Cleveland continues to be plagued by a terrible ‘Midwest’ economy. According to this Crain’s report, downtown retail vacancies have hit 10.4%.
Following trends in national retailing and its own market, CBRE Group Inc. has started reporting downtown Cleveland statistics as part of its just-completed annual retail survey covering eight Northeast Ohio counties.
CBRE reported downtown vacancy at 10.4% among the 1.6 million square feet of selling space on the city’s broad thoroughfares and the long-suffering enclosed malls The Avenue and Galleria.
Surprisingly, that’s not far from areawide averages as retail gets roiled by oversupply and competition from the internet.
CBRE estimates the region has 11.7% retail vacancy as of year-end 2016 from 10.3% a year ago. However, regional asking rental rates climbed to $12.13 a square foot at year-end 2016 from $12.02 a square foot a year ago.
In-demand retail locations are able to command far higher rates than the regional ask, with taking rates at some new retail centers commanding rents of $40 a square foot. Adding more downtown retail specifics required the realty brokerage to rejigger its approach for a different selling environment.
Brandon Isner, CBRE research analyst, and two other staffers had to physically canvass the storefronts to produce the figure. The national brokerage also had to report street retail for the first time, a big switch from its traditional way of surveying about 400 shopping centers above 50,000 square feet in size in eight Northeast Ohio counties. Isner said additional downtown retail data is a natural response to increasing urbanization in the U.S.
Keith Hamulak, CBRE vice president, said the firm is getting increased queries about downtown retail space as well as neighborhoods such as Tremont and Ohio City.
“This is so we can drill down our data properly,” Hamulak said. “In the past, there was little demand from national retailers about downtown space. Now, national retailers want to know about downtown and Main Street retail locations.”
Moreover, the market is changing between proposed downtown developments such as Stark Enterprises of Cleveland’s 48-floor nuCLEus project in the Gateway District, which has 150,000 square feet of proposed retail space, and developers converting office buildings to apartments also want to revitalize their first-floor spaces with new retailers. All told, CBRE estimates 550,000 square feet of retail is proposed downtown.
Michael Deemer, executive vice president of business development at Downtown Cleveland Alliance, said having a national brokerage firm produce such information will be helpful as he is getting increasing requests for it.
Deemer said he personally estimated the figure at about 10%, but he believes many building and business owners he works with peg it at a much higher level.
“For a lot of folks in the marketplace, that will be a real surprise,” Deemer said. “In a lot of ways, I wish we had an earlier benchmark. As the downtown residential market has taken off, we could show how much the market has improved.”
The report is also useful given the leading role that chefs and quick-serve restaurants are playing in the retail sector.
Stephen Taylor, a CBRE vice president who focuses on restaurants, said that when he works with chefs in Cleveland or other parts of the state, they actively seek sites in revitalizing neighborhoods.
“It’s the walkability of the environment that is drawing them. Breweries are also serving as a catalyst for neighborhoods,” Taylor said. “It’s the attraction of storefront retail that was popular from the 1920s to the 1940s.”