HEARTLAND SNAPSHOT, AUGUST 2005

Cleveland Industrial Market

With the manufacturing shift overseas, the greater Cleveland industrial market is focusing on warehouse and distribution space, according to Dave Stover, vice president of Chartwell Group in Cleveland. “After products and equipment are built abroad, they need to be stored and distributed throughout the U.S. Many Cleveland property owners are focusing on this segment by building high cube warehouse facilities or converting older manufacturing properties into warehouse/storage facilities.”

New construction in Cleveland’s industrial market typically has 24- to 28-foot clear heights, and the majority of the larger 100,000-square-foot properties are being converted to multi-tenant facilities. The demand for larger facilities is slow, and warehouse spaces ranging from 20,000 to 50,000 square feet are the most in demand. “Very little speculative projects are being built,” he says. “Companies building their own facilities make up the bulk of new construction.”

The majority of industrial development is taking place in the southeast and southwest suburbs. “The rationale behind this is affordable open space and available land with access to turnpikes and freeways,” Stover says. “There are limited land sites available within the city of Cleveland that are not environmentally challenged.”

Duke Realty and Geis Companies are the two largest developers in the Cleveland industrial market, according to Stover. Geis Companies currently is constructing approximately 350,000 square feet in Solon, Ohio, for Swagelok Company, and last year the company constructed approximately 700,000 square feet in Streetsboro, Ohio, for L’Oréal. Duke Realty has completed numerous build-to-suit projects during the last 10 years, primarily in the 70,000-square-foot to 150,000-square-foot range. Duke also has two significant industrial parks in the metropolitan area, the 170-acre Emerald Valley Business Park in Glenwillow and the 130-acre Hudson Business Park in Hudson.

Several large lease transactions recently have closed in metropolitan Cleveland. Royal Appliance Manufacturing Company has leased 216,190 square feet of space at 1200 Babbitt Road in Euclid, Ohio, and RPI leased 151,000 square feet at the former Goodyear Tire & Rubber Company facility near the Cleveland Hopkins International Airport.

Older industrial properties in Cleveland are renting for $1.50 to $2.50 per-square-foot while newer properties in the suburbs are ranging from $4 to $5 per-square-foot. The vacancy rate has fluctuated between 9 percent and 11 percent during the last 5 years.

In the future, the southeast and southwest markets will continue to be strong due to their convenient access to the major freeway. The population shift out to those areas will help by attracting a quality labor force. However, even with those active markets, the greater Cleveland area has very little ‘new blood’ entering the market, according to Stover. “There are existing companies moving around from building to building, and even downsizing from building to building, but few companies have relocated to the area,” he says. q “Local government, community leaders and real estate professionals need to develop a strategy to attract and secure quality companies to the area so that they can call Cleveland home for many years to come.”

©2005 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.