Cleveland Market Overview
Economic Overview
As the nation begins to rebound from the recession that will characterize 2009 for future generations, the question of recovery is still uncertain for secondary markets such as Cleveland. In the latest release from the Bureau of Labor Statistics, seasonally adjusted unemployment in the region saw a 0.1% increase to 9.6%. While the increase does reflect a slowdown in the rise of unemployment, it is recorded during a period when most other states are experiencing flat or declining unemployment. A glimmer of hope comes from the latest report on the leading indicators for the Cleveland-Elyria-Mentor Metropolitan Statistical Area which reported no decline in the leading indicator index from October to November; suggesting that employment loss in the region should be less this winter than in years past.
Market Conditions
Cleveland ended on a positive note, posting a positive overall absorption of 46,459 square feet in the fourth quarter and drop in total vacancy of 0.1%. Despite an increase in direct vacancy of 0.2%, subleasing activity was able to offset losses with nearly 150,000 square feet of positive net absorption. Class B productalso outperformed Class Asuggesting that there is not a "flight-to-quality" that is typical in down real estate cycles.
Despite meager activity in the market, overall quoted rental rates have remained stable over the year. Many landlords in the market have been reluctant to dramatically reduce face rates, opting to offer generous tenant concessions in lieu of reduced rates. In addition, more expensive space that has become available within the market has been able to offset rent reductions.
Looking Forward
Recovery in the Cleveland market will lag at lease a year behind many of the larger, primary office markets. Many tenants that have survived the tumultuous year have shadow vacancy within their current space that will allow for growth as the economy begins its recover. Tenants that were able to capitalize on the down economy have committed to longer lease terms in return for reduced rental rates and/or the right to relinquish underutilized space. Cleveland will remain a tenant favorable market for the foreseeable future.
More information on the Cleveland market for the fourth quarter of 2009, including Cleveland Office Highlights and Occupier Market Conditions, is available courtesy of Jones Lang LaSalle. For questions on this information, or to request more detailed Cleveland Office Statistics, please contact Andrew Coleman or J.R. Fairman at (216) 861-7171.