Terry Coyne Commercial Real Estate

CoyneReport Reveals Trends/Changes in Value Across Cuyahoga County Communities

2012-01-23T08:47:00.000-05:00

Since the Cuyahoga County Assessor’s Office has last updated property values, almost 1,000 commercial sales have taken place. Utilizing the search power of the CoyneReport.com, we have compiled a list of all these transactions. Since the Assessor and the Board of Revision use sales comps to determine property values, we thought we’d take a look to see whether local communities can expect their commercial property values to increase or decrease in the 2012 reassessment. Commercial property values provide a significant portion of many cities’ property tax revenues, so this data is relevant to school boards, town halls, and concerned citizens alike. Our study revealed some surprising results.

The City of Cleveland has had the largest positive difference in property values, with buyers paying more than $26 million over the assessed values. Other cities that saw large increases were Berea ($9,734,301), Richmond Heights ($7,891,800) and Bedford ($4,740,971). Woodmere, Parma, Beachwood, Lakewood and North Royalton also saw significant gains.

Not every city saw gains, however. Where 21 cities recorded gains, 27 saw property values slip. The good news is that the county as a whole recorded $11,040,693 in gains. Shaker Heights (-$5,766,980), Solon (-$5,691,720) and Strongsville (-$5,559,400) recorded the biggest losses. Westlake, Brooklyn and Euclid all recorded negative differences between assessed values and sales prices as well.

The news of cities showing lower property values is not surprising; the last full reassessment was conducted in 2006, with an update in 2009. The Great Recession took its toll on commercial property in Cleveland in 2009 and 2010, so it is hardly surprising that property values in some communities would be lower. The news that the county’s commercial property values have increased, albeit slightly, is welcome good news. The City of Cleveland led the way as companies and investors purchased property, and the trend of downtown revitalization continues. Although not a perfect predictor of future events, this analysis would seem to suggest that the commercial real estate market is beginning to recover from the lows of the recession.

For this and other insights into the Cleveland commercial real estate market, please visit us at CoyneReport.com.

CoyneReport - Analysis of Ohio’s CMBS Loans & Breakdown of 8 Counties

2012-01-16T11:26:00.001-05:00

State of Ohio:

There are 1,088 hold CMBS loans in the stateof Ohio. The total appraised value for these properties is approximately $8.5billion, with the total current loan balance of a little more than $10 billion.The shortfall of approximately $1,500,000 is not nearly as dramatic asexpected. With more than half of these loans due between 2015 to 2017, it ispossible the market could turn favorably, thus closing the gap (data providedby bloomberg.com).

Almost 30% of these loans are retail anchordevelopments, a little more than 20% multifamily housing, and the third largestgroup is office buildings. Cap rates range from 7.02% for mