Lately, it has been quite challenging to pick up a newspaper, watch television or even view an online news source and not be inundated by sour economic events occurring throughout the world, as well as in the Greater Cleveland area. As we navigate our way through these uncertain times in the economy, and more specifically in the commercial real estate industry, owners and users of real estate will be faced with challenges as well as opportunities. The Cleveland industrial real estate market, which ranks as the ninth largest industrial market in the United States, remains healthy largely due to its conservative growth during the last decade. The Cleveland economy is comprised of a diverse range of businesses from many different sectors, making it less prone to volatile cycles common in other industrial-based regions. Our local industrial market, which consists of numerous submarkets, had a vacancy rate ranging from 8 to 10 percent throughout 2009. The average lease rate for industrial space was approximately $3.90 per square foot. Both of these indicators compare favorably to the U.S. average, which has slightly higher vacancy and lease rates. A major obstacle weighing on today’s real estate consumer in the Cleveland area is the …
Ohio
With little demand for new retail space and even less money to fund new development, developers and owners have been focused on improvements at existing properties, tenant retention and strategic redevelopment. Westfield has plans to relocate the food court at Great Northern Mall in North Olmsted, Ohio, to allow for a new anchor and restaurant space with exterior entrances, which continues with the trend of turning malls inside out. In Solon, Giant Eagle has won a rezoning effort to replace its store at Solar Shopping Center with a new 99,000-square-foot store and Getgo fuel station. The remainder of the center is slated to undergo a complete redevelopment as well. Giant Eagle has also replaced its stores at Southland Shopping Center in Middleburgh Heights and the Day Drive location in Parma with new larger prototypes. Coral Company has revised its development agreement with the city of South Euclid to allow for the Cedar Center North redevelopment project to be completed in phases; leasing for the all-retail first phase is currently under way. The largest retail development in the Cleveland market is Visconsi Companies’ Plaza at Southpark in Strongsville, which has just opened with Costco, Bed, Bath & Beyond and Best Buy …
Cincinnati-area multifamily developers are watching expenses, right-sizing and, if they have a management arm, expanding their third-party management operations to increase potential income streams. Buyers are seeking short sales and loan assumptions, allowing buyers to put very little money down to invest and continue to leverage their cash for future purchases. Of course, cash is still king. There are many new buyers in the market, but developers have been extremely quiet, as they shore up their portfolios by trimming overhead, cut costs, and become more lean and efficient. Also, developers have a limited supply of cash that may be needed elsewhere to shore up the company, which prevents them from pouring any money into new endeavors. Their resources are stretched, which limits their ability or desire to purchase land holdings for future development. As the recession recedes and demand grows, the downtown, north (Union Center and Liberty Township) and northeast (Mason and South Lebanon) submarkets will be in need of further multifamily development. In Northern Kentucky, outlying markets in close proximity to downtown that feature good access to the Interstate 75 or Interstate 275 corridors, will continue to need multifamily development. The central Cincinnati submarket, an area north of downtown …
What area is your expertise? For the purpose of this report I will be discussing the office market in and around Akron. What trends do you see presently in office development in your area? Akron has historically been a fairly conservative and stable office development market. Fortunately, this has meant that our area has not fallen in the trap of being over developed like a lot of cities experience in a market downturn. However, as we’ve experienced in the past down markets, those tenants that are making moves are expecting and getting rental concessions, increased tenant improvement allowances and very attractive rental rates. We’ve also experience a substantial increase in locally owned businesses opting to either build or buy their own office space which is due to the attractive mortgage rates and sale prices. Who are the active office developers in your area? In the 35-plus years that I’ve been in the office/industrial real estate business, I have not seen as many major expansion projects announced as I’ve seen in the past 18 months in our area. These projects will undoubtedly help bolster the Akron economy and help spur additional growth, or a trickledown effect as some would choose to …
