this is not only a clear indication that we have turned the corner, but also that the community has genuine faith in the investment in commercial real estate. Although it may be time-consuming for some local businesses to secure financing, it is evident that traditional lending institutions are far more accessible than they were in 2009 and early 2010, albeit some more than others. The Small Business Administration (SBA) programs are propagated frequently, and the qualification process is not as cumbersome as in years past. The types of businesses that have taken advantage of the improved lending environment vary, and include automotive parts suppliers, manufacturing businesses, and distribution companies. Many area businesses are unsure about the near future. Considering what Detroit has endured over the past three years, this is to be expected. Although cautious, these same businesses are moving forward in a confident manner. …
After years of little or no new construction, the Greater Cleveland area is experiencing the construction of a broad range of major new projects representing more than $5 billion of new investment. Some of the largest projects include a new convention center and medical mart, a new Caesars Horseshoe Casino, plus major new medical center facilities developed for the Cleveland Clinic, University Hospitals and the VA Medical Center. There also are four new office developments: a 450,000-square-foot multi-tenant office tower in the Flats East Bank area of the central business district; a 580,000-square-foot world headquarters complex on 53 acres in the eastern suburb of Beachwood for Fortune 500 company Eaton Corp; a 700,000-square-foot corporate headquarters for American Greetings in Westlake, a western suburb; and a 639,000 sq. ft. global headquarters for Goodyear Tire & Rubber Co. in Akron to the south. Not since the 1990s, when we saw the completion of a half dozen CBD office towers and new stadiums for the Browns, Indians, and Cavaliers has Cleveland seen this kind of activity. Build new or renovate? In mature, established cities like Cleveland, the time comes for companies and institutions to decide between building new or renovating existing structures. The …
When people manufacture products in the U.S., they manufacture them in the Rust Belt, and Cleveland is in the heart of the Rust Belt. Our manufacturing sector has experienced increased occupancy and decreased vacancy levels quarter over quarter for the past three quarters. Cleveland historically has been a manufacturing market, and when manufacturing is strong the Northeast Ohio market is strong. In addition to the strength of manufacturing, the development of the Utica and Marcellus Shale is the biggest factor affecting Cleveland right now. The Utica and Marcellus Shales have been big in the Pennsylvania market for the past five years, but development is now moving westward into Ohio. As drilling increases, so too does the need for services for the drillers. The drillers and their service providers need real estate, and there have been dramatic increases in prices over the past four months in rural markets such as Steubenville, Ohio. That growth is beginning to move toward Youngstown, Warren, and up to the Streetsboro area. Employment is expected to grow dramatically over the next five years. While the overall manufacturing market is surging, there are still challenges in old properties that were modern in the 1930s and 40s, which …
The office market vacancy rate for the Cleveland market registered 22 percent in the third quarter, up 10 basis points from the previous quarter, according to Grubb & Ellis. Vacancy in Cleveland's West submarket decreased to 24.9 percent, 130 basis points lower than the second quarter. While most of the region's submarkets saw little to no change in vacancy, the South submarket increased to 24.3 percent, 110 basis points higher than the previous quarter. The region posted 16,708 square feet of negative net absorption in the third quarter, lowering positive absorption to 115,416 square feet year to date. On a quarter-over-quarter basis, average asking rental rates for Cleveland's Class A office market increased 18 cents to $21.54 per square foot. During the same time period, average asking rental rates for Class B office space rose 11 cents to $18.02 per square foot. To view the entire report, click here
The Columbus retail market finished the third quarter with moderate positive absorption of 118,454 square feet, according to Colliers International. This marks the sixth consecutive quarter of positive absorption. Still, consumer demand and confidence have remained stagnant over the past six months. In construction news, both the 44,000-square-foot Rave movie theater and the nearby 55,000-square-foot Hobby Lobby Project in Grove City were completed in the third quarter. To read the entire Columbus retail report, click here. To read third-quarter reports on other property sectors, click here.
It is no secret that, like much of the State of Michigan, the Motor City has not exactly been motoring along with regard to retail performance during the last few years. Southeast Michigan has been struggling, and since the beginning of the national recessionary cycle a few years ago, the state has been held up as an example of taking a retail roundhouse right on the chin from a faltering economy. A more nuanced view, however, reveals some more interesting — and in some cases more positive news — with regard to where southeast Michigan stands today, and how the region seems to be setting up for future growth. In a macro sense, it is accurate that Michigan was more challenged than the rest of the country by the initial economic downturn. There was a perception, real or not, that the struggles in the auto industry would substantially exacerbate the impact of the recession. The state’s unemployment rate was higher than the national average and Michigan was bleeding population. While some of those difficult circumstances and dire predictions seemed to be holding up two or three years ago, the state has made a pretty significant recovery in the last 10 …
The Cleveland real estate market can be characterized by a variety of ‘good news/bad news’ stories. For example, American Greetings announced earlier this year that it would be building a new $100 million world headquarters in Cleveland’s suburb of Westlake, Ohio. And while retaining this Fortune 500 company in the region is good news to most, it certainly was bad news to Cleveland’s suburb of Brooklyn, the long-time home to the company and its 1,750 workers. But no where is the ‘good news/bad news’ story more compelling than in the central business district or CBD. First, the good news. Cleveland is undergoing a massive construction boom, the largest since the late 1980s/early 1990s. Over $1 billion of new development is currently under way in the CBD alone, spearheaded by three primary projects. The first is the long-anticipated Medical Mart and associated convention center. This $465 million complex will include a four-story permanent showplace for medical equipment and technology, connected to a 230,000-square-foot convention center, which is anticipated to be completed in 2013. The $465 million Medical Mart and adjacent convention center is expected to be complete in 2013. The second is the Horsehoe Casino, initially converting 300,000 square feet in …
Lou Kahnweiler, the founder of Bennett & Kahnweiler, the predecessor to Colliers International here in Chicago, is reported to have once declared, “Industrial Real Estate is a great way to get rich slowly.” He meant buying or building buildings, putting 25-year debt on them, keeping them leased and was the way to wake up rich 25 years later. During the late 1990s and most of the 2000s, industrial real estate in Chicago was the place to get rich quick, as developers couldn't build fast enough to satisfy the demand of well-heeled investors who, by 2006, were actually paying more for vacant properties than those actually encumbered by leases and demanding tenants. “Buy it and figure it out” was their strategy. Flips, portfolio premiums, cap rate compression and an overall “drunken sailor” mentality generated lots of fees for brokers and huge profits for many developers and investors until the music stopped. I vividly recall touring in 2006 with a group of investors from the East Coast who, after looking at the per square foot prices of property around O'Hare and comparing them to New Jersey, said that they wished they were brokers and owners in Chicago, because it must be so …