Just posted so we can refer to it when discussing empty downtown lots. If you are paying attention you'll know what lots are no longer in use. The dollar amounts at this point are just an estimate.

How old is that map? From my experience the 'green' lots near the flats east bank development are now a minimum $5.

It's predates the Flats East Bank development because it shows Old River Road still there as well as the lot where the developments now sit. So it's easily a five-year-old map. Also the parking lots along Chester where the Langston now stands are gone. That's progress I'll take.

Is Weston Inc. preparing to acquire the Standard Building?

 

Weston Inc., the Warrensville Heights-based real estate concern, may be preparing to add the largest building yet — the 21-story Standard Building — to its recent spate of downtown Cleveland acquisitions.

 

Such a name would be appropriate for a company to own the structure, as it pairs the building’s name with its address on Ontario Street.

 

A Weston play for the 1925-vintage building has been widely rumored for months among downtown Cleveland real estate insiders and developers, perhaps incorporating adjoining properties to accommodate the lack of parking on the block.

 

 

http://www.crainscleveland.com/article/20140627/FREE/140629796

 

 

Sometimes it surprises me what will generate conversation on this forum and, in this situation, what won't. The above article was posted in the Cleveland developments thread.

 

Unlike other large office building conversions to apartments, the likely conversion of the Standard Building is VERY different. Foremost, it would be the fourth 20+ story building downtown to be converted. The other three were the Embassy Suites Hotel, the East Ohio Gas building (VACANT) and the Ameritrust Tower (VACANT). Plus there are also four 10+ story office buildings being converted: Schofield (VACANT), 1010 Euclid (VACANT), 1220 Huron (Unknown) and CAC (may not happen).

 

So how is it so different? It is still occupied by office users, the largest of which may be the Brotherhood of Locomotive Engineers & Trainmen. I don't know it's occupancy percentage, but it is in a good location and well kept. The average occupancy for Class C office buildings in downtown Cleveland is 74% (SOURCE: http://www.crainscleveland.com/article/20140615/SUB1/306159983&template=mobile#ATHS). If any building is at or above the average, I would expect the Standard Building to be one of them. Here is the marketing brochure for the building (http://s.lnimg.com/attachments/0B62352F-5D5E-441B-856A-BF0A1EC5A71D.pdf).

 

To be conservative, if the occupancy of the Standard Building is right at the average, then 74% of the 350,000-square-foot Standard Building is full. That's about 260,000 square feet of office users. So the conversion takes 350,000 square feet of vacant space off the market (90,000 sf of vacant space in the Standard Building + the relocation of 260,000 of the Standard Building's office users to other buildings). There is 3 million sf of vacant office space in Class B and C buildings downtown -- that's before the other conversions are taken into account. When the new conversions are done, that number will drop to 2 million square feet. If most or all of the Standard Building's users move to these buildings (a definitely possibility because they are more affordable), the vacancies among Class B and C buildings downtown will drop to less than 1.7 million sf with this conversion.

 

That leaves a vacancy rate among remaining Class B and Class C buildings of just 18 percent, if my math is correct. Plus K&D is selling many of its apartment buildings in its suburban portfolio to buy one or two downtown buildings which it hopes to convert into residential (http://online.wsj.com/news/articles/SB10001424052702303626804579506073419741570). So that will take more Class B/C inventory off the market.

 

EDIT: And imagine how the downtown office market changes if the Huntington Building with its 1.3 million square feet turns residential and also comes off the office market? That would cause a major splash in the market. The ripples from which would seem more like some waves downtown could ride to creating more product.

 

That will drive up prices across all office markets, including Class A. And that may help drive demand for a new office tower downtown, not just the small building proposed in the Flats.

^  Great analysis, I hope this all happens.  A Huntington Building conversion and the subsequent reduction of 1.3 million sq ft would be huge.

I just realized -- my math is wrong.

 

There is currently nearly 14 million square feet of Class B and C office space downtown. Of that 9.3 million square feet is Class B and 4.64 million square feet is Class C. Between Class B/C, there is about 3.36 million square feet of office space that's vacant, or 24 percent.

 

That's about 10.64 million square feet of tenants occupying Class B/C offices downtown.

