Cleveland: Downtown Office Development News

[pcforsgren]

From CB Richard Ellis:

Local unemployment rates dropped sharply during the quarter from 7.1 % to 5.4%. Ohio had a slight drop from 6.4% to 6.1% and the
national rate declined as well to 5.1%. In the Cleveland MSA, more employment was seen in service-providing industries, with a boost of
6,100 jobs. There was also growth in the goods-producing sector with an additional 3,700 jobs since May 2004. Manufacturing and
Educational and Health Services sustained slight losses in employment. The effect of these declines is unknown, as it is questionable how these changes will affect real estate markets.

Cleveland’s Central Business District (CBD) appeared to stabilize in the second quarter after 170,000 square feet was vacated by ICI Paints
in the first quarter of 2005. A handful of sizeable occupancies contributed to the second quarter rebound, while a number of signings
and rumored deals, combined with renewed interest in the improvement of the downtown area have poised the market for a solid
performance in the next 12 to 18 months. Overall, the CBD had a slight decrease in vacancy dropping from 22.04% in the first
quarter to 21.07% in the second quarter. Class “A” vacancy fell a half percent to 17.38%, which was mainly driven by the US Department of Health and Human Services leasing 35,000 square feet and Wells Fargo leasing 9,200 square feet in 200 Public Square. Likewise, class
“B” vacancy rates declined as blocks of space in the 2,000 to 15,000 square foot range were occupied. Realty One’s relocation from the South Suburban submarket to 31,000 square feet in the CBD occurred in the second quarter, which helped to improve class “B” vacancy and absorption.

You can see the full PDF report here:
http://gkc2.cbrichardellis.com/GlobalMarketReports/us/cleveland2q05ofcdt.pdf

Great news all around, especially that unemployment rate.  I think we are beginning to see the fruits of Cleveland's efforts to turn the regional economy on again.

[Map Boy]

well, isn't that encouraging!

[KJP]

That's pretty impressive. I think it's interesting to note that Greater Cleveland's unemployment rate went from being above the statewide average to below it, even though the statewide unemployment rate also fell.

I know one day doesn't make for an accurate appraisal of the overall economy, but when I brought a friend in from Cincinnati yesterday, she had a hard time getting hotel space. Most hotels were booked last weekend, so she came up this weekend. North Coast Harbor was busy with tourists, apparently from all over the world, based on the variety of their accents and languages. The Warehouse District was hopping, Flats West Bank was hopping, Little Italy was overflowing with people (and water, with the hour-long downpour!). She wondered if Cleveland was always this busy and, like a good little promotionalist, of course I said "yes!"

There's still a lot of work to do (21% office vacancy), so let's keep plugging away at filling up those vacancies, plus the nasty suface parking lots and keep building more housing.

KJP

[Map Boy]

more housing = more amenity retail = more around-the-clock action downtown = more businesses wanting to be a part of something labeled as "thriving" or "successful" = lower office vacancy rate. 

[pcforsgren]

my thoughts exactly, this is a solid set of positive news for the city.  CBRE also mentioned several possible major moves into downtown (probably OfficeMax and such) that would be a sizable drop in vacancy.  The rebound is at hand, folks, it just took a little longer then we thought.

[X]

Plain Dealer Front Page here we come!  Right?

[WoollyBear]

This is really good news. The best part of the article is that they expect a solid perfomance in the next 12-18 months. I just wish we could fast-forward to 2010.

[pcforsgren]

I agree wooley, I'd like to see if Cleveland finally ends its population decline by 2010.  I am honestly hopeful that the city will gain population by the next census, or at least in some of the more revitalized areas (downtown, OC, tremont, shaker, etc).

[KJP]

Here it is, almost three weeks since CBRE issued that report, and I haven't seen word one from the PD on this. Was there anything in Scene or Free Times?

Ahem...I did mention it in my Write Of Way column in Sun!

KJP

[MayDay]

"I haven't seen word one from the PD on this. Was there anything in Scene or Free Times?"

1. The PD is too busy being scooped on the Nate Gray scandal.
2. Scene isn't interested in business news, unless there's some salacious dirt behind it.
3. Free Times wouldn't dare print something positive - don't you know that good news isn't 'cool'? 

