The Cleveland multifamily market continues to be impacted by low home mortgage rates. Vacancies have moved to new highs in some middle market properties, and a 15 percent vacancy rate is not uncommon in many suburban markets.

Properties that have been less impacted by the slow rental market — since their tenants are not part of the home buying population — are age-restricted housing properties with occupancies of 95 percent or higher, and low-income properties and student-related housing with occupancies of 90 percent or higher.

The soft market has slowed development of new rental apartment projects. “Owners are focused on maintaining their occupancy rates and are revaluating older properties to determine how they can stay competitive in a submarket with a shrinking pool of tenants,” says Harry Giallourakis, senior vice president with Cleveland-based Capstone Realty Advisors. Landlords are readily offering concessions of up to 1 month of free rent, and remodeling and updating common areas and individual suites.

Apartment developers are experiencing strong sales in for-sale clusters and condominiums, and they are focusing their development efforts on these properties.

The downtown multifamily market continues to draw developers. New for-sale product at the Sincere Building (a 14-unit condominium being developed by G&Z Partners on East 4th and Prospect) and the former WKYC building (a 48-unit condominium being developed by Lewis Wallner on East 6th and Rockwell) will be available this year. These projects and the condominiums at Stonebridge Waterfront Apartments — a 159-unit complex developed by The K&D Group on the west bank of the Flats — will test the depth of the market for home ownership in the central business district (CBD). Several for-sale and rental unit projects, continuing to target high-income households/individuals and young professionals, are in process for the CBD.

In 2002, several large garden-style projects were sold in the greater Cleveland area, including the 366-unit Polo Club in Strongsville, purchased by Silver Spring, Maryland-based Realty Investment Company for $20 million; the 244-unit Arbors in Westlake, purchased by Cleveland-based WXZ Development Company for $15 million; and the 252-unit Village Park Apartments in Mayfield Village, purchased by New York-based RCP General for $17 million. Low interest rates coupled with available capital drove cap rates down and prices up as vacancies and concessions were increasing. “The ability of these properties to return to stabilized levels in the near term will determine if the prices paid were warranted,” Giallourakis says.

The next several years will test the market’s ability to recover from sone of the weakest rental rates during the past decade. An increase in the home mortgage interest rates and new jobs are essential to making that recovery possible.


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