Tenant and investor activity is escalating in downtown Cleveland. To learn more about the changing CRE landscape, read JLL's Cleveland Office Insight

1. Office employment trends (12-month change, 000s)
Source: JLL Research
Skyline vacancy projections
Source: JLL Research
Total office sales ($, millions)
Source: JLL Research
Office-using employment sectors record steady, albeit modest gains
According to the most recent estimates from the BLS, office employment sectors
in Cleveland added 4,000 jobs year-over-year, equating to a 1.1 percent
increase. These sectors have recorded annualized gains for 26 consecutive
months, representing a steady streak of expansion. The issue though is that the
expansion has been relatively modest. Total employment in these sectors
remains more than 27,000 jobs below the highs recorded in 2007. While
continued employment growth among the office employment sectors will
increase the number of active requirements in the near-term, continued
rightsizings by tenants will equate to fixed levels of demand over the forecast.
Rightsizings outweigh expansions in Skyline, vacancy to escalate
Cleveland’s Skyline set experienced robust leasing activity over the last 18
months with many sizable tenants making long-term real estate decisions.
However, rightsizings outweighed expansions as reducing footprints and
increasing efficiencies remained a key focus for office tenants. As a result, the
Skyline’s vacancy is forecast to reach 24.0 percent by the end of 2015. The
increase in vacancy is largely attributed to occupancy reductions by three
primary tenants, Key Bank, BakerHostetler and Deloitte, which by the end of the
year will have reduced their Skyline footprints by nearly 300,000 square feet.
Office sales surge in the first half of 2015, approach 2008 highs
Sales activity has been mounting in Cleveland over the last three years, although
a significant portion of the trades were distressed properties. This is particularly
true downtown where surging multi-family demand has led to the sale of vacant,
functionally obsolete office buildings for residential conversion. Slowly though,
investment-grade assets have been making up a larger percentage of trades.
The scales tipped in the second quarter when the Hertz Investment Group
purchased the Fifth Third Center in downtown Cleveland from TIER REIT. The
508,000-square-foot Class A office tower was 77.9 percent leased. It traded for
$53.8 million or $106 per square foot and a 7.4 percent cap rate.
Tenant and investor activity escalates downtown
2,257
Office Insight
Cleveland | Q2 2015
27,812,134
Total inventory (s.f.)
-30,059
Q2 2015 net absorption (s.f.)
$19.05
Direct average asking rent
0
Total under construction (s.f.)
20.4%
Total vacancy
-218,550
YTD net absorption (s.f.)
-0.5%
12-month rent growth
0.0%
Total preleased
(10.0)
0.0
10.0
2011 2012 2013 2014 YTD 2015
Financial Activities Professional & Business Services Information Government
15.0%
20.0%
25.0%
2011 2012 2013 2014 YE 2015
$0
$100
$200
$300
2011 2012 2013 2014 YTD 2015
Rolling 12-month total Quarterly volume

2. Current conditions – submarket Historical leasing activity (s.f.)
Source: JLL Research Source: JLL Research
Total net absorption (s.f.)
Source: JLL Research
Total vacancy rate (%)
Source: JLL Research
Direct average asking rent ($ p.s.f.)
Source: JLL Research
542,471
-274,386
458,867
-622,126
-551,674
29,238
226,632
570,893
273,709
-41,538
-800,000
-400,000
0
400,000
800,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015
$19.77
$19.94
$19.45
$19.74
$19.46
$19.13
$19.05
$18.93 $18.98
$19.05
$18.50
$19.00
$19.50
$20.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015
16.6%
18.6%
17.1%
19.8%
21.8%
22.3%
21.7%
21.2%
20.3% 20.4%
14.0%
17.0%
20.0%
23.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015
Landlordleverage
Tenantleverage
Peaking
market
Falling
market
Bottoming
market
Rising
market
1,500,000
1,700,000
2,000,000
1,500,000
600,000
0
750,000
1,500,000
2,250,000
2011 2012 2013 2014 YTD 2015
©2015 Jones Lang LaSalle IP, Inc. All rights reserved.For more information, contact: Andrew Batson | andrew.batson@am.jll.com
Cleveland
CBD
Suburbs