Cleveland Plus Quarterly Economic Report

Our partners include: Greater Cleveland Partnership Greater Akron Chamber Stark Development Board Team Lorain County Youngstown-Warren Regional Chamber Medina County Economic Development Corporation Cleveland Plus ® Economic Review March 2009 Volume 3, Issue 1 biomedical industry a driving force in Northeast Ohio

March 2009 | Volume 3, Issue 1 Growing Biomedical Sectors are Helping to Transition the Cleveland Plus Region’s Economy With 60 hospitals, we know that the Cleveland Plus region is a healthcare hub, but how does that translate into business for the economy? 7.4 The biomedical industry is a driving force in % Northeast Ohio. While the region has long been a leader in healthcare, our 30 colleges and annual growth 600 universities, strong manufacturing capabilities, plus billions of dollars in private and public investment are making the region a premiere biomedical $2.3B companies location for biomedical business. State of Ohio Northeast Ohio’s biomedical industry is producing $395M Technology Investment goods and services that are exported nationally and internationally, thus redefining healthcare in 2008 outside the 21st century, and increasing the wealth of VC/NIH the Cleveland Plus region. funding According to BioEnterprise—Northeast Ohio’s healthcare business formation, recruitment, and acceleration initiative—the regional biomedical industry has grown by more than 30% in the past five years. Northeast Ohio is now home to 600 biomedical companies, with many more starting or moving to the region each year. “Access to partners, customers and workforce is critical to Proxy Biomedical’s success. Establishing US Operations in Northeast Ohio will allow us to take advantage of critical product development support and clinical trials that will enable our accelerated growth and service to the world’s largest market, the United States.” Peter Gingras, CEO, Proxy Biomedical, an Irish Biomaterials Firm

NEO Bio Sector Growing 7.4% Annually: Outpacing U.S. Average NEO Bio-Related GRP Growth: 2003-2008 6000.00 The GRP for the biomedical sector 5000.00 4000.00 (Millions 2008 $) (which includes pharmaceuticals & 3000.00 therapeutics; medical devices & equip- 2000.00 ment; and research & development) 1000.00 has grown more than 37% over the 0.00 2003 2004 2005 2006 2007 2008 past five years. Medical Device Manufacturing Pharmaceuticals & Therapeutics R&D and Labs Source : Moody’s Economy.com Biomedical Share of Total NEO GRP: 2003-2008 2.9% 2.7% 2.5% 2.3% Furthermore, as a share of the 2.1% total GRP for Northeast Ohio, the 1.9% 1.7% biomedical sector has increased 1.5% 33%—from 2.1 to 2.8 over the 2003 2004 2005 2006 2007 2008 past five years. Series 1 Source : Moody’s Economy.com Aggregate Bio Sectors GDP: NEO vs US: 2003-2008 1.4% 1.3% 1.2% While the Cleveland Plus region has grown an average of 7.4% annually, 1.1% the United States has grown at 1.0% 6.8% annually. 0.9% 2003 2004 2005 2006 2007 2008 NEO US Source : Moody’s Economy.com

Historical Assets Fuel New Economic Landscape Manufacturing in Northeast Ohio continues to account for a “Prior to 2003, at Astro Manufacturing higher share of output than the national average and remains an important advantage for the Cleveland Plus region. and Design the revenue we generated However, the products that are being produced are changing was more than 50% automotive related. as the economy is transitioning. For example, the medical By the end of 2008, we had evolved devices & equipment manufacturing sector has grown 75% in the past five years. Because of Northeast Ohio’s strength in our production to the point that more healthcare, and the region’s strong legacy of skilled manufacturing, than 60% of our revenue comes from the Cleveland Plus region is primed to meet the needs of the work done for customers in the medical biomedical industry. and biomedical markets.” Proactive attraction of new venture capital (VC) funding from outside of Ohio is fueling much of this biomedical growth. Rich Peterson, Since 2005, the State of Ohio has attracted $783.9 million in new Vice President, Business Development VC funding. In fact, more than 60% of this has been attracted Astro Manufacturing & Design, Inc. to the 16-county Cleveland Plus region: $493.2 million. National Institute of Health (NIH) funding has added additional fuel. In fact, in 2008 alone, Ohio attracted $817 million combined VC/NIH funding, making Ohio the second in the Midwest for outside VC and biomedical funding. These grants recognize and fund cutting edge research in the treatment and prevention of diseases, and their funding is pivotal to advancing the biomedical industry in the United States and Northeast Ohio. The Cleveland Plus region alone has attracted nearly half of Ohio’s VC/NIH 2008 funding, accounting for $395 million of Ohio’s total. This ranks our region higher than some states, including Indiana, Kentucky, and Kansas. In addition, Ohio’s Third Frontier Project has added $1.6 billion to expand the state’s research Venture Capital & NIH Funding on Bio/Healthcare: 2008 ( in Mid-American States) capabilities, company formation, new product development, and advance manufacturing technologies in Ohio’s high-tech industries Illinois such as alternative energies and biomedical. Ohio When coupled with $750 million Building Ohio Minnesota Jobs programs, $2.3 billion in state technology Michigan funding is leveraged. Pennsylvania Missouri Wisconsin The Cleveland Plus region Cleveland Plus attracts more outside VC funding Indiana than many states, fueling new Kentucky business start-ups. Kansas $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $ Millions Venture Capital NIH Grants Source : National Institute of Health and Midwest Health Care Venture Report (2008), BioEnterprise and Mid-American Healthcare Investor Network. Since 2005, Ohio has attracted $783.9 million in new VC Funding.