 

Between now and 2017, all the residential conversions on the books will reduce the downtown Class B/C office building supply to 9.34 million square feet (7 million in Class B, 2.34 million in Class C).

 

So does that mean there's 1.36 million square feet of office users who have to find space in Class A buildings? There is about 8 million square feet of Class A office space downtown. And the latest tally is that only about 12 percent of that is vacant -- or almost 1 million square feet. The new office building as part of Phase 2 of Flats East Bank will add 220,000 square feet of Class A space. So if my latest math is correct, this could mean there will be no vacant office space left anywhere downtown -- assuming that all downtown office users relocate elsewhere within downtown. And it assumes there are no changes in absorption. That's a big "if" too.

 

And this doesn't account for the Standard Building or the old Huntington Building being converted to non-office uses. Even before that happens, there are fast-growing pressures to build at least one new large office building downtown. The Flats East Bank office building won't be anywhere near large enough.

Never would have expected that apartment dwelling would be the potential catalyst for a new skyscraper in Cleveland. Here's hoping.

I turned it into a blog item. Feel free to tweet and share....

 

Downtown Cleveland apartment conversions may drive demand for constructing a big office tower -- or two

By Ken Prendergast

June 30, 2014

 

Many older office buildings in downtown Cleveland are getting converted to apartments and other uses. How many? So many that ALL of the vacant office space may soon be gone -- and then some. So many that the time for constructing one or more major new office towers in the central business district is fast approaching.

 

In fact, by 2017, assuming that existing tenants in the older office towers relocate within downtown, there could actually be a shortage of leasable office space downtown. Typically, market pressure for a constructing a new office tower reaches a critical point when Class A (the most modern buildings) office vacancies drop below 10 percent and rents are rising.

 

At the start of 2014, Class A office buildings downtown Cleveland were only 12.5 percent vacant, according to a market report by real estate firm Jones Lang LaSalle. This includes absorption of space by office users at the new 21-story, 550,000-square-foot EY Tower at Flats East Bank. A second, but smaller office building measuring 220,000 square feet will soon rise across Front Street from the first tower. But that won't be anywhere near large enough to relieve the coming pressure for more office space.

 

Consider:

 

READ MORE AT:

http://neo-trans.blogspot.com/2014/06/downtown-cleveland-apartment.html

Here's another office building that may not be an office building for long....

 

http://www.loopnet.com/Listing/18582816/75-Public-Square-Cleveland-OH/

Its kind of crazy how bad our office market got.

^^Yes that one's a no brainer. C'mon investors we are on a roll.

That is such a cool building that never gets much notice. Hopefully good news will come soon. 

Here's another office building that may not be an office building for long....

 

http://www.loopnet.com/Listing/18582816/75-Public-Square-Cleveland-OH/

Well, that's probably the best location for a hotel in the city right now. 

 

I like your blog KJP.  My thoughts are that a mixed use residential/commercial project is in order.  Class C commercial on the lower floors with residential on top.  Probably not a common mix, but I think it could work. 

Except that Class C refers to old buildings with obsolete office layouts and outdated technology/utilities -- usually referring to 60+ year old structures. Sure, they can be updated to meet contemporary needs, but then they're no longer Class C. If they are fully gutted and renovated, even 100+ year old buildings can become Class A. See what I mean "you don't build Class C" space? Saying you're going to build Class C space is like saying someone is going to give birth to a 70-year-old grandfather.

 

And while my math in my blog is certainly up for debate, the basic premise is sound -- the downtown office market is getting tighter and fast. In past office markets, the top end of the market would tighten and some users would get priced out, then move down to more affordable buildings until a new building is built, thus making the market more tenant-friendly. In this market, it's as if there's a flood (yes, there is, of apartment demand) and it's taking out the lowest rated apartment buildings first. Thus the office space is disappearing from the bottom, forcing the few tenants those remaining Class B/C buildings to run for higher ground. DCA says there's lots of Class C and especially Class B space to run to, but there's about 4.5 million to 5 million square feet of Class B/C space that will be gone from the market by 2017 just from the conversions we know about. And there's more coming.

Cleveland Office

Strong Residential Demand Boosts Cleveland’s Downtown Office Market

07/09/14

 

Apartment development is currently the driving force in downtown Cleveland’s commercial real estate market, including the conversion of office buildings to residential use and the rehabilitation of existing apartment buildings.

