CL EV EL A ND Q2 2016

Transcription

1 Q2 WN IANCE brat ing 10 year s C ele CL EV EL A ND ALL O 2016 DOWNT Q

2 1010 EUCLID AVENUE, THIRD FLOOR, CLEVELAND OH Instagram.com/DwntownCLE YouTube.com/DwntwnCLE

3 QUARTER SUMMARY DOWNTOWN CLEVELAND MARKET UPDATE - QUARTER 2 SUMMARY The middle of 2016 marked a fundamental change in the way the world views Downtown Cleveland. Over 1 million people gathered downtown to celebrate Cleveland s first major professional sports championship in 52 years after the Cleveland Cavaliers won the 2016 NBA Finals. Most importantly, Downtown Cleveland earned national accolades for its walkability, cleanliness and safety while successfully hosting the 2016 Republican National Convention. The second quarter concluded with the completion of Public Square s $50 million renovation. The rejuvenated public space played a central role during the RNC and marked the completion of one of the primary key downtown connections identified in DCA s Step Up Downtown Vision and Tactical Plan. The real estate surrounding Public Square now represents some of the most desirable office, retail and development locations in all of Downtown Cleveland, and Cleveland s central park is already attracting locals and visitors into Downtown on a daily basis. Other Q2 Highlights include: New York Life announced it is moving into Downtown s 200 Public Square from a western suburb. Class A office vacancy dropping to 16.1 percent Apartment occupancy at 96 percent Monica Potter Home, J3 Clothing, Hidden Closet and other retailers opening in The Arcade during the RNC The grand openings of the Hilton Cleveland Downtown and Drury Plaza Hotels The Water Taxi and Coastal Taco opened on the East Bank of the Flats Nuevo Mod Mex opened in North Coast Harbor Cleveland Metroparks Water Taxi 3

4 OFFICE MARKET UPDATE DOWNTOWN BUILDINGS HELP BUSINESSES RECRUIT TALENT Two trends continue to propel the Downtown office market: 1. The conversion of underutilized office space into housing. 2. Businesses relocating and expanding in Downtown in order to better recruit and retain top talent. As an example of the conversion trend, JLL noted in its Q2 Office Insight that the recently announced plans to convert portions of Terminal Tower and the Tower at Erieview will remove 547,000 square feet of office space from the downtown market and relocate 300,000 square feet of office tenants. The relocation of IBM and New York Life into Downtown Cleveland and the expansion of Brandmuscle and Quicken Loans exemplified the trend of businesses selecting or growing their downtown address to better position themselves to recruit and retain talent. DOWNTOWN CLEVELAND CLASS A OCCUPANCY INCREASES, OPPORTUNITIES REMAIN Class A vacancy dropped from 16.8 percent in Q to 16.1 percent in Q Average asking lease rates for Class A space remained above $21.00 per square foot, while the downtown Class A market gained 63,312 square feet in positive net absorption. DOWNTOWN CLEVELAND CLASS A VACANCY AND LEASE RATES LEASE RATE $21.50 $21.25 $21 $20.75 $ % $ % $ % $ % $ % $ % 17% 16% 15% 14% VACANCY $ % $20 Q Q Q Q Q % MAJOR LEASE TRANSACTIONS ATTRACTION RELOCATION EXPANSION/ RENEWAL RETENTION 5,284 SF 81,000 SF 8,691 SF 9,060 SF 7,043 SF 110,000 SF 3,424 SF 3,080 SF 4 Candlewood Partners BrightEdge Technology Huntington National Bank Quicken Loans Northern Trust New York Life Bober, Markey Fedorovich & Co American Interiors Inc. Sources: CBRE, Colliers International, Downtown Cleveland Alliance, JLL, Newmark Grubb Knight Frank, Xceligent

