Economic and Demographic Update
Population: The population in Cleveland in the 4Q of 2020 was 2,035,686. This represents a decrease in total population of 10,990 over the course of the last year. During 2019 Q4, the Cleveland population stood at 2,046,676. The number of people employed rose to 984,922 in 2020 Q4 from 967,386 over the last quarter, an increase of 17,536 or 1.81% for the period.
Median Income: The median household income for Cleveland in the 4Q of 2020 was $59,484. At this time last year, the median household income was $57,228. 2020 Q4 median income represents a quarter-over-quarter increase of 0.85% and a year-over-year increase of 3.94%. Cleveland has a median household income lower than the U.S. average, which is $69,270.
Current and Historical Data Review (Rates PSF, Vacancy)
Office leasing: Overall office base rent rates have decreased by $0.03/SF. It went from $17.13/SF in 2020 Q3 to $17.10/SF in this most recent quarter. Office rates grew in 2020 Q4 when compared to last year’s quarter, when office base rent was $16.86/SF.
In 2020 Q4, overall market rents rose in Cleveland by 0.85% since 2020 Q3, bringing market rent per square foot to $19.14.
Vacancy rates also went from 7.12% to 7.45%. They stood at 8.23% this time last year. Throughout the next quarter, the vacancy rate is expected to change from 7.45% to 7.56% next quarter.
In the Cleveland market’s central business district (CBD) specifically, 2020 Q4 base rents stood at $20.93/SF, an increase from $20.71/SF in 2020 Q3. When compared to last year’s quarter, CBD office rates decreased from $21.62.
CBD vacancy rates went from 9.37% to 9.44%. They stood at 6.78% in 2019 Q3. Throughout 2021 Q1, the CBD vacancy rate is expected to lower to 9.20%.
Office Sales Metrics (Cap Rates, Volume, Average Price PSF)
For investors, the cap rate during 2020 Q4 was 10.62%, compared to the previous quarter’s cap rate of 8.90%. The cap rate was 11.02% this quarter last year.
In terms of transaction volume, there were 40 sales transactions during the period, the same amount as the last quarter. Last year at this time, there were 71 transactions. In terms of transaction amounts, office transactions were valued at $19,174,550 in 2020 Q4. That’s an increase compared to $14,969,020 of transaction value in the previous period. Last year at this time, office transactions were valued at $97,701,168.
Industrial Leasing Metrics (Rates PSF, Vacancy)
Industrial leasing: For the Cleveland, OH industrial sector, we look at warehouse and distribution spaces specifically. Overall warehouse and distribution base rent rates have increased by $0.07/SF. It went from $4.83 in 2020 Q3 to $4.90/SF in this most recent quarter. Warehouse and distribution rates grew in 2020 Q4 when compared to last year’s quarter, when industrial base rent was $4.77/SF.
Warehouse and distribution vacancy rates also went from 3.78% to 3.87%. Next quarter, the vacancy rate is expected to reach 3.93%.
Industrial Sales Metrics (Cap Rates, Volume)
For investors, the warehouse and distribution cap rate during 2020 Q4 was 9.28%, compared to the previous quarter’s cap rate of 9.25%. The cap rate was 9.16% this quarter last year.
In terms of sales volume, industrial transactions were valued at $47,775,668 during the quarter. That’s a decrease compared to $75,827,658 of transaction value in 2020 Q3. Last year at this time, industrial sales transactions totaled $30,568,600.