[punch]

^Good summary of the print media in town....I do think you could swap Scene and Free Times in#2 and #3 and it would still be true

[KJP]

Here is what I wrote about it (in the second part of the following column) last month. If you want to comment on the Inner Belt project, there's a message string about it in the transportation section of this forum.  KJP
_____________

Sun Newspapers�
July 21, 2005�
Write of Way�
�
Inner Belt a chance to rebuild city's core�
Ken Prendergast�
�
   When taxpayer funds are used to build or rebuild a highway or other transportation facility, the goal usually is to maximize the public benefits from that investment. If the benefits are maximized, more private capital tends to flow to where the public investments are made.
   That happens whenever an interchange, a lane or other similar investment is added to a highway to increase its capacity of accommodating more vehicles. Unfortunately, since the Greater Cleveland area's population isn't growing, and that most of the clean and green open land is at the outer edges of Cuyahoga County and beyond, public and private capital continues to flow away from older parts of the city that need to reinvent themselves.
   That's why the $700 million Inner Belt reconstruction project is such a tremendous opportunity for the core city. But, the way the Inner Belt, a.k.a Interstate 90, is being designed, it could be a wasted opportunity.
   Yes, it's going to be a newer highway. And, yes, it's probably going to be safer, with Dead Man's Curve eased, fewer merging lanes, and a fifth lane in each direction across the Cuyahoga Valley span. The Ohio Department of Transportation should be commended for adding those features.
   But where ODOT and, more notably, the city are coming up short is to look at how a rebuilt Inner Belt can promote more economic development. It falls on city officials to tell ODOT how they want land to be used for the Inner Belt project.
   City officials should tell ODOT they want a new, shorter bridge across a more narrow part of the Cuyahoga Valley, and build it south of the existing bridge. They should do it even if it means demolishing or moving the Greek Orthodox Church of Annunciation in Tremont. If someone could move London Bridge to Lake Havasu City, Ariz., then the church can be saved, too.
   Instead, ODOT planners are seeking a longer, more expensive bridge for westbound traffic, north of the existing bridge. The old bridge will be rebuilt for eastbound traffic. Not only is that more expensive than it needs to be, it looks and sounds, well, goofy.
   City officials should also tell ODOT they want the Inner Belt moved south, away from Jacobs Field and put in trench, so that the St. Vincent-Quadrangle area isn't cut off from downtown. ODOT did that in Cincinnati, rebuilding Fort Washington Way in a manner that is enabling The Banks riverfront area to be redeveloped.
   And, they should tell ODOT to replace the long, one-lane, looping exit ramps to Ontario and East 9th streets with short, straight and three- or four-lane-wide ramps that take up less up space, yet can absorb rush-hour and special-event traffic.
   Combine all these scenarios, and it will open up the urban wasteland of the Central Interchange, south of Jacobs Field, with many of acres of prime, clean land for development. Plus, it will make the abandoned Norfolk Southern rail yard, just south of the Inner Belt and next to Ontario, more accessible to redevelopment.
   Problem is, when it comes to downtown highway projects, city officials aren't looking south. Instead, they are focusing mainly north, to the lakefront. There, city officials want to see the Shoreway rebuilt into a boulevard that will open up lakefront land for redevelopment. They also are eyeballing a possible boulevard to University Circle, as an extension of I-490 east from I-77.
   Both appear to be good projects, if designed to ensure the automobile doesn't dominate the urbanscape, and allows for high-density development sites, good transit, pedestrian and bicycle access to the areas through which the roadways will pass.
   City officials should take the same approach with Inner Belt, to attract more private capital to the urban core, rather than settle for a highway that only makes it easier for people to merely speed through downtown.
�
   In case you haven't already heard, Greater Cleveland's unemployment numbers have taken a dramatic turn. For those of us accustomed to bad economic news around here, we might expect the turn to be for the worse. Not true. Not only did Greater Cleveland's unemployment rate drop, it fell so fast it overtook the state's overall rate, which also declined.
   According to real estate firm CB Richard Ellis, Inc.'s Global Markets Report, the raw numbers for the second quarter of 2005 show the Greater Cleveland area's unemployment fell from 7.1 percent to 5.4 percent. Statewide, the rate slipped from 6.4 percent to 6.1 percent. However, our little corner of paradise is still above the national average of 5.1 percent — but not by much.
   Pacing the job growth was a rise in employment in the service-providing industries, where 6,100 jobs were added in the past year. Another big growth sector was in the production of goods, adding 3,700 jobs. Manufacturing, educational and health services saw a slight loss.
   CBRE noted another positive sign, that the downtown Cleveland office market appears to be stabilizing. In recent months, a number of tenants have agreed to move to downtown, or expand into vacant space.
   Tenants include Realty One, Case Western Reserve University, and National City Bank. All told, more than 200,000 square feet was gobbled up in just the last three months, reducing office vacancy rates from 22 percent to 21 percent.
   CBRE's market report noted a couple of big question marks remain, namely the fate of the Defense Finance Accounting Service and whether Charter One Bank's offices will be down-sized after its recent acquisition. But, the report was upbeat, noting recent market activity, plus the city's aggressive efforts to attract more technology firms downtown, and the pending creation of a downtown improvement district.
   "Cleveland's Central Business District has reason to be cautiously optimistic when looking to the next 12 to 18 months," the report said.
   
