June 2008 Cleveland Plus Quarterly Economic Review
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June 2008 Cleveland Plus Quarterly Economic Review

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Team Northeast Ohio looks at the overall climate of industrial real estate in our 16-county Cleveland Plus™ region. The industrial real estate market is strong, and demand is growing in Northeast ...

Team Northeast Ohio looks at the overall climate of industrial real estate in our 16-county Cleveland Plus™ region. The industrial real estate market is strong, and demand is growing in Northeast Ohio. Charts and data contained within this report include industrial space use, occupancy and vacancy, employment, unemployment, and gross regional product.

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June 2008 Cleveland Plus Quarterly Economic Review June 2008 Cleveland Plus Quarterly Economic Review Document Transcript

  • Our partners include: Greater Cleveland Partnership Greater Akron Chamber Stark Development Board Team Lorain County Youngstown-Warren Regional Chamber Medina County Economic Development Corporation Northeast Ohio Economic Review June 2008 Volume 2, Issue 2 The demand for industrial real estate in Cleveland Plus is ™ strong, and growing.
  • Team Northeast Ohio looks at the overall climate of commercial real estate in our next two editions of the Northeast Ohio Economic Review. This June 2008 edition takes a look at industrial real estate. Then in September, we will cover the market for office space in our 16-county Cleveland Plus™ region. The industrial real estate market is strong, and demand is growing in Northeast Ohio. According to Colliers Ostendorf-Morris, Cleveland ranks as the nation’s ninth largest area of industrial space. This, when coupled with the industrial space throughout the 16-county region, ranks Northeast Ohio as the sixth largest industrial market in North America.1 Northeast Ohio has a total stock of industrial square feet larger than at any time since 2000, with approximately 411 million square feet in total. In 11 of the past 16 quarters, the industrial market has seen positive net change in space being used. In fact, we’re using over 11 million more industrial square feet than we used in early 2004. Even in a slower economy, the demand for industrial space is growing. And it’s worth noting the industrial real estate market is not facing the same constraints as the residential market. According to Grubb and Ellis, companies are looking for modern, efficient facilities, despite the uncertainty reported in the current economic climate. A great number of these modern facilities can be found in areas such as Solon and Glenwillow, which currently are seeing the construction of nearly 600,000 square feet. Northeast Ohio’s vacancy rate is at 8.4%, the second lowest point in the last five years, with the only lower rate coming in the last quarter of 2007. This nearly mirrors the national rate of 7.9%2 and indicates the demand for industrial space in Northeast Ohio remains strong. This also suggests a stable real estate market. Specifically, the occupied space continues to grow at a moderate rate. In addition, vacancy rates for manufacturing space are the lowest they have been since 2003. The market is watching Northeast Ohio: •Real Estate Research Corporation states that Cleveland is one of the top ten industrial markets to watch in 2008. •The December 2007 Heartland Real Estate Business publication stated the Akron/Canton area is a market that people should keep their eye on for the future. 1 Based on rankings of Existing Industrial Inventory, Colliers International North American Industrial Report, Q1 2008. 2 Grubb and Ellis North American Industrial Market Report, Q1 2008.