NEO Total Employment ( Not Seasonally Adjusted ) Soft Economy Reflected 2.08 in NEO Job Total 2.06 2.04 2.02 This chart shows total employment in Northeast Ohio (Millions) 2.00 without seasonal adjustments. 1.98 1.96 By viewing employment on a quarter to quarter basis 1.94 we can see the overall trend that occurs due to seasonal 2006 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2007 2008 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2008 patterns of employment. Typically there is a drop between the third and fourth quarters, however the state of the Q1 Q2 Q3 Q4 national economy is reflected in the more substantial drop realized from a year ago. Total employment dropped just Source : Ohio Labor Market Information (LAUS Data) below 2 million workers in Q4 2008, down 3% from Q4 2007. NEO Unemployment Rate NEO Quarterly Unemployment Rate Trending Better Than 7.5% 7.0% National Rate 6.5% 6.0% The regional unemployment rate has been following the 5.5% pattern of both the U.S. and Ohio. However, Northeast 5.0% Ohio did show a slight improvement from Q3 2008 to Q4 4.5% 2008, closing the gap between the region and the state. Over the last 18 months, the rise in unemployment in 4.0% Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Q1 Q4 Northeast Ohio has been less than the U.S. as a whole. 2002 2003 2004 2005 2006 2007 2008 NEO 16 counties Ohio U.S. Source : Ohio Labor Market Information (LAUS Data) $190 NEO Real GRP Billions (2007 Dollars) GRP Continues to Grow 0.4% 0.4% $180 (-0.9%) 1.8% 2.6% 0.5% Modest growth is still projected for Northeast Ohio’s $170 1.2% 0.3% (-1.9)% 1.2% 4.8% 2.6% 2008 Gross Regional Product, based on the most recent $160 $150 5.1% 3.8% 3.0% projections available from Moody’s Economy.com. $140 3.6% 0.3% Moody’s detailed models of regional economic $130 conditions are revised as actual data is received. $120 Moody’s estimates that the Northeast Ohio economy 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 has grown at an annual rate of 1.6% over the past Real GRP Average Annual Growth = 1.6% 15 years and has grown in 13 of the past 15 years. Source : Moody’s Economy.com

March 2009 | Volume 3, Issue 1 Demand for Industrial NEO Occupied Industrial Space & Vacancy Rate Space Remains Strong 405 9.5% Occupied Square Feet (Millions) 400 9.0% Vacancy Rate 395 8.5% This graph shows the total amount of 390 8.0% industrial space occupied by quarter from Q1 2004 to Q4 2008. Over this period, 385 7.5% total occupied industrial space grew steadily. 380 7.0% In addition, the vacancy rate of 7.4% remains 375 6.5% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 at the lowest point in the past five years. 2004 2005 2006 2007 2008 Industrial space includes primarily manufacturing, warehouse, and distribution related space. Occupied Square Feet Vacancy Rate Source : CoStar Industrial Data About Team NEO Due to market limits within the CoStar database, historic trend data for the Team NEO advances Northeast Ohio’s economy Team NEO region is defined as 10 of the 16 counties forming the regional by attracting businesses worldwide to the 16-county footprint. These counties include Ashtabula, Cuyahoga, Geauga, Lake, Lorain, Medina, Portage, Richland, Stark and Summit. Cleveland Plus region. The organization is a joint venture of the region’s largest metro chambers The categories and data used to analyze the Northeast Ohio Biomedical sector, including medical device and equipment manufacturing, of commerce. Since 2007, the organization has pharmaceuticals and therapeutics, and R&D and Labs, were compiled attracted more than 20 new companies, 2,200 based on sector definitions provided in the BioOhio 2007-2008 Ohio Bioscience Growth Report. new jobs and more than $70M in annual payroll to Northeast Ohio, leading to a total regional annual impact of $150M. For more information, Ashtabula Lake visit www.clevelandplusbusiness.com. Cleveland Plus 16-County Region Data Sources: Team Northeast Ohio uses a number of data sources for Cleveland Geauga Cuyahoga the Regional Economic Review. One of the primary sources is the Moody’s Lorain Trumbull Economy.com (www.economy.com) Northeast Ohio modeling system. This firm is the leading independent provider of economic, financial and Summit Portage industry research and data that specializes in national and metropolitan Medina Youngstown Akron economic growth forecasts. Moody’s Economy.com county level output, Mahoning employment and payroll historical data are estimated from several publicly available sources and are summarized into the Team NEO Ashland regional footprint. It is important to understand data provided by Wayne Canton Columbiana Richland Stark Economy.com are estimates of economic activity. Team NEO also uses data from federal and state sources as part of the Carroll report. As with Economy.com, the information for the Team NEO footprint is derived from data reported at either the county or metropolitan level. We rely heavily on data from the U.S. Bureau of Labor Statistics (www.bls.gov) and Ohio’s Labor Market Information (www.lmi.state.oh.us) for information on wages, unemployment and both general and industry- specific employment. In addition, Team NEO uses data from the Census (www.census.gov) to track housing-related activity including the number of single and multifamily permits, as well as their values. Industrial real estate 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 This report made possible through the generous of property throughout the country. support of Dominion. 737 Bolivar Road, Suite 2000, Cleveland, Ohio 44115 888.NEO.1411 • www.clevelandplusbusiness.com

Cleveland Plus Quarterly Economic Report

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