In the Cleveland retail market it is becoming popular to develop lifestyle centers and to redevelop and reposition existing shopping centers.

Steven Eisenberg President Arnold J. Eisenberg Inc.

According to Steve Eisenberg, president of Beachwood, Ohio-based Arnold J. Eisenberg Inc., Legacy Village — being developed by First Interstate Properties and scheduled to open this month — will be Cleveland’s first true lifestyle center. The development’s tenant mix will include a variety of shops and retailers new to the market, such as The Cheesecake Factory, Brio Tuscan Grill, California Pizza Kitchen, Stir Crazy, Claddagh Irish Pub, Atria’s, Galyan’s Trading Company, Expo Design Center and Crate & Barrel.

On the west side of town, Robert L. Stark Enterprises is developing Crocker Park, which will combine the lifestyle center experience with office and residential space in Westlake. In Lakewood, a joint venture of Jeffrey R. Anderson and CenterPoint Properties Trust is developing the Shops at West End with space for retail, restaurant, entertainment and hospitality tenants.

Starwood Wasserman is developing University Square, a redevelopment of the Cedar Center shopping area known as Kaufmann’s on the Heights. The 600,000-square-foot power center will be anchored by a new Kaufmann’s Department Store and a Tops Supermarket.

Development also is occurring in second ring suburbs of Cleveland to accommodate the continued expansion of grocery, home improvement and general merchandise retailers. Two examples of this are Heritage Development’s Marketplace at Four Corners in Bainbridge Township, and DeBartolo Property Group’s Macedonia Corners in Macedonia.

“Development activity is strong in comparison to past years as consumerism drives retail expansion,” Eisenberg says. “Developers continue to build new centers to keep up with the residential growth throughout the metropolitan area. Mass merchandisers are increasing their numbers of stores and growth should remain constant. With all of this development, retail sales are expected to increase more than 25 percent during the next 5 years.”

Developers in the Cleveland market that specialize in retail are the Visconsi Companies, First Interstate Properties, Robert L. Stark Enterprises and Starwood Wasserman. Companies that have a made a significant entrance into the market by purchasing retail properties include Edens & Avant, Inland Commercial Property Management and New Plan Excel Realty.

The average vacancy rate in Cleveland retail properties is 8 percent, with the highest vacancy rates in centers built prior to 1985. For centers built after 1985, the vacancy rate is less than 5 percent.

The communities surrounding the Cleveland area will continue to see major retail expansion. Residential growth in suburbs such as Aurora, Avon, Strongsville, Lake County and the southwestern suburbs will remain high because of the availability of land and the lower tax rate outside of Cuyahoga County. “Our transportation system offers ease and convenience for people to commute and allows wide accessibility to retail centers,” Eisenberg says.

RETAIL VACANCY RATE ON THE RISE IN CLEVELAND On the more traditional retail front, the western suburb of Avon continues to be the preferred community for new development. Wal-Mart recently completed a 157,000-square-foot store, and Avon Commons, an 800,000-square-foot power center completed in 2001, recently added 240,000 square feet of space. French Creek Square, an 80,000-square-foot center located adjacent to Avon Commons, is also under development. However, this type of activity is clearly in the minority. The overall vacancy rate has increased to about 11 percent as of the second quarter of 2003 — the highest rate in more than 7 years. Hampered by continuing struggles of retailers such as Kmart, as well as an overall decline in consumer spending, velocity has slowed to a trickle in many traditional retail hubs, particularly those in older, core submarkets. These locations have been hurt by the gradual but steady outward migration of population to newer suburbs located west, southwest and southeast of downtown Cleveland. Unfortunately, many of these areas, such as the hubs around Euclid Square Mall and Randall Park Mall, face a difficult, if not impossible, uphill climb. — Alec Pacella is vice president in Grubb & Ellis’ Cleveland office.

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