END

[pcforsgren]

I too was amazed that the PD/Scene/FT/anybody hadn't mentioned these improved numbers, but then I remembered the "woe is us" Cleveland media could never print positive news without somehow spinning it into the death of the city.  Thanks, KJP, for bucking the trend of doom and gloom and showing people that good things ARE happening here.  If we (and indeed, the nation) heard more about these good things going on, Cleveland's can't-do attitude could be slowly reversed.

[MyTwoSense]

ok...so the DFAS is expanding.  Denver company opening up office.  Quicken opening up.  and the county, city, DTP and Development districts working hard to retain current downtown tennants.

the numbers must have improved. 

I wonder - since its an election year - if we will hear anymore surprise company moves?   

[KJP]

CBRE's latest report, released after Sept. 30, shows a minor rise in overall office vacancy rates, though Class A space saw a slight drop in vacancies. Also, the region's unemployment fell slightly, from 5.6 to 5.5 percent, though not as dramatic a drop as in 2Q (when it fell from 7.1 to 5.6 percent). Still, Greater Cleveland's unemployment rate is better than the statewide average of 5.9 percent, yet worse than the national average of 4.9 percent.

See the full report at http://gkc2.cbrichardellis.com/GlobalMarketReports/us/cleveland3q05ofcdt.pdf

I was surprised it made no mention of the DFAS decision, unless CBRE is waiting to see if Congress amends Bush's recommendations in any way. Also, it makes no mention of Quicken Loans' announcement to open a call center downtown. Again, CBRE may be waiting to see where they will lease space.

By the way, see CBRE's industrial and suburban office market reports for Greater Cleveland, visit:

Industrial:  http://gkc2.cbrichardellis.com/GlobalMarketReports/us/cleveland3q05ind.pdf
Suburban office:  http://gkc2.cbrichardellis.com/GlobalMarketReports/us/cleveland3q05ofcsub.pdf

KJP

[Map Boy]

what's this about a Denver company opening an office here?  I'm assuming it's not too huge if I haven't heard about it!

[3231]

I saw that the Elyria company that was to locate in the burned-out building on West 25th street will now take up space at the Idea Center in Playhouse Square. 

[Map Boy]

Well, that makes sense.  Too bad about West 25th, though.  I hope this doesn't mean that the building will be lost!  Every time I pass that building I want to cry!

[zaceman]

i finally saw it the other day.  i realllly was hoping it wasnt that building, damn it looked near complete for new tenants.

[MyTwoSense]

what's this about a Denver company opening an office here?  I'm assuming it's not too huge if I haven't heard about it!

MGD here is the forum on UrbanOhio.  http://www.urbanohio.com/forum2/index.php?topic=5609.0

Although the way I read it is that the company is "opening" an office here in cleveland not "relocating" from Denver. 

However, if the Corporate HQ's was to relocate..that would be quite a bit of good news!

[Map Boy]

This is going to hurt:

Empty Charter One offices hit market

By STAN BULLARD

6:00 am, November 21, 2005

The downtown Cleveland office market this week took its hit from the job cuts and office moves that resulted from Charter One Bank's merger with Citizens Bank.

John Glasstetter, a CB Richard Ellis vice president, has started marketing for sublease a total of 182,569 square feet in the Erieview Plaza and IMG Center buildings. Much of the space was renovated since 2000 as the bank expanded.

The move hikes by 44% the volume of sublease space available in the city center.

From Tuesday's Crain's Cleveland Business on the Web

[KJP]

I'd like to see what CBRE has to say about it.

[WoollyBear]

I saw an article in Crains that said downtown office vacancies were tailing off. I was wondering if anyone who is a subscriber would be nice enough to post this article? 

