IRR-Cleveland Mid-Year Viewpoint 2015 Local Market Report - Office
Growth has gained some traction. More important, modern space requirements dictate demand for more modern, efficient space than can be accommodated in 30+ year old buildings. Future space needs also dictate preferences of millennials. Tenant inquiries, and expansion of existing tenants, continues to be reported by brokers, especially compared to 2-4 years ago. In the CBD, many C buildings have been, or are undergoing, conversion into residential. This has now spilled over to some long dormant B buildings. As these buildings are converted, the inventory of empty shell buildings for conversion has largely depleted.
Developers have more recently begun acquiring partially occupied B-C buildings, hoping to find credits and incentives for mixed-use conversion with first floor retail, continued office on some lower floors, and residential use on the upper floors. This will further reduce the inventory of vacant office space. Consequently, a general tightening is slowly starting to occur with a reduction in supply, particularly at the more obsolete end of the spectrum.
The former Huntington Building at 920 Euclid Avenue now experiences substantial vacancy. A mixed use redevelopment proposal is contemplated in conjunction with a sale of the iconic building. Besides continuing to offer some office and retail space, preliminary plans are in place for the largely empty office building to undergo an adaptive reuse that would incorporate apartments, condominiums and a boutique hotel as well as office. Meanwhile, the current state of this building. Coupled with the definite increased attractiveness of the CBD for younger workers, as well as eventual completion of the Innerbelt bridge project, demand is also expected to increase for office space that is functional for current and anticipated future needs. Overall, recovery is occurring, and conditions are more amicable to the development of new office space within the next five years. A group spearheaded by Stark Enterprises has acquired a large parking lot and dilapidated Huron Road parking garage and small Prospect retail building just north of Quicken Loans Area. Their announced plans involve a mixed use project incorporating approximately 500 residences, 1,600 parking spaces, 200,000 square feet of offices and 140,000 square feet of retail, and is to include a signature 54-story tower. An agreement with an established law firm to anchor the office was recently published. Regionally, the pace of growth continues to be held in check by slow employment growth that, although improved from 2009-2011, remains well below total employment figures of the past decade.
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IRR Mid-Year Viewpoint 2015 comprises a National Overview report and 300+ two-page Local Market Reports for all key property types as well as additional resources, including metrics methodology, graphs, and tables; these free reports may be downloaded from IRR’s site here.