By George Pofok, Cushman & Wakefield | CRESCO Real Estate
The Northeast Ohio market has consistently been a stable industrial hub, and over the last couple years, has been attracting the interest of investors and developers from other regions. Spanning approximately 527 million square feet, this market stretches from Cleveland down I-77 to include Akron-Canton.
In the second quarter of 2024, the overall vacancy rate decreased to 2.8 percent, driven by 1.1 million square feet of positive direct absorption, a strong recovery from the negative absorption in the first quarter. Over the past few years, the vacancy rate has remained between 2.4 and 3 percent.
Leasing activity kicked off the year robustly, with 4 million square feet of leases in the first quarter. However, it normalized in the second quarter, with 1.6 million square feet leased, which was slightly below the usual pace. The market is expected to remain stagnant due to limited inventory and a lack of new speculative construction starts, which continue to hinder demand from local and regional tenants seeking to expand and backfill spaces.
Leasing deals are trending longer, between five to 10 years, with annual rental rate increases averaging 3 to 4 percent. Meanwhile, the direct weighted average net rental rate rose to $5.88 per square foot from $5.79 per square foot in the first quarter, marking a 22 percent increase since early 2022.
Two significant deals were recently completed at the Forward Innovation Center East in Walton Hills, a redevelopment of the former Ford manufacturing facility by Weston, DiGeronimo Cos. and Scannell Properties. Great Day Improvements, a vertically integrated, direct-to-consumer provider of premium home improvement products, leased a 247,000-square-foot speculative building. Additionally, Cardinal Health is expanding and consolidating operations, leasing a 248,000-square-foot, build-to-suit cross-dock facility.
Piping Rock Health Products, a vitamin and health supplement company, has been aggressively expanding in the market and leased 169,000 square feet at 630 Mondial Parkway in Streetsboro. The Southeast submarket, where these properties are located, is the largest and most active submarket, comprising 84 million square feet with a 3.4 percent vacancy rate.
The Southwest submarket, consisting of suburbs along I-71, is the third largest submarket with just over 55 million square feet and a 2.2 percent vacancy rate. ARK Transportation subleased the remaining 178,000 square feet in Strongsville from Michaels Stores following its acquisition of Pat Catan’s. Michaels initially listed approximately 750,000 square feet for sublease, which ultimately took about four years to absorb.
Also in Strongsville, Industrial Commercial Properties leased 139,316 square feet to BidFTA, an online auction house. With this lease, the building at 21160 Drake Road is now fully leased and has been listed for sale as an investment opportunity.
Integra Mission Critical, a company specializing in designing and delivering turnkey data centers, expanded into 240,000 square feet at 1210 Massillon Road in Akron, which is owned by Industrial Commercial Properties. Additionally, Lumitex is relocating from Strongsville and leasing 50,545 square feet at 6611 W. Snowville Road in Brecksville.
User sales activity in Northeast Ohio has been robust this year, with approximately 120 deals totaling 3.9 million square feet. Notably, 84 percent of these transactions involved spaces under 50,000 square feet, with an average deal size of 16,000 square feet. A significant transaction was A.R.E. – RealTruck.com’s $25 million acquisition of a 608,737-square-foot building at 4676 Erie Ave. in Navarre. RealTruck, a manufacturer of plastic and aluminum truck bed caps, is consolidating two leased rural locations.
Mytee Products, a distributor of trucking supplies and equipment, acquired a 337,046-square-foot industrial complex for $11.2 million at 30701 Carter Street in Solon, purchased from Cosmax USA. Other notable sales included: 1972 Akron Peninsula Road in Akron, a 117,800-square-foot manufacturing building that sold for $2.8 million; 755 Alpha Drive in Highland Heights, a 65,147-square-foot industrial building purchased by ParkPlace Technologies as part of a larger campus development; and 6441 David Industrial Parkway in Solon, a 42,000-square-foot industrial building purchased by IC Automation for $3.2 million.
Investor interest in Northeast Ohio remains strong. Brait Capital recently entered the market by acquiring three properties totaling 1.2 million square feet in Lakewood, Warrensville Heights and Cleveland. Royal Oak Realty Trust acquired a 347,205-square-foot property leased to Riddell Sports at 7501 Performance Place in North Ridgeville from LCN Capital Partners for $36.5 million. Kokot Realty Enterprises purchased a 248,000-square-foot Amazon-leased facility from Omega Industrial for $22.9 million at a reported 6.5 percent cap rate. Diamond Properties bought a two-tenant industrial building totaling 151,659 square feet from Industrial Commercial Properties for $9.7 million, reflecting a 7.8 percent cap rate.
Currently, there are 18 new construction projects underway, totaling 3.8 million square feet. The largest project is a 2.3 million-square-foot expansion led by Rudolph Libbe at the Avon Lake Ford plant.
Other projects under construction include: a 200,000-square-foot facility for Swagelok in Solon; a 180,000-square-foot building by Geis Cos. for Viega in Shalersville, a 60,000-square-foot facility for Cleveland Tank & Supply; and a 100,000-square-foot building for Lake Shore Electric in Bedford, both being developed by Liberty Development.
George Pofok is a principal with Cushman & Wakefield | CRESCO Real Estate. This article originally appeared in the August 2024 issue of Heartland Real Estate Business magazine.