 

Downtown Cleveland’s population stands at more than 12,500, an 88 percent increase since 2000, according to a first-quarter market update from the Downtown Cleveland Alliance.

As a result, apartment demand is unrelenting with many properties boasting a long waiting list.

 

The renovated Ameritrust Building that includes “The 9” Apartments is one such development that has a significant waiting list.The strong tenant demand has driven Cleveland’s apartment vacancy to below 5 percent.

 

Corporate Relocations

 

In response to a growing number of young professionals seeking a downtown work/live/play environment, several corporations have relocated from the suburbs to downtown Cleveland. This trend is particularly evident among high-tech companies. The list of companies growing and expanding downtown includes Dakota Software, Dwellworks, National General Insurance, OnShift, BrandMuscle and BrownFlynn.

 

- See more at: http://www.rebusinessonline.com/main.cfm?id=36606#sthash.aUzOIwCL.dpuf

So with K&D acquiring the Leader Building and transitioning it over to residential, this will put more office tenants out to find new digs. The Leader Building is 322,600-square-feet and 60 percent occupied with offices and ground-floor retail. That's 194,000 square feet of occupied space. The first floor is about 20,000 square feet. So about 174,000 square feet is offices. As Michelle's article from today stated, K&D will keep some of the building as offices but their goal is to put about 230 apartments in the Leader Building. That could be about 230,000 square feet. That may leaves about 70,000 square feet for offices. The end result is that about 100,000 square feet of offices will be looking for a new address -- hopefully downtown.

 

The Standard Building is 400,000 square feet and is 45 percent occupied, or 180,000 square feet -- although perhaps 20,000 of that is ground-floor restaurants/retail. So roughly 160,000 square feet will be looking for a new address, too.

 

The second Flats East Bank office building will be about 225,000 square feet and was anticipated to meet absorption rates for Class A office space.

 

EDIT: also the Huntington Building is still about 10 percent occupied (almost entirely offices as nearly all retailers are gone), equaling about 130,000 square feet of offices. Michele told me this building isn't being marketed as an office building anymore, so apparently it's not showing up in the downtown office vacancy calculations. That should also be a leading indicator as to this building's future -- apartments! Although for a more successful and diverse retail mix, keeping the existing offices would be a good idea. The retailers would likely be busy throughout the day and evening if this building was a mix of offices and residential. It certainly is big enough for both!

^maybe the wrong thread, but what is the timeline on the FEB office building?  Not taht it's an architectural gem or anything, but still a significant pice to the end result on the project. 

^maybe the wrong thread, but what is the timeline on the FEB office building?  Not taht it's an architectural gem or anything, but still a significant pice to the end result on the project. 

 

Could be any day now.

Redirected from the Leader Building thread since we're getting into general market trends........

 

It's also not clear to me that tightening the class b and c office markets will so directly contribute to new class A office construction.  How may blue chip tenants are really left in these older buildings?  Seems just as likely that start ups and smaller law firms, etc will have to start heading to the burbs if class b/c rents start creeping up too much, so at some point we may just be trading office tenants for apartments rather than growing downtown. Similarly, it's possible that subsidizing these conversions delays new residential construction by sopping up more rental demand.

 

I don't mean to sounds like a downer, just questioning whether one of our policy levers needs to be tightened up to maximize the benefits it produces. I'd much rather see state money go to things like the mostly empty May Co building than the mostly full Leader Bldg.

 

If the market means a property owner can make more money on residential (even after the costs of conversion are included) vs. office then its inevitable that this, the Standard Building and more obsolete office buildings will also be converted. I don't know how you can tell investors not to do this when financial scales are tipped in favor of residential. Perhaps the City of Cleveland could offer some low-interest loans to help modernize older office buildings not just downtown, but citywide. Or Cleveland could emulate NYC's Co-op development fund, though perhaps on a smaller scale. See article below.

