Cleveland Has Growth Momentum. Now It Needs To Keep It
Cleveland is on the rebound, but according to the speakers at Bisnow's first Cleveland State of the Market event, a budding urban renaissance is no guarantee of future robustness. Neither the public nor private sector can assume that Cleveland's momentum will continue on autopilot. They have to continue to cooperate to make it so.
Cleveland Mayor Frank Jackson gave the event's opening remarks, emphasizing that much of Cleveland is doing well — far better than anyone would have thought even a decade or so ago. That is especially true in the central business district and neighborhoods such as Tremont, Ohio City and Shaker Square.
"People want to be in those places," Jackson said. "They've stabilized, investment is coming in and people want the lifestyle that they offer. They want to live in the city and be consumers of that lifestyle."
But, he said — and it is an important but — if Cleveland is going to continue to have a bright future, that kind of stabiliztion and growth needs to extend to other parts of the city, places that are currently left behind.
"The most distressed areas are the future," he said. "The future will fade for Cleveland, and all that we've done so far, if those distressed areas do not improve."
Jackson stressed that the private sector is the key to this kind of growth, as it always has been. The city has an important role, but mainly as a facilitator.
"The public sector provides services, mostly outside the CBD. The private sector needs to invest in the more distressed areas, to rebuild and invest in the people of those areas," he said. "That's the future of Cleveland."
Like a lot of downtowns across the country, Downtown Cleveland has seen an influx of people and buisnesses recently, and there is no indication that the trend is going to reverse, the speakers said.
There is not even any indication of a plateau, with about 3,300 new apartments in the works Downtown.
In 2017, more than 1,000 housing units came online in Downtown Cleveland. The area's population bumped up to about 15,000. Too many? Hardly, the speakers agree. In a metro the size of Cleveland, that is still a relatively small number, and there is still room to grow Downtown.
There will also be a more diverse mix of residential space in the near future, the speakers said. There will be demand for condos, and while their development involves a different but related skill set as apartments — and extra complications, sometimes — they will be developed in Downtown Cleveland.
Older millennials, who are known for their renting ways, may be among those most eager to buy their residences in the near future. If not Downtown, then neighborhoods like Tremont or Ohio City.
Meanwhile, with over 95,000 jobs Downtown, the area is one of the largest employment hubs in Ohio. That too is unlikely to change, the speakers said. As major employers make commitments to the area, such as Medical Mutual of Ohio did last year, other businesses are going to follow.
In the industrial sector, Cleveland is a hot market, the speakers said. It has one of the lowest vacancy rates in the country, around 4%, rivaling California's tight Inland Empire market.
Yet demand remains strong: businesses need more space as they grow, and since there is not enough inventory, that is not only driving rental rates up, but spurring development.
But not just any kind of industrial development. Since Cleveland is emerging as an e-commerce hub, the next wave of industrial development in the market is going to be quite specialized, because e-commerce operations need highly sophisticated space, not ordinary warehouse/distribution space.
Amazon's two fulfillment centers in northeastern Ohio it committed to last year, seemingly one right after another, are prime examples of this kind of development: specialized, multistory facilities that feature advanced robotics and materials-handling systems, but also a lot of workers, perhaps as many as 2,500 across three shifts.
Building these kinds of facilities, and getting them up and running on a tight timetable, is a major challenge, the speakers said, and assembling the parcels can be as well. But the demand is there, so they will be built.
Why greater Cleveland for these kinds of major e-commerce facilities? Finding a market with enough land, but also near population centers, and with the right infrastructure, is actually a fairly tricky proposition, the speakers said.
Cleveland has the right combination of land, labor and infrastructure, so it is getting attention from national and international e-commerce specialists.