5 OFFICE MARKET UPDATE DOWNTOWN CLEVELAND & PEER DOWNTOWN CLASS A VACANCY & LEASE RATES FOR Q Despite a steadily improving office market, Downtown Cleveland s Class A vacancy ranked 10 out of 13 peer downtowns and ninth in Class A average asking lease rates. Considerable opportunities remain for office users seeking Class A in a walkable, transit-oriented and business friendly downtown. $60 24% $55 22% $50 20% ASKING LEASE RATES $45 $40 $35 $30 $25 $ % 17.6% 17.2% 7.6% 7.8% 12.1% 6.8% 12.3% 12.3% 14.1% 8.1% 15.7% 14.8% 18% 16% 14% 12% 10% 8% VACANCY $15 $10 $21.07 $24.47 $21.06 $21.11 $22.88 $21.73 $28.70 $41.09 Q $17.81 $19.78 $57.90 $24.37 $ % 4% Cleveland Cincinnati Indianapolis Detroit Pittsburgh Columbus Charlotte Denver Minneapolis St. Louis Boston Richmond Kansas City GREATER CLEVELAND* EMPLOYMENT CONTRIBUTES TO STRENGTHENING DOWNTOWN OFFICE MARKET Cleveland added 23,300 jobs in 2015, the region s biggest single year increase since percent job growth in 2015 was fourth highest increase among peer cities. 87 percent of 2015 job growth was in four industry sectors (education & health services; leisure and hospitality; construction; and financial activities). Among 15 peer cities, Cleveland ranked first in financial services jobs; first in construction jobs; and third (behind Charlotte & Pittsburgh) in education and health services jobs. Downtown Cleveland s largest employment sectors are professional, scientific, and technical services; government; education; financial services; and management. Downtown employment increased 3 percent ( ). Average Downtown Cleveland Salary is $73,561. Only 7 percent of Cuyahoga County companies are in the central business district, but those companies generate 17.4 percent of Cuyahoga County s total income. *Greater Cleveland = Cuyahoga, Lorain, Lake, Geauga and Medina Counties Sources: Cleveland State University, Levin College of Urban Affairs, Center for Population Dynamics; CBRE MarketView 5

6 HOUSING MARKET UPDATE DEMAND REMAINS HIGH FOR DOWNTOWN LIVING Even with the addition of 630 market rate apartments over the last year, 16 of the last 17 quarters have reported apartment occupancy of over 95 percent, including Q There is still plenty of unmet demand for downtown living. As noted by NAI Daus, less than 1 percent of Cleveland s metropolitan area is concentrated in Downtown, while 2-3 percent of Midwestern metro areas like Indianapolis and Milwaukee make their home in those cities central business districts. Q % occupancy Q % occupancy 6 The Edge, CSU Student Housing

7 HOUSING MARKET UPDATE STRONG HOUSING PIPELINE WILL DELIVER OVER 1,000 APARTMENTS With new apartment construction and historic redevelopments commanding lease rates over $2.00 per square foot, the average lease rate for market rate housing increased from $1.29 to $1.49 per square foot. Over 1,000 apartments are currently under construction and will be delivered to the downtown market over the next months. OWNED RENTED Q Q Q Q Number Sold 24 TOTAL TOTAL UNITS UNITS Number Sold 20 TOTAL UNITS TOTAL UNITS Occupancy Occupancy 97..5% 96% 5,543 6,195 Avg. Sale Price $342,140 PSF for Sale $ PSF for Sale $ Avg. Sale Price $224,340 Avg. PFS Rental $1.35 Avg. PFS Rental $1.49 DOWNTOWN CLEVELAND RESIDENCE MAP Residential Units Built Since Residences at Joshua Hall Building 3. University Lofts Apartments 4. Euclid Block 5. University Lofts Condos 6. University Studios 7. Langston 8. Lofts at Rosetta 9. Residences at Hanna 10. Seasons at Perk Plaza 11. Reserve Square 12. Residences at Residences at The 9 First Energy Stadium Lofts 15. Ivory on Euclid 16. Flats at East Bank Apartments 17. The Creswell at Playhouse Square 18. The Archer 19. Schofield Building 20. Park-Southworth Building Under Construction/Renovation 21. The Sphere 22. Leader Building 23. Garfield Building 24. The Edge East 9th Street 34 Lakeside Aven 27 St. Clair Ave. st 18th Street 25. Standard Building 26. Cedar Estates 27. Avenue District Apartments Residences Planned 28. Superior Warehouse Lofts 29. nucleus 30. Halle Building 31. Johnson Court Euclid 33. Weston/Citymark Project 34. North Coast Harbor 35. Cleveland Athletic Club 14 Superior Ave. 7 Flats East Bank (Phase 2) W. 9th Street 31 W. 6th Street W. 3rd Street Ontario Street The Malls East Mall Drive 25 Public Square East 6th Street 22 Euclid Avenue Chester Avenue East 14th Street Euclid Avenue Prospect Aven 28 3rd street 29 Huron Road W. Quicken Loans Arena arnegie Avenue 26 7