 

But I don't think the problem is as bad as you're fearing. For example, I'm aware of some downtown office tenants (local offices of large national/global companies) who moved from Class B/C spaces into Class A because the rents, although slightly higher, were affordable and the more modern, comfortable and prestigious address was worth the extra money. For example, one of them moved from the Rockefeller Building (another building that's a good bet for conversion to residential someday!) into one of the Skylight Office Towers built circa 1990 at Tower City Center -- even though it cost more money. Their rationale was that the Class A space was still a reasonable cost compared to Class A spaces in other major cities so why not make the move?

 

There is still a lot of Class C square footage around downtown -- and in surrounding neighborhoods like Ohio City, Asiatown and Midtown. And as downtown becomes more populated with residents, more amenities and shops will follow, which strengthens the desirability of the downtown office market as well. CSU's Tom Bier predicted this more than a decade ago, that a residential downtown makes a more attractive place for office workers, too.

 

As noted earlier, here's the idea NYC is pursuing. Note the Cleveland reference in the article.....

 

Worker-Owners Cheer Creation Of Co-op Development Fund In NYC

By Rebecca Burns, In These Times

Popular Resistance

Monday, Jul 14, 2014

 

In a victory for new economy advocates, the New York City Council passed a budget last week that will create a $1.2 million fund for the growth of worker-owned cooperative businesses. The investment is the largest a municipal government in the U.S. has ever made in the sector, breaking new ground for the cooperative development movement.

 

Melissa Hoover, executive director of the U.S. Federation of Worker Cooperatives and the Democracy at Work Institute, hails the New York City Council’s move as “historic.” “We have seen bits and pieces here and there, but New York City is the first place to make an investment at that level,” she says.

 

New York’s cooperative development fund was the brainchild of a coalition of community groups—including the Federation of Protestant Welfare Agencies, the New York City Network of Worker Cooperatives, the Democracy at Work Institute, Make the Road New York and others—that came together to stage a series of public forums and advocacy days to secure widespread support for the initiative on the City Council. Over the next year, the fund will provide financial and technical assistance in the planned launch of 28 new cooperatives and the continued growth of 20 existing cooperatives, supporting the creation of 234 jobs in total.

 

READ MORE AT:

http://axisoflogic.com/artman/publish/Article_67019.shtml

^Yeah, I take your point that class A space in Cleveland is still pretty darn cheap, so probably unlikely anyone who wants to be downtown will be priced out in the near term even if they might face some rent hikes.  And I definitely agree that an improving downtown is a better magnet for office tenants in the long run.

 

However, on your first point, if it's "inevitable" that these buildings will be converted, why on earth are we spending scarce state subsidy dollars on these projects?  Yes, residential tenants pay more currently, but the state money is a serous thumb on the scale in terms of getting these projects done- it's not all the market.

 

Ink's reply is comforting though.  If in the upcoming rounds there are other projects that would more meaningfully resurrect old buildings, it's quite possible K&D will strike out on the Leader Bldg for a while, which is fine.  Hopefully those other projects are in Cleveland though.

If the market means a property owner can make more money on residential (even after the costs of conversion are included) vs. office then its inevitable that this, the Standard Building and more obsolete office buildings will also be converted.

 

For sure property owners will persue residential conversion when construction costs are kept artificially low with subsidies.

However, on your first point, if it's "inevitable" that these buildings will be converted, why on earth are we spending scarce state subsidy dollars on these projects?  Yes, residential tenants pay more currently, but the state money is a serous thumb on the scale in terms of getting these projects done- it's not all the market.

 

I may be mistaken but can't the historic tax credits also be applied equally for buildings renovated with office tenants? If true, the market for rehabbed buildings is greater for residential than it is for office because the downtown office market isn't growing. By contrast the downtown residential market is growing fast.

 

EDIT: If the number of office workers downtown grew 88 percent since 2000 and NOT the residential population growing 88 percent, we'd have Class C buildings renovated into Class A space and probably some small-scale new construction. But since residential grew and office didn't, the market is demanding the tax credits be used for residential conversions rather than office rehabs.

The conversion of these buildings could be a windfall for the East 9th Corridor. Many of these displaced tenants are litigation firms which strongly prefer  to be downtown. I recently toured several buildings in this area with a broker and frankly was surprised by the high vacancy levels in some nice buildings such as One Cleveland Center and Erieview Tower. Granted the rents are higher but still a pretty good deal.

Good point. A friend of mine runs the Cleveland office of a national company that had an office in One Cleveland Center but moved to North Point Tower for lower rents and a larger suite. And the Leader Building was/is the center of many criminal defense attorneys because the federal courts were across Superior. Same deal for the Standard Building, which also was/is home to numerous criminal defense attorneys as it is across St. Clair from the county courthouse. The Marion Building, 1264-1276 West 3rd, may also have been home to some attorneys even as it was owned by Cuyahoga County (for probation department offices) but since was purchased by a Weston subsidiary (Marisupham LLC) for possible conversion to apartments or even part of a larger development plan as Weston owns the parking lot to the south. It's a 100,000-square-foot building that has Karl's Inn of the Barristers on the ground floor.

 

Ironically, a new office tower on Public Square would be convenient to both the county and federal courthouses. Just sayin'. :)

The great thing about Cleveland is there are both a lot of older buildings and a lot of vacant lots. How off base is it to say that the current Class B will eventually be the Class C's and the Class C's that are currently being converted to residential would have gone vacant by that time anyway? Class A office construction will continue on the vacant lots (as well as hopefully residential when pricepoints hit the target). I also feel like we will start getting more mixed use. Until the city truly starts growing, I don't think we have much to worry about in the way of not enough cheaper properties.

The great thing about Cleveland is there are both a lot of older buildings and a lot of vacant lots. How off base is it to say that the current Class B will eventually be the Class C's and the Class C's that are currently being converted to residential would have gone vacant by that time anyway? Class A office construction will continue on the vacant lots (as well as hopefully residential when pricepoints hit the target). I also feel like we will start getting more mixed use. Until the city truly starts growing, I don't think we have much to worry about in the way of not enough cheaper properties.

 

Good description. To me, office buildings are like hand-me-down clothes or used cars. They cascade down with each stage of the hand-me-down process, especially to users of lesser means. Someday, today's Class B buildings will become Class C, while Class A buildings become outdated and are then considered Class B inventory. But I do recognize the concerns expressed here that office rents will rise with declining office availability. That's why the hand-me-down process depends on new office inventory being added at some point while old inventory is being taken away. And that is all the more reason why we'll need a new office building again someday, perhaps soon.

Question about the Superior Building? I assume it is a class C building but it doesn't appear to be very full.

I feel like something that also gets lost in this discussion is that rising office rents in downtown could also help to drive up office demand for old stock in adjacent neighborhoods (and even on the outskirts of downtown), which seems like it can only be a good thing for the core overall.

 

There's definitely businesses that are willing to pay a premium to be near city, county, federal government (attorneys, title insurance, etc.), even as the downtown market gets tighter. Then there's a lot of businesses that want to be in multi-tenant facilities or newer facilities with relatively low rents, but don't have a particular driving need to be downtown, and we may see some of these get lost to the edge office parks. But there's a fair amount of companies that I have to believe want to be in an urban environment but don't necessarily need to be downtown and don't necessarily need to be in a high-rise ... GoMedia at 45th and Lorain, JakPrints at 24th and Superior, Skylight Financial in the United Bank Building at 25th and Lorain, DigiKnow in Tyler Village ... Just a few examples of seemingly thriving entrepreneurial companies that aren't in the core business districts of downtown but that also haven't been lured to the exurbs.

 

So I definitely understand the anxiety about loss of downtown workforce, but I think the downtown core versus exurban office park dichotomy is probably an overstated one. With some planning, some assistance getting important historic designations for tax credit purposes and some additional city or county subsidy for smaller rehab projects that don't tend to fare as well with the state competitive grants, we could see some movement of existing downtown tenants (as well as prospective tenants that are priced out of considering downtown) into the edges of downtown ... East 30th; East 40th; Superior, Euclid and Prospect in the east 30s and 40s; a number of warehouse buildings around E. 55th and Euclid; St. Clair in the teens; Lorain Avenue in the 30s up into possibly the 60s, Detroit in the 30s through 50s; Scranton descending from Tremont; West 25th heading back toward MetroHealth, etc., etc.,  :)

Question about the Superior Building? I assume it is a class C building but it doesn't appear to be very full.

 

The company that owns the Superior Building, E.V. Bishoff, also owns the building my office is in -- the City Club. Both are Class C and both have some serious vacancies. I think both are huge candidates for conversion to housing, especially the City Club building given it is across the street from the future Heinen's and in a more residential area. I am VERY surprised that the Standard Building, Leader Building and Halle Building are all being considered for conversion before the City Club or Superior Buildings.

Question about the Superior Building? I assume it is a class C building but it doesn't appear to be very full.

 

The company that owns the Superior Building, E.V. Bishoff, also owns the building my office is in -- the City Club. Both are Class C and both have some serious vacancies. I think both are huge candidates for conversion to housing, especially the City Club building given it is across the street from the future Heinen's and in a more residential area. I am VERY surprised that the Standard Building, Leader Building and Halle Building are all being considered for conversion before the City Club or Superior Buildings.

 

Thanks.  The Superior building could make for some awesome housing...  it seems to get overlooked but with a proper renovation it could be really great.  It is one of the few older buildings we have with some substantial height. 

Brokaw is expanding, staying put downtown

 

"That was the headline that a Cleveland-based advertising agency put on its July 16 news release announcing that it plans to expand by 60% its offices at the 425 Lakeside Building in downtown’s Warehouse District.

 

Brokaw, known for quirky, prize-winning ad and social media campaigns, has a notable first-floor presence on the street, partially due to a mannequin in a window that wore a Cleveland Browns jersey with Tim Couch’s name on it … and slips of paper identifying his many quarterback successors since 1999. In a signal of a switch, Brokaw last week put a LeBron James jersey on the mannequin."

 

http://www.crainscleveland.com/article/20140721/FREE/140729969/0/search

Brokaw is expanding, staying put downtown

 

"That was the headline that a Cleveland-based advertising agency put on its July 16 news release announcing that it plans to expand by 60% its offices at the 425 Lakeside Building in downtown’s Warehouse District.

 

Brokaw, known for quirky, prize-winning ad and social media campaigns, has a notable first-floor presence on the street, partially due to a mannequin in a window that wore a Cleveland Browns jersey with Tim Couch’s name on it … and slips of paper identifying his many quarterback successors since 1999. In a signal of a switch, Brokaw last week put a LeBron James jersey on the mannequin."

 

http://www.crainscleveland.com/article/20140721/FREE/140729969/0/search

 

“This adds to the zestiness of our great community,” Cimperman said.

 

Zestiness?

Brokaw is expanding, staying put downtown

 

"That was the headline that a Cleveland-based advertising agency put on its July 16 news release announcing that it plans to expand by 60% its offices at the 425 Lakeside Building in downtown’s Warehouse District.

 

Brokaw, known for quirky, prize-winning ad and social media campaigns, has a notable first-floor presence on the street, partially due to a mannequin in a window that wore a Cleveland Browns jersey with Tim Couch’s name on it … and slips of paper identifying his many quarterback successors since 1999. In a signal of a switch, Brokaw last week put a LeBron James jersey on the mannequin."

 

http://www.crainscleveland.com/article/20140721/FREE/140729969/0/search

 

“This adds to the zestiness of our great community,” Cimperman said.

 

Zestiness?

 

That's his new tag line.  Mr. Cimperman full of Zestiness!  Grrrrrrrr  Or either he is setting himself up as a D--F! DOH!  :o :o :o

the more conversion of historic downtown buildings like the leader to residential the better. half empty vacancies and class b/c offices aren't doing anything for these structures, so let them be converted and restored. the key being the restoration itself rather than the use. there are always plenty of 1940's-80's crapola bldgs around that will never be considered for residential that can absorb the lower end office needs. so its an interesting discussion about where do class b/c offices go if they get bumped out of a building, but not to the level of a worry. in fact, sometimes the developers even help the tenants to find new space rather than wait out the leases if they want them out. anyway, the bottom line is, an attractive and lively downtown will keep and bring in more jobs both downtown and nearby (w25th, midtown, etc) than get pushed out.

DowntownCLE ‏@DowntownCLE  15m

Our Q2 market update highlights Downtown’s forward momentum & showcases one of its most exciting quarters in memory

http://www.downtowncleveland.com/media/221278/Q2-2014-DCA.pdf

 

In addition to various charts & graphics at the above link is this summary....

