HEARTLAND SNAPSHOT, JUNE 2004

CLEVELAND INDUSTRIAL MARKET

The Cleveland industrial market has seen a significant increase in activity and some substantial absorption of facilities that are 75,000 square feet and larger, according to David Hexter, vice president and principal with Cleveland-based NAI Alan R. Daus & Associates. While there is still a significant oversupply of buildings that are 50,000 square feet and larger, the demand to purchase buildings that are 30,000 square feet or less has recently exceeded supply. New construction has also picked up, although it is below the peak experienced during the middle to late 1990s.

The industrial market has seen little speculative development. The bulk of the speculative construction was built by Duke Realty Corporation (two 144,000-square-foot buildings in Glenwillow) and Geis Companies (a 75,000-square-foot building and a 60,000-square-foot building in Oakwood Village and a 70,000-square-foot flex building in Parma). Duke has had relatively good success in leasing its projects, having only half of the second Glenwillow building vacant, Hexter says. This activity has occurred with more than 2 million square feet of vacant space (or more than 10 percent) in the Solon industrial market.

Rental rates in Cleveland average around $2 per square foot for buildings with more than 100,000 square feet of space and $6 per square foot for flex space less than 5,000 square feet in the suburban markets, Hexter says. Vacancy rates have decreased during the past 6 months with the rate in Cuyahoga County at 10.5 percent.

Regarding the build-to-suit market, Geis Construction Company recently completed two major projects in the area: a 650,000-square-foot regional distribution center for L’Oreal in Streetsboro and a 400,000-square-foot plant for Laich Industries near Cleveland Hopkins Airport. “The Laich project in Cleveland used one of the few remaining land parcels near the airport,” Hexter says. Also, Sysco Food completed a 500,000-square-foot distribution center in Chelm Management’s business park near the airport.

“The Streetsboro market remains an area of strong development because of available land and great access to Interstate 480 and the Ohio Turnpike,” Hexter says. “The majority of new development west of Cleveland is occurring in the Strongsville and Avon areas.”

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