8 STARTUP CORNER STARTUP CORNER Downtown Cleveland is home to many startup companies. Over the last quarter, Downtown has added assets which will continue to help the startup community grow. AT&T added additional data capabilities to Downtown, allowing for faster cell service and data usage, benefiting employees and companies alike. Downtown s co-working offerings are growing as well. In addition to StartMart, Downtown added coworking space this quarter with the opening of Spaces & CO, co-working, creative space aiming to inspire and help others grow by offering a workspace that encourages creativity and results. STARTUP CORNER SPOTLIGHT: INTOUCH Located at 50 Public Square, intouch is using Bluetooth beacon technology to connect consumers with their surroundings and obtain real-time information from the places and things around them by simply having the intouch mobile application downloaded on their smartphone device. In Q2 2016, intouch deployed and activated 250 beacons around Cleveland providing information regarding the area and gathering data. InTouch works with local organizations like Destination Cleveland to share data, proving valuable during the RNC. InTouch s technology was featured at Cisco Live in Las Vegas June and was named runner-up for the $140M funded City of Columbus Vulcan/Paul G. Allen Smart City Project Public Square

9 RETAIL MARKET UPDATE DOWNTOWN CLEVELAND GROWS AUTHENTIC RETAIL CORRIDORS Downtown Cleveland has the authentic retail corridors that millennial consumers, restaurateurs and retailers increasingly desire. The Arcade and the 5th Street Arcades, located across the street from each on Historic Euclid Avenue, exemplify the unique experiences that Downtown Cleveland offers residents, workers and visitors. The Arcade hosted seven temporary retailers during the RNC, including Monica Potter Home, J3 Clothing and The Hidden Closet. These retailers joined four others that recently opened at The Arcade. The 5th Street on the other side of Euclid Ave are operating at nearly 100 percent capacity. WANTED: MORE DOWNTOWN RETAIL Downtown is full of opportunity for retailers and restaurateurs because of the growing residential, office and visitor populations. Downtown Cleveland Alliance s Step Up Downtown Tactical Plan identifies several retail areas of particular need: General Merchandise: $16.5 million spent annually by downtown residents at general merchandise retailers outside of downtown Women s and Men s Apparel & Accessories Fast Casual Dining Monica Potter Home in The Arcade DOWNTOWN S DESIRABLE DEMOGRAPHICS ATTRACT RETAILERS AND RESTAURATEURS Downtown Cleveland and the surrounding neighborhoods form an increasingly desirable trade area that attracts retailers and restaurateurs. Downtown Trade Area: Population: 41, percent aged percent hold at least a 4 year degree Aggregate Income: $884,311, percent increase ( ) Average Household Income: $47, percent increase ( ) Daytime Workers: 130,000 Cuyahoga County Visitors: 16 million Cleveland in a Box in The Arcade 9