What area is your expertise? Summit County, Ohio What trends do you see presently in retail development in your area? Change of use and or contraction of older areas due to demographic and economic changes. Example: Rolling Acres Mall – redevelopment into light industrial. What type of retail product is doing well in your area? Essentially high-end and discount retail stores. Williams-Sonoma, Coach, Build-A-Bear Workshop, Wal-Mart, Marc’s Discount Stores, Gabriel Brother’s and Big Lot’s. What retailers are new to your area? Aldo, Coach, Ann Taylor Loft, Coldwater Creek, Bravo Italian Bistro and P.F. Chang’s China Bistro and Five Guys Burgers. Who are the active retail developers in your area? Stark, Simon, Marchetta, Deville, Altman, and Developer’s Diversified. Please name one or two significant retail developments in your area. What impact will these projects have on the market? Summit Mall expansion, Fairlawn, Ohio — Developed by Simon: Bravo Cucina Restaurant, Ann Taylor Loft, Coldwater Creek and others. Wadsworth Crossing, Wadsworth, Ohio — Developed by Forest City: Anchored by Kohl’s, The Home Depot, Target, Bed Bath & Beyond, as well as a few specialty retailers. Arlington Ridge Market Place, Green, Ohio — Developer Deville: Anchored by Target and specialty retail: Alltel Wireless, …
What area is your expertise? For the purposes of this report we are discussing the Industrial Market in Akron, Ohio and the five counties surrounding it (Summit, Stark, Wayne, Portage and Medina counties). What trends do you see presently in industrial development in your area? We are in a stable market with softness in the industrial sector, primarily due to the credit crisis and overall skepticism in the marketplace beginning in 2008 to present. The greater Akron marketplace is made up of many older industrial buildings that were built by the rubber companies and other industrial giants such as the Hoover Company located in North Canton. Local and regional rehab developers have come into the marketplace and purchased these million-square-foot facilities and rehabbed them into multitenant, mixed-use type facilities. The attractiveness of these facilities is generally low-lease rates and the infrastructure that is already in place, making total occupancy cost lower than new construction. What type of industrial product is doing well in your area? Smaller industrial, newer buildings with land for expansion available on a purchase basis as a second or third opportunity from an ownership basis. Who are the active industrial developers in your area? Richfield, Ohio-based Realty …
What area is your expertise? • Retail services in Northeast Ohio What trends do you see presently in retail development in your area? • The current trend across the board is an increase in environmental awareness. Developers selecting sustainable sites, retailers constructing LEED buildings, and city and county governments working together to minimize the negative impacts on the environment while maximizing existing infrastructure. What type of retail product is doing well in your area? • Power centers, grocery anchored shopping centers and convenient strip centers. What retailers are new to your area? • Menards, Massage Envy, Five Guys Famous Burgers and Fries and a Cabela’s are expected. Who are the active retail developers in your area? • First Interstate Properties, Liberty Development Group, Snider-Cannata and Centro Properties. Please name one or two significant retail developments in your area. What impact will these projects have on the market? • The redevelopment of Westgate Mall in Fairview Park is the first redevelopment of an enclosed regional mall in Northeast Ohio into a lifestyle and power center. Centro Properties, in partnership with the Richard E. Jacobs Group, redeveloped the property. The center is anchored by Target, Lowe’s Home Improvement Warehouse and Kohl’s. Additional …
What area is your expertise? • The Greater Cincinnati, Ohio metropolitan area — a seven-county area in southwestern Ohio and northern Kentucky. What trends do you see presently in office development in your area? • Speculative new construction and existing Class A buildings have captured the lion’s share of the nearly 1 million square feet of net positive absorption in 2007. In stark contrast, the Class B office market accounted for only 24 percent of this total. This trend is leading to increasing rental rates for Class A product while the Class B rents remain stagnant or are even on the decline. Who are the active office developers in your area? • Duke Realty Corp., Scott Street Partners, Al. Neyer, Inc., Neyer Properties, Inc. and Miller-Valentine Group Please name one or two significant office developments in your area. What impact will these projects have on the market? • Kenwood Towne Place is a mixed-use development adjacent to the high-end Kenwood Towne Centre regional mall currently under construction in the Kenwood submarket. The retail component will contain a Kroger and the area’s first Crate and Barrel along with a 250,000-square-foot office tower that has signed UBS as its first tenant. Nearby …
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