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Cleveland: Downtown Office Development News

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On 3/5/2019 at 7:12 PM, PoshSteve said:

With the name and address they're coming from, I'm guessing they spun off from Amtrust. 4,500 sq ft - I couldn't imagine its very many employees moving though. Wouldn't be surprised to find out who ever is running it lives in Solon.

 

Chagrin Falls.

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2 hours ago, Mendo said:

 

It might be a slow replacement. Voss, Jakprints, Chilcote, and Produce Packaging are taking with them about 1000 jobs.

 

I wonder how many people PNC moved downtown. And the new owners of the Chilcote block talked about moving their mortgage(?) company into that space.

I know alot of people are concerned about the loss of industrial but I don't think anyone here really realizes the magnitude of jobs added to existing companies in Cleveland in the last two years alone. My uncle works for a metal fabrication company on the floor. In 2015 they had about 700 workers on the floor. Today's that number is closer to 2000. He says he has to get to work 30 minutes early if he even wants to get a spot in the parking lot.

 

This story is much more common than you would imagine, and none of it really makes the news. My father used to be a defense lawyer for alot of the machinery companies in the city and he's heard similiar things everywhere. Whether it's a small company ramping up from 15 to now 30 workers or my much larger example. 

Edited by KFM44107
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Interesting 2019 1Q office market report in many respects. One item of general interest is that, while the overall downtown office vacancy is higher than the suburbs, the Class A vacancy is four basis points better than the suburbs and rents are higher than the 'burbs. At 11 percent, downtown's Class A vacancy rate is near the magic number when a spec office building might be justified. It's why Stark doubled the size of the office component of nuCLEus to 400,000 sf while cutting the residential in half and eliminating the hotel. Also, Market Square will add 150,000 sf of office space to the urban core. If downtown office users keep growing, suburban office tenants keep moving downtown, and New York/coastal office users keep moving to Cleveland, there may be demand for even more Class A products....

 

http://www.ngkf.com/Uploads/FileManager/1Q19-Cleveland-Office-Market.pdf

Edited by KJP
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https://www.us.jll.com/content/dam/jll-com/documents/pdf/research/us-cleveland-office-insight-q1-2019-jll.pdf

 

JLL reports it at 13%.  They stated in the report that a good chunk of Class A became available because "Fifth Third renewed and downsized from 104,000 to 37,000 square feet."  Were there a bunch of cuts there that I missed?

Edited by cle_guy90
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Ad, marketing firm with Akron roots adds office in downtown Cleveland

 

Geometry Global, part of an international advertising and marketing agency, with a legacy home in Akron, plans to add a second office in downtown Cleveland by 2020.

 

That's the upshot of Post Office Plaza owner K&D Group of Willoughby announcing Tuesday, May 7, that Geometry plans to move 100 jobs to the building at 1500 W. Third St. after leasing more than 14,000 square feet of office space on its fourth floor.

 

Doug Price, K&D Group CEO, said in a May 7 phone interview, "We're real excited. We've been working with them for some time. They felt they needed to be in Cleveland."

 

https://www.crainscleveland.com/real-estate/ad-marketing-firm-akron-roots-adds-office-downtown-cleveland

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They're locating in the Warehouse District....

 

Top of Mind Networks Announces New Cleveland Office

May 21, 2019

 

ATLANTA--(BUSINESS WIRE)--May 21, 2019--

Top of Mind Networks, a leader in customer relationship management and market automation software for the mortgage lender and real estate industries, is pleased to announce the opening of its new office in Cleveland, Ohio. This new Technology Center represents the continued growth of Top of Mind Networks and its willingness to invest in additional resources to meet the growing needs of its client base around the country. The Cleveland office will be the company’s software development hub, while the corporate office will continue to be based in Vinings, Ga., in the metro Atlanta area.

 

https://www.apnews.com/Business Wire/a73ceb7a9e7d4ff49ba69cbbbc9bccf0

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^The Cleveland office will be the company’s software development hub, while the corporate office will continue to be based in Vinings, Ga., in the metro Atlanta area.

 

This is notable. They could have put software development in Boston or Austin or San Jose. But they chose Cleveland.

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More fallout related to Optima Ventures. It looks like we’re very fortunate that they’ve already divested many of their Cleveland properties. 

 

https://m.clevescene.com/scene-and-heard/archives/2019/06/11/how-ukrainian-oligarchs-secretly-became-the-largest-real-estate-owners-in-downtown-cleveland?utm_source=feature&utm_medium=home&utm_campaign=hpfeatures&utm_content=HomeFeaturedStoriesCustomMobile

 

They do still own 55 Public Square and One Cleveland Center as well as having some amount of ownership of the Westin. 

