by Dan Rafter
How positive is the year-end 2014 office report from Cleveland’s NAI Daus? The headline on the report itself tells the tale: “The future is bright!” it declares.
It’s hard to argue. NAI Daus had plenty of positives to share about the state of the Cleveland office market in its year-end report.
As the company reports, the Central Business District in Cleveland remains in the middle of a renaissance period, generating plenty of positive press across the nation. The Republican National Committee has added to the good feeling here, choosing Cleveland as the home for its 2016 national convention.
In the Class-A office category in Cleveland’s CBD — a sector that NAI Daus says includes 11 buildings — the vacancy rate stood at 15 percent at the end of 2014. That’s down a bit from 15.23 percent at the end of 2013, and makes this sector the strongest of all the office submarkets in the Cleveland area.
A big boon to the area has been the Ernst & Young Tower in the Flats East Bank neighborhood. As NAI Daus reports, a flow of tenants has moved to this new office tower. This has provided opportunities for tenants currently in Class-B office buildings to upgrade to more efficient and higher-quality space.
An important trend in the CBD office market is the continuing conversion of obsolete Class-B and -C office buildings to apartment buildings. Like many Midwest markets, Cleveland has seen its downtown core become a hotspot for those who want to rent in walkable neighborhoods. Because of this, NAI Daus officials predict that during the next 24 to 36 months the Cleveland market should see a steady reduction in vacancies in the Class-B and Class-C office categories.
University Hospital’s purchase of 90,000 square feet of vacant space at One Harvard Crossing in the city’s East submarket was also an important transaction. This property will disappear from the city’s competitive inventory after it makes the transition to owner-occupied status in the first quarter of this year.
NAI Daus also pointed to Graftech’s plans to move its office headquarters and research center into two South submarket locations. This move will equal around 50,000 square feet of positive absorption.