 

OFFICE MARKET OVERVIEW & ANNOUNCEMENTS

 

DCA’s Step Up Downtown Market Assessment found that “Downtown Cleveland is the hottest address for office in the

region right now.” GenomOncology led the way in continuing the trend of suburban businesses choosing a downtown

address, relocating its headquarters from Westlake to the NineTwelve District’s One Cleveland Center.

 

The two fastest growing employment sectors impacting the office market are the service and creative class sectors.

Over the next eight years, creative class jobs will increase to 33 percent of the Cleveland market. Moreover, Cleveland

expects to outpace the national average with a 13.9 percent increase in creative class jobs. Service sector jobs will make

up just under half of Cleveland’s workforce. Downtown Cleveland, since Q1 2011 has added over 6,000 creative class,

hospitality, and retail jobs.

 

Based on projected job growth in Downtown Cleveland, the Step Up Market Assessment identified three niche office

opportunities: “Super” Class A, Class A- and B upgrades, and co-working space for entrepreneurs. The successful

leasing of over 90 percent of the nearly 500,000 square foot EY Tower illustrates that Northeast Ohio businesses are willing

to pay a per square foot premium for modern downtown office space. This dynamic should also create opportunities

for Class B buildings with conducive floor plates to modernize and capitalize on demand for downtown office space. The

conversion of older office buildings to residential uses continues to impact the office market. Step Up Market Assessment

projects that conversions could remove up to 2.8 million square feet of potential office space from the market. Much

of this space is currently occupied, creating opportunities for downtown property owners to pick-up tenants and

drive down vacancy rates.

http://socialnet.naiglobal.com/research_manager_publications/000/000/336/original/NAI_Dau_Office_2nd_Qtr_2014.pdf

 

2nd Quarter 2014

 

Submarket    Total RBA        Total SF    Vacancy%

Class A        6,995,410    1,075,979      15.38%

Class B      10,490,913    2,874,760      27.40%

Class C        3,240,830        829,678      25.60%

TOTAL CBD 20,727,153    4,780,417      23.06%

 

Class C office buildings to be converted to residential:

 

      Building                  office sf    vacancy%

Marion Building              90,000      50?%

Leader Building          302,600        40% (about 70,000 sf to remain offices)

Standard Building        380,000      55%

Halle Building              392,000      47%

Huntington Building  1,300,000      90%

 

That's 666,000 square feet of offices who will be looking for a new home.

Also, 559,000 sf of vacant Class C office space is removed from the downtown market (not including the Huntington which isn't being marketed as offices).

 

The second Flats East Bank office building will add about 225,000 square feet of Class A office space. Combined with the loss of the Class C inventory, the downtown submarkets will adjust accordingly:

 

Class A      7,220,410

Class B    10,490,913

Class C      2,076,230 (not including Huntington which is no longer included in the office market)

TOTAL      19,787,553

 

Proportion of total office market:

Class A:  36.5%

Class B:  53.0%

Class C:  10.1%

 

If the 666,000 sf of office tenants are redistributed proportionally to the downtown office spaces available, they would be distributed like this:

 

Class A:  244,000

Class B:  354,000

Class C:  68,000

 

Thus the downtown office market and its respective submarkets could look something like this:

 

Submarket    Total RBA        Total SF    Vacancy%

Class A        7,220,410        831,979      11.52%

Class B      10,490,913    2,520,760      24.03%

Class C        2,076,230        202,398        9.75%

TOTAL CBD 19,787,553    3,555,137      17.97%

 

At least that's what it looks like according to my math.

"mjarboe[/member]: American Landmark picks up former Eaton Center office tower in downtown #CLE. No purchase price. $23.2M loan. http://www.cleveland.com/business/index.ssf/2014/08/former_eaton_center_office_tow.html#incart_m-rpt-1 #CRE"

Former Eaton Center space to begin marketing. http://www.crainscleveland.com/article/20140815/FREE/140819836/american-landmark-properties-begins-marketing-office-space-in-the

Let this be a lesson to you Eaton, Ferro et al....

 

Weyerhaeuser moving downtown to get "access to a larger talent pool to meet future recruiting needs...” http://t.co/G6xDxODusD

Let this be a lesson to you Eaton, Ferro et al....