  • “The general market for space is public perception would lead y Northeast Ohio Occupied Industrial Space: The graph shows the total 2003–2008 amount of industrial space 32,214,618 371,265,554 occupied by quarter, from the 369 380 403,670,905 34,460,903 369,210,002 first quarter of 2003 through 369 403,800,985 34,022,815 369,778,170 366 403,977,146 36,986,657 366,990,489 the first quarter of 2008. Over 364 404,692,638 39,855,489 364,837,149 this period, total occupied 375 365 405,099,348 39,230,654 365,868,694 Square Feet (Millions) 367 406,624,789 38,644,911 367,979,878 industrial space has increased 369 407,178,000 37,883,300 369,294,700 by approximately 11 million 372 408,487,815 35,728,080 372,759,735 370 372 408,555,915 35,750,581 372,805,334 square feet. 372 409,103,978 36,390,391 372,713,587 369 409,607,686 39,936,244 369,671,442 372 409,900,641 37,867,652 372,032,989 365 371 409,947,141 38,076,933 371,870,208 372 409,955,391 37,241,277 372,714,114 371 410,176,715 38,414,921 371,761,794 372 410,241,015 37,596,877 372,644,138 360 373 410,380,795 36,417,291 373,963,504 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 375 410,459,659 35,294,212 375,165,447 377 33,859,369 2005 377,157,582 2003 2004 2006 2007 2008 376 34,589,053 376,484,148 Northeast Ohio Industrial Vacancy Rates: 2003–2008 16.0% 14.0% Vacancy Rate 12.0% 10.0% 8.0% 6.0% Q1 Q3 Q4 Q1 Q3 Q4 Q1 Q3 Q4 Q1 Q3 Q4 Q1 Q3 Q4 Q1 Q2 Q2 Q2 Q2 Q2 2003 2004 2005 2006 2007 2008 NEO Canton-Massillon MSA Cleveland-Elyria-Mentor MSA Youngstown-Warren-Boardman MSA Akron MSA The graph above depicts industrial vacancy rates for Northeast Ohio (see Data Sources) and the Metropolitan Statistical Areas (MSAs) within the 16-county region. The vacancy rate for Northeast Ohio is similar to the U.S. as a whole. Due to data limitations, trend data was only available for NEO, the Cleveland-Elyria-Mentor MSA, and the Akron MSA, while snapshots of current industrial vacancy rates were available for the Canton-Massillon MSA and the Youngstown-Warren-Boardman MSA. Full data history is not available on the Canton–Massillon or Youngstown–Warren–Boardman MSAs, but has been included as a point of reference for where these MSAs currently stand. View slide
  • s a lot stronger than what you to believe.” — Bob DeHoff, president of DeHoff Development and Prudential DeHoff Realtors “Much of the interest for expansions is coming from the manufacturing sector, as U.S.-made products become more attractive internationally due to the weakened dollar.” — Grubb and Ellis, Q1 2008 Northeast Ohio Industrial Space: Manufacturing vs. Distribution and All Other Uses: 2003–2008 16.0% 15.0% 14.0% Vacancy Rate 13.0% 12.0% 11.0% 10.0% 9.0% 8.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2003 2004 2005 2006 2007 2008 Manufacturing Distribution/All Other Uses The graph above shows the vacancy rates of space when broken down into two subcategories: manufacturing space, and distribution and all other uses (see Data Sources). Vacancy rates for manufacturing space have declined significantly over the past several years, while rates in all other industrial space are nearly 2% lower than they were at their peak in 2005. Both mirror steady gains in the Cleveland Plus™ industrial economy. “Although some tentativeness exists, businesses are still looking for and committing to industrial space. Many prospects are actually very surprised to find the market is much tighter than they expected.” — Joseph Martanovic, senior vice president with the Colliers Ostendorf-Morris Industrial Services Group View slide
  • Industries Quarterly Unemployment Rate Susceptible to 7.5% Seasonality Impacted 7.0% Unemployment Rate 6.5% 6.0% For several reasons, the unemployment rate 5.5% usually jumps higher in the first quarter. The 5.0% quarterly unemployment rate for Northeast Ohio increased in Q1 of 2008 to just under 4.5% 6.5%. This upward shift was identical to 4.0% the change in national unemployment, with Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 both rates increasing 71 basis points. This 2002 2003 2004 2005 2006 2007 2008 upward shift is largely the result of softness NEO 16 Ohio U.S. in the service and construction sectors. The unemployment rate was 6.0% in Q1 of 2007. Source: Ohio Labor Market Information (LAUS Data) Employment Numbers Reflect Typical Decrease from Q4 to Q1 Northeast Ohio Total Employment This chart shows the total jobs in Northeast Ohio without seasonal adjustment. (Not Seasonally Adjusted) Looking at the history for each quarter makes 2.08 it easier to see year-to-year comparisons. The 2.06 overall trend also illustrates the seasonal pattern 2.04 in employment. Total jobs usually are highest in 2.02 (Millions) Q3 and lowest in Q1. 2.00 1.98 Total employment in Northeast Ohio declined 1.96 to just under 2 million workers in Q1 of 2008. This follows the traditional downward trend that 1.94 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007 occurs between Q4 and Q1 due to changes in seasonal employment. Compared to a year ago, Q1 Q2 Q3 Q4 employment was down over 16,500, on par with 2006 and above 2004 and 2005. National employment has fallen for the last five months. Source: Ohio Labor Market Information (LAUS Data)