Edited by Boomerang_Brian
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Place matters. People like being close to each other, close to stuff, able to collaborate, innovate....

 

Jobs moving to places like downtown Cleveland, University Circle

https://www.crainscleveland.com/government/jobs-moving-places-downtown-cleveland-university-circle

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^I agree.  Based on data from the Brookings Report, cited above, Where jobs are concentrating and why it matters to cities and regions   (https://www.brookings.edu/research/where-jobs-are-concentrating-why-it-matters-to-cities-and-regions/). The report has a map of all cities, color-coded, by 2004-15 change. I instead chose 2012 to reflect life in the post-recession world.

 

Change in Job density in job dense areas from 2012 to 2015:

 

Akron: -19% (see note under Seattle)

Chicago:  6%

Cincinnati:  15%

Cleveland: 13%  -- ranked 17 out of 94.

Columbus:  9%

Dayton:  -1%

Detroit: 17%

Philly: 13%

Pittsburgh:  -6%

San Francisco:  30% -- the highest on the list

Seattle:  -21% --the worst on the list of 94 metros.  Akron was 2nd worst.

Toledo: 0%

All US Metros:  7%

 

I also ranked the raw job densities for 2015 for the 94 cities.  Cleveland came in at a respectable 18. Here are the top 30:

 

Rank  City    2015 Density 

1New York, NY-NJ-PA 138,541

2San Francisco, CA 54,375

3Urban Honolulu, HI 51,554

4Chicago, IL-IN-WI 42,428

5Seattle, WA 35,122

6Philadelphia, PA-NJ-DE-MD 25,338

7Pittsburgh, PA 19,320

8Minneapolis, MN-WI 17,631

9Los Angeles, CA 17,386

10Las Vegas, NV 15,633

11Denver, CO 15,259

12New Haven, CT 15,000

13Portland, OR-WA 12,978

14Houston, TX 12,556

15Hartford, CT 12,471

16Baltimore, MD 12,397

17New Orleans, LA 11,754

18Cleveland, OH 11,578

19San Jose, CA 11,133

20Nashville, TN 10,143

21Miami, FL 9,020

22Dallas, TX 8,896

23Atlanta, GA 8,641

24Charlotte, NC-SC 8,092

25Detroit, MI 8,071

26San Diego, CA 7,937

27Rochester, NY 7,635

28Austin, TX 7,502

29Cincinnati, OH-KY-IN 7,484

30Albany, NY 7,253

 

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^Awesome! Nice to know they have a nice, modern new place to sit around and plan projects that will never happen! 😉 

Edited by jeremyck01
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Booming? No. But Cleveland's office market remains steady

June 21, 2019 | Dan Rafter

 

The biggest office sale in Cleveland in the first quarter of the year came relatively late: Oaktree Capital Management’s $51.5 million purchase of PNC’s operations at 4100 W. 150th St. But while that transaction grabbed most of the headlines, it wasn’t the only big office sale of the first quarter here.

 

In the suburbs, Time Equities purchased PNC’s property at 23000 Millcreek Blvd. in Highland Hills for a $7.5 million price tag.

 

And while those sales boosted the office sector in the first quarter, new construction projects are also expected to goose the activity here. It all adds up to an office market that, while not booming, has certainly been solid in the first half of 2019.

 

MORE:

https://www.rejournals.com/booming-no-but-cleveland-s-office-market-remains-steady-20190621

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More...

 

 

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Downtown's office market gave back 245,000 square feet of space so far in 2019. That's the down side. The upside is that NYC-based Somera Road bought 1020 Bolivar Rd and has something planned for that building. I'd like to see them fill up the Ohio Bell building on East 9th at Lakeside someday.....

 

MORE:

http://www.ngkf.com/Uploads/FileManager/2Q19-Cleveland-Office-Market.pdf

 

BTW, at the CRE conference on Thursday, a speaker noted that downtown has 3 million square feet of office space available. There are two problems here --

 

First, property owners in Class B and C buildings need to make some cosmetic improvements to their buildings if they hope to beef up occupancy. Too many buildings give awful first impressions in their lobbies and common areas. 

 

Second, Cleveland is way behind on the co-working front. Many national and international businesses would like to offer a toe-hold in this market with an eye toward possible expansion but the lack of co-working spaces makes this unnecessarily complicated for them. Rico Pietro noted that some businesses start in a market with a token workforce at a co-working space and then dramatically ramp up their presence. Cleveland is losing out on these opportunities because it lacks the co-working spaces.