[lopsidedfrock]

if there's an article in crain's that's online you can just go www.bugmenot.com and it will spit out a username and password for you to use.

[blinker12]

All seems like pretty good news, though it irks me that no mention is made of live-work in the discussion of industrial space. Joe Cimperman and a coalition of artists are working hard in Columbus to revise building codes to allow artists and others to live and work in Cleveland's myriad old industrial buildings. This should be considered the true future -- and best use -- of such buildings.

[KJP]

^It was mentioned in Sun Newspapers. 

[blinker12]

Great, KJP!
By the way, can't wait for your Pesht story to appear tonight or tomorrow.

[Map Boy]

From Crain's

450 jobs exit Halle Bldg. For space on Superior

By STAN BULLARD

6:00 am, January 23, 2006

Snapping a string of office tenant wins for Cleveland’s Theater District, First American Lenders Advantage plans to leave the Halle Building and move to the 1100 Superior Avenue Building.

Although the company, which formerly went by the name First American Title Solutions, is little known, the loss is a big one for the Halle Building. Lenders Advantage is a growing provider of title services to lenders, particularly for quick-turnaround home equity loans. It’s a Cleveland-based division of First American Corp., a national title company and business information provider headquartered in Santa Ana, Calif.

The late-summer move will transfer about 450 jobs to 1100 Superior, said David Petro, Lenders Advantage vice president and national sales manager. The company has leased two-and-a-half floors at 1100 Superior, or 68,000 square feet of offices, he said. That’s about the same amount of office space the company occupies at the Halle Building, but it occupies all the fourth floor and parts of three others in the Theater District building.

“It’s difficult for us to operate the way we are,” Mr. Petro said. “This will make for more efficient work flow. We need more meeting rooms, more break areas and dining rooms.”

Lenders Advantage tried to remain in the Halle Building, but the structure couldn’t accommodate its need to consolidate from smaller offices to a larger, more efficient one, Mr. Petro said. Lenders Advantage looked at Halle’s third floor as a site to consolidate but was told it wasn’t available because of the pending move of Case Western Reserve University’s back-office operations to the building.

Pat Lott, senior vice president of office leasing at Halle landlord Forest City Enterprises Inc., said, “We were disappointed to lose them. We tried to keep them.”

Mr. Petro said Lenders Advantage found the space it needed downtown after a six-month search that included sites outside the central city. He said the company elected to stay downtown because of the lease it secured and the desire to minimize the disruption to employees, many of whom use public transportation.

While some of the company’s increase in personnel downtown is from America’s appetite for home-equity loans, Mr. Petro said Lenders Advantage grew in Cleveland because it decided to centralize operations here.

During the last year, the company closed 12 regional production offices around the country to centralize operations in Cleveland and moved to the city employees who were willing to transfer here. Mr. Petro estimates those moves and job growth connected with rising business levels helped boost its Cleveland work force to 450 from 350 a year ago. He put the division’s national work force at 550.

Lenders Advantage has applied for Cleveland’s Job Creation Grant program, which rewards companies that add office jobs downtown by giving them annual grants equal to about 1% of their prior year’s payroll. Two calls to Greg Huth, the city’s interim economic development director, to request the grant data weren’t returned by Crain’s deadline last week.

Al Wiant, a principal of the Brandon Wiant Converse real estate brokerage who assisted Lenders Advantage in its search, said the grant is justified because the company is making a big commitment to the city.

Lenders Advantage will become 1100 Superior’s largest tenant, said Mark Ferris, property manager for building’s manager, the Gerald Hines Interests.

The Halle Building will be about 85% leased once Lenders Advantage leaves and Case moves in.

..................

This must mean that the building was going to be damned near 100% full before this latest move was announced!  It's too bad, but at least they're staying Downtown.  The Halle Building has a lot going for it, though, and should be better able to find a replacement tenant, or allow existing tenants to lease the space, than many of our buildings with large amounts of vacant space.

[MayDay]

One good thing about this - 1100 Superior (aka the Diamond Building) has had one of downtown's highest vacancy rates, and I imagine that won't be the case once First American moves in.

[3231]

I don't feel like this is significant.  At the very least, we are more secure in that we have another tenant who will be around for a while.  I would like to keep office density in key places, such as the theater district. But, I feel that the Halle building should be one of the easier buildings to rent out. I believe the FCE owns it.