10 HOSPITALITY MARKET UPDATE NEW HOTELS ADD ENERGY AND ECONOMIC IMPACT TO DOWNTOWN During Q2 2016, Downtown Cleveland welcomed two new hotels and thousands of visitors. The Hilton Cleveland Downtown opened in June with 600 new hotel rooms, two new bars and two new restaurants. The Drury Plaza Hotel opened 189 rooms and a bar and restaurant. Both new hotels were fully active when thousands of visitors flocked into town for the Cavs play off run and the championship parade in June, bringing the hotel occupancy to 76.9 percent despite the rise in number of hotel rooms in Downtown. Average daily rate of hotel rooms in Downtown Cleveland rose to $ this quarter. HOTEL OCCUPANCY RATES: 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 79.7% June % Sept % Dec % March % June 2016 AVERAGE DAILY RATE June 2015 $ June 2016 $ REV. PER AVAILABLE ROOM June 2015 $ June 2016 $ Hilton Cleveland Downtown

11 ARTS & ENTERTAINMENT UPDATE DOWNTOWN ARTS AND CULTURE EVENTS DRAW VISITORS As home to the nation s second largest performing arts center as well as three professional sports arenas, Downtown Cleveland s arts and entertainment scene always has something new to offer. In Q2 2016, arts and entertainment highlights included: The Cleveland Cavaliers won the 2016 NBA Championships, despite being down 3-1 early in the series. Playhouse Square announced that Hamilton will being coming to Cleveland during the KeyBank Broadway Series. The Lake Erie Monsters beat the Hershey Bears, 1-0, in overtime in front of a sold out Quicken Loans Arena to complete the sweep and win the Calder Cup. DCA, the DCA City Advocates and Crown Castle beautified Downtown and improved connectivity with the addition of nine public art pieces wrapped around utility cabinets throughout Downtown Cleveland. LAND Studio, Cracking Art and the Chuck Fowler Family Foundation worked to place colorful animals throughout Downtown Cleveland for the summer. The animals are located at the Cleveland Public Library, North Coast Harbor and other areas in Downtown Cleveland. The Rock and Roll Hall of Fame and LAND Studio created a connection from the Museum throughout Downtown by installing artistic speakers along E 9th street that play hits from the Hall of Fame throughout the day. Next quarter, Downtown Cleveland will host SPARX City Hop on September 17, an all-day arts adventure throughout Downtown and into the surrounding neighborhoods. This event will allow Clevelanders to tour historic Playhouse Square theaters, learn about local artists and experience all Cleveland s arts and culture scene has to offer. Crown Castle Art Box LAND Studio Cracking Art Display 11

12 MAJOR INVESTMENTS: PUBLIC SQUARE RENOVATION OF PUBLIC SQUARE CONNECTS DOWNTOWN The much anticipated renovation of Downtown Cleveland s Public Square was completed during Q As soon as the fencing surrounding Public Square came down, residents, visitors and workers flooded into Downtown s new central park. Public Square immediately looked and felt more energized than ever before. Public Square was one of the key Downtown Connections identified in DCA s Step Up Downtown Vision and Tactical Plan because it is strategically poised to attract jobs, residents and investment dollars to the buildings surrounding it. Businesses seeking to recruit top talent and housing developers are drawn to walkable downtowns. The areas around public green spaces are in especially high demand. Buildings directly outside the square have a Walk Score of 97 considered a Walker s Paradise and a Transit Score of 89 considered Excellent Transit, according to Walk Score. The availability of strong transportation options and connections to other downtown neighborhoods makes Downtown Cleveland s new Public Square even more attractive. 12

13 MAJOR INVESTMENTS: PUBLIC SQUARE Public Square began attracting investment into Downtown before it was complete. Downtown developers K&D are currently in the planning stage of converting Terminal Tower into new apartments. Two-Hundred Public Square has announced several new tenants over the past year including Fox Sports Ohio, New York Life, Bloom Bakery and in Q2, a Cleveland Clinic Express Care, whose leadership stated, We want to provide access for folks who are living and working downtown. Around Public Square, even more opportunity exists for businesses seeking to relocate or expand into Downtown. Ample Class A office space with spectacular views is available overlooking Public Square. Redevelopment opportunities in the shape of historic properties or new construction exist immediately adjacent to this world class green space, including The May Company Building and 55 Public Square. Public Square s renovation will help continue momentum in Downtown by attracting investment, creating opportunities, attracting residents and visitors and acting as a new shared space for the community. 13

14 DCA UPDATE DOWNTOWN CLEVELAND ALLIANCE BUSINESS DEVELOPMENT UPDATES Downtown Cleveland Alliance s Business Development Center serves as a single point of contact for business leaders, commercial real estate professionals, developers and investors. The Center s services include advocacy, marketing, research, site selection assistance, public and private financial assistance consulting, and technical support. Q Business Development Center Highlights included: Assisting The Arcade, Collier s Realty and The Cleveland 2016 Host Committee in attracting seven retailers into The Arcade, including Monica Potter Home, J3 Clothing and Cleveland in a Box. Co-sponsoring an open house to highlight retail vacancy at 2020 Euclid Ave. Successfully advocating for continued service to RTA s Waterfront Line during budget cuts Assisting in the placement and completion of the University Hospitals Bike share program DCA s Business Development Center consults with developers and investors, providing in depth market research and analysis. Looking for market analysis information on Downtown Cleveland? Reach the Business Development Center at DCA S CLEAN & SAFE AMBASSADORS ARE AT YOUR SERVICE DCA s Ambassador program employs more than 60 hard-working people who are dedicated to keeping Downtown s streets clean and safe year-round. The DCA Ambassadors can be seen patrolling Downtown s neighborhoods by foot and by bike, acting as both mobile concierges and an incredible maintenance staff. No matter what your needs are, the Ambassadors are there to assist you quickly and efficiently, just call In Q2 of 2016, DCA s Ambassadors: 14 COLLECTED 151,475 POUNDS OF TRASH FROM DOWNTOWN STREETS PROVIDED 1,156 SAFETY ESCORTS TO & FROM DOWNTOWN DESTINATIONS SERVED AS CONCIERGES TO 8,374 VISITORS Clean & Safe Ambassadors

15 STEP UP DOWNTOWN UPDATE PUBLIC SQUARE RENOVATION MARKS COMPLETION OF MONUMENTAL KEY CONNECTION IN STEP UP DOWNTOWN The Step Up Downtown Vision and Tactical Plan will guide DCA s work for the next five years with the goal of building on and sustaining Downtown s current momentum. The plan identifies connectivity as the overarching theme necessary to take Downtown Cleveland to the next level, and identified 18 key connections to improve Downtown s walkability, including Public Square. By addressing the gaps in the public realm that keep pedestrians from experiencing Downtown as a continuous urban fabric, and by linking current nodes of activity with points of interest, Downtown will continue to evolve into the vibrant, walkable environment that is most attractive to businesses and their employees. These Q projects speak directly to Step Up Downtown s goal of creating a more pedestrian friendly Downtown Cleveland. Public Square Completed Public Square was identified as one of the major gaps, barriers and missing connections in the downtown area by participants in the community engagement process for Step Up Downtown. The renovation of Cleveland s central park helps link and integrate the plans and investments taking shape throughout Downtown. Public Square helps enable people and activities to flow effortlessly from one part of Downtown to the next, the major goal of Step Up Downtown. Bike Cleveland and University Hospitals install Bike Share Program Bike Cleveland, in partnership with Cuyahoga County and University Hospitals installed 250 bicycles in Cleveland in time for the Republican National Convention. Bike Share locations are located throughout Downtown, including outside the Cleveland Public Library, PNC Plaza, 200 Public Square and North Coast Harbor. This project supports the overarching goal of enhanced connectivity mandated by Step Up Downtown. Downtown Beautification outlasts RNC Prior to the RNC, DCA and other partners including the City of Cleveland and the 2016 Cleveland Host Committee worked to beautify Downtown Cleveland in preparation for the 50,000 visitors the events would bring. While the RNC is over, these beautification efforts are still visible. DCA led projects included the sidewalk brick improvements and the lighting of downtown trees. DCA laid new bricks in place of deteriorated ones on sidewalks throughout Downtown and worked with volunteers to wrap trees in twinkle lights, adding light and increasing walkability between downtown destinations. Bike Share Program 15

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