Edited by KJP
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58 minutes ago, KJP said:

 

Second, Cleveland is way behind on the co-working front. Many national and international businesses would like to offer a toe-hold in this market with an eye toward possible expansion but the lack of co-working spaces makes this unnecessarily complicated for them. Rico Pietro noted that some businesses start in a market with a token workforce at a co-working space and then dramatically ramp up their presence. Cleveland is losing out on these opportunities because it lacks the co-working spaces.

 

Did Rico mention if anything was being done to remedy the situation?  It seems people are aware of the issue, so I wonder if anyone plans to do anything about it.  WeWorks co-working is on every other block here in LA and I believe they just opened in Columbus.

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His complaint is that Cleveland landlords aren't doing enough. He and others said that Cleveland is way behind other major cities and offering coworking opportunities.

 

Edit:  I just did a quick Google search on Cleveland coworking spaces and below is where they are. That's a pretty small number.

 

Edit2: I did a similar search on Pittsburgh, Columbus, Detroit and Cincinnati and all showed a similar number of dots on their maps. Now, of course, dots on a map don't say how many units are available at each dot so it's not really telling the full story.

20190629_120914.jpg

Edited by KJP
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The Class A vacancy rate is near 10 percent. That's a very good vacancy rate. The Class B and C rates are high because they are non-competitive with Class A properties downtown and especially in the suburbs.

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Looking forward to seeing more 2nd quarter reports. 

 

Meanwhile....

 

 

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7 minutes ago, Terdolph said:

So if the downtown Class A vacancy rate is below 10% why is this building going broke?

 

The article states that the building is 96% leased. The owner had trouble paying some repair bills, etc.

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On 8/23/2017 at 12:18 AM, KJP said:

AML RightSource is headquartered at 200 Public Square...

 

New York private equity firm invests in Cleveland-based AML RightSource

August 21, 2017

By SCOTT SUTTELL

 

New York private equity firm Clarion Capital Partners LLC on Monday, Aug. 21, announced it has made an investment in AML RightSource, a Cleveland company that provides clients with anti-money laundering, Bank Secrecy Act and financial crimes compliance services.

 

Specific terms of the investment, which closed last Friday, Aug. 18, were not disclosed. On the "About Us" page on its website, Clarion says it focuses "on equity investments in the range of $15-$50 million with enterprise values of $50-$200 million."

 

...AML RightSource has about 575 total full-time employees, including about 410 in Cleveland, according to the email.

 

MORE:

http://www.crainscleveland.com/article/20170821/NEWS/170829961/new-york-private-equity-firm-invests-in-cleveland-based-aml

 

OK, now this doesn't sound good....

 

Head of Cleveland-based firm buys Buffalo home for $1.4 million

https://buffalonews.com/2019/08/08/aml-rightsource-ceo-buys-1-4-million-buffalo-house/

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2 hours ago, KJP said:

 

OK, now this doesn't sound good....

 

Head of Cleveland-based firm buys Buffalo home for $1.4 million

https://buffalonews.com/2019/08/08/aml-rightsource-ceo-buys-1-4-million-buffalo-house/

 

I dunno--it says he is from Buffalo, and the firm already has 31 offices.  It also plans to expand to 50 nationally.   So hopefully Cleveland isn't going anywhere.  

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AML Rightsource also has offices at 200 Public Square. I wonder if they tried to expand downtown before choosing Highland Hills?

 

Growing tech firm snaps up full floor at East Side building

https://www.crainscleveland.com/real-estate/growing-tech-firm-snaps-full-floor-east-side-building

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Scrolling through the downtown Cleveland alliance website and their new “build it” icon I came across this graphic. 1 million square feet of office space? Seems suitable for a certain large downtown company?

image.jpg

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Old plan. New plan is for 400,000 sf of office. 

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A pretty compelling stat even if the factors behind it are complex....

 

 


"Life is 10% what happens to you and 90% how you respond." -- Coach Lou Holtz

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26 minutes ago, punch said:

what does "negative rent growth" meaning rents are less expensive year over year (function of supply / demand?) 

 

Could also mean a lack of quality office product which commands higher rents. Brokers have been noting that office tenants have been pursuing a "flight to quality" among office products. Yet the CBD market has only 3.165 million sf of "Trophy Class" office inventory and just 2.5 million sf of Class A inventory in a market with 15-20 million sf of office space (depends on the CBD boundaries). No one is building new Trophy/Class A office space because the rents aren't high enough to offset construction costs and there aren't enough subsidies (as with housing) to justify office construction. So the market is inactive.

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Downtown Cleveland getting a new Fortune 500 HQ

 

 

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4 hours ago, freefourur said:

Was this the big news you had been hinting about in the SHW thread?

 

No 😄

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