  • Northeast Ohio economy still showing growth. Modest Growth Expected Northeast Ohio: Real GRP Billions (2007 Dollars) to Continue in 2008 $190 0.9% 0.7% 0.2% $180 1.1% 12.6% Northeast Ohio is seeing its seventh consecutive year of 1.8% $170 0.3% (-1.9)% 1.2% 2.6% 1.2% growth and has grown in 14 of the last 15 years. We 4.8% $160 3.0% expect modest growth to continue through 2008. 3.8% $150 5.1% 0.3% 3.6% The 2008 number was adjusted down as was 2007. $140 This data comes from Moody’s Economy.com, which $130 continues to revise its estimates. Even now, 2007 $120 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 remains an estimated number. It comes as no surprise 2006 2007 2008 Real GRP Average Annual Growth = 1.9% that these numbers were adjusted down, as we know the economy weakened at the end of 2007 and the Source: Moody’s Economy.com beginning of 2008. The gap between the Average Annual Growth trend line and the 2007 and 2008 bars is representative of softness in both the national and local economies. About Team NEO Team NEO markets Northeast Ohio to attract business investment in targeted industry clusters. The organization is a joint venture of the largest metro chambers, representing 16 counties and their 4 million people. Team NEO serves as a central resource, informing and serving those considering investment in Northeast Ohio and is a co-founder of the Cleveland Plus™ Marketing Alliance, a coalition to drive strategic, long-term marketing for Northeast Ohio. For more information, visit www.teamneo.org. Data Sources: Team Northeast Ohio uses a number of data sources for the Regional Economic Review. One of the primary sources is the Moody’s Economy.com (www.economy.com) Northeast Ohio modeling system. This firm is the leading independent provider of economic, financial and industry research and data that specializes in national and metropolitan economic growth forecasts. Moody’s Economy.com county Ashtabula Lake level output, employment and payroll historical data are estimated from several publicly available sources and are summarized into the Team NEO regional footprint. It is important to understand data provided by Economy.com are estimates of economic activity. Cleveland Geauga Team NEO also uses data from federal and state sources as part of the report. As with Economy.com, the Cuyahoga information for the Team NEO footprint is derived from data reported at either the county or metropolitan Trumbull level. We rely heavily on data from the U.S. Bureau of Labor Statistics (www.bls.gov) and Ohio’s Labor Lorain Market Information (www.lmi.state.oh.us) for information on wages, unemployment and both general and Summit Portage industry-specific employment. In addition, Team NEO uses data from the Census (www.census.gov) to track Youngstown housing-related activity including the number of single and multifamily permits, as well as their values. Medina Akron Mahoning Industrial data for this edition was derived from the CoStar Group. The CoStar Group is a leading provider of commercial real estate data throughout the United States, covering more than 58 billion square feet of Ashland property throughout the country. Wayne Columbiana Canton Richland Stark Due to market limits within the CoStar database, historic trend data for the Team NEO region is defined as 10 of the 16 counties forming the regional footprint. These counties include Ashtabula, Cuyahoga, Geauga, Carroll Lake, Lorain, Medina, Portage, Richland, Stark and Summit. Additionally, the industrial property breakdown between manufacturing and distribution and all other uses is defined by industrial properties classifying a second use. This encompasses approximately 70% of all Cleveland Plus 16-County Region industrial properties. 737 Bolivar Road, Suite 2000, Cleveland, Ohio 44115 888.NEO.1411 • www.teamneo.org • www.clevelandplusbusiness.com