 

Weyerhaeuser moving downtown to get "access to a larger talent pool to meet future recruiting needs...” http://t.co/G6xDxODusD

I got excited for a second thinking that this was a company moving to downtown Cleveland lol......... :-(

KeyBank is on move, in more ways than one

By CHUCK SODER

August 31, 2014 4:30 AM

 

The KeyBank shuffle has begun.

 

Through the first half of 2014, roughly 550 Key employees moved from the Higbee Building in downtown Cleveland out to the bank's campus on Tiedeman Road near Interstate 480.

 

Now another 650 Key employees are in the process of moving from Key Tower to the Higbee Building.

 

And then most of its employees at Key Tower will be shuffled around so that the bank can seriously reduce the amount of space it uses in the building — one of the more expensive places to rent office space in Cleveland.

 

READ MORE AT:

http://www.crainscleveland.com/article/20140831/SUB1/308319995/keybank-is-on-move-in-more-ways-than-one

^ Meanwhile PNC is building a new skyscraper in downtown Pittsburgh. Key continues to cut cost and liabilities, IMO to make itself an acquisition target.

^what does PNC building a skyscraper in Pittsburgh have to do with Key Bank in Cleveland? Nothing. Key built their skyscraper 20 years ago and their needs have changed. These moves address that change and open up more room in Key Tower to rent to others.  The article clearly stated that the way business was done in the 90's, with lots of space and high cubicles, is not how business is done now. Now people work closer together in a more open setting, thus reducing the amount of space necessary to do said work. 

^what does PNC building a skyscraper in Pittsburgh have to do with Key Bank in Cleveland? Nothing. Key built their skyscraper 20 years ago and their needs have changed. These moves address that change and open up more room in Key Tower to rent to others.  The article clearly stated that the way business was done in the 90's, with lots of space and high cubicles, is not how business is done now. Now people work closer together in a more open setting, thus reducing the amount of space necessary to do said work.

It's just a comparison of a similarly sized bank and region. Key has been shedding employees for the better part of 15 years. Key moving hundreds of employees out of downtown to Brooklyn is not a positive development for the downtown office market.

Opening more room in key tower to rent to others?  That is the most glass-half-full approach to a tenant shedding 10 stories of office space.

I feel like you guys are making much ado about nothing regarding this story

Opening more room in key tower to rent to others?  That is the most glass-half-full approach to a tenant shedding 10 stories of office space.

 

It's not glass half full. It's a simple fact that they are streamlining operations and saving space by creating a more collaborative work environment. Big deal. Companies do it all the time. They are also saving quite a bit of money. This is not some indication of weakness.

I feel like you guys are making much ado about nothing regarding this story

 

I think Mendo makes an interesting comparison in corporate philosophies with regards to their space/site needs. PNC is investing in downtown Pittsburgh and creating a more commanding presence. Key seems to be doing the opposite regarding downtown Cleveland.

I agree, and also agree that it sounds like Key is struggling. If you have a building named after your business and are moving people out of it relatively quickly over a few years' period, what else does it mean?

I feel like you guys are making much ado about nothing regarding this story

 

I think Mendo makes an interesting comparison in corporate philosophies with regards to their space/site needs. PNC is investing in downtown Pittsburgh and creating a more commanding presence. Key seems to be doing the opposite regarding downtown Cleveland.

 

My sister worked at PNC for 6 years and I totally agree with this.  It's not about changing office needs but a civic minded choice.  As office needs have changed PNC has chosen to move their employees downtown.  The PNC Firstside center houses a lot of back office functions (where my sister worked), essentially the offices Key chose to put in Brooklyn, and it has the more modern style collaborative workspaces.  So does the PNC tower constructed mid 2000's and the new one being built now.  Heck PNC now has 4 skyscrapers in Downtown Pittsburgh and the firstside center.  We're just stating the Key, and to be fair many other large Cleveland area businesses, have not chosen to invest downtown to this same level as PNC has done for Pittsburgh.

 

Just imagine if Key announced that to meet today's office needs it would partner with a developer to create new offices above retail and a transit center on the public square lot, along with housing.  That would make a statement about their commitment to the city and move along a key transit concern and redevelop an important space.