How do you expect the Cleveland real estate market to perform going forward?
Cleveland will continue to perform at a stable and modest rate. The strength of the market lies in the depth of large stable employers. The world-renowned hospital systems (and the ancillary businesses built around them), Progressive Insurance, Key Bank, Sherwin Williams are all steady growth, recession-proof types of businesses and that filter down into the real estate market. Cleveland is an excellent, low-cost, and business-friendly market that will continue to pull talented workers who have flexibility in where they can work and businesses looking to expand. In the current environment, Cleveland is going to attract a high number of transplants that will continue to bolster demand both downtown and in the surrounding suburbs, with the work-from-home trend as a tailwind. There aren’t a lot of cities that boast the amenities that Cleveland provides without the big-city drawbacks.
What attracts investors to the market?
Cleveland is a stable market. Even when demographics were shifting negatively 15 to 20 years ago, Cleveland didn’t experience the large swings that high-growth markets experience every cycle. It is a mature market with lower volatility. Stability, low unemployment, and low cost of living are the greatest strengths of the Cleveland real estate market, and why investors strive to have investments in Cleveland in their portfolio.
How has CRE performed in Cleveland?
Supply growth in Cleveland is one of the lowest in the nation, providing investors with a wide moat to protect their investments. The market hasn’t experienced a rapid boom or bust cycle, which is typically associated with over-development. However, the most rapidly expanding sector at the moment is industrial, which is being driven by a fundamental shift in the way businesses view their supply chains. There is a massive runway for development on the industrial front, a trend seen across the county.
What sector is poised to see the most growth?
From a square foot standpoint, industrial shows no signs of slowing down and will dominate the GLA growth for the foreseeable future. In terms of investment returns, the future for office is still cloudy due to the resurgence of COVID-19 across the United States, but wherever there is uncertainty there is opportunity. Retail is also poised for excellent returns as leasing volumes are up, and the chance to grow NOI at the rate seen today hasn’t been experienced since before the Great Recession.
Are there any trends likely to transform the market in the coming years?
One key area that is emerging as an investment class in Cleveland is the single-family rental market. Institutions are diving into this space, as it is ripe for consolidation, especially in such a fragmented market like Cleveland. According to Housing Tides, since March, 295 single-family permits were recorded, far more than the projected number. This shows tremendous growth in the space and is an excellent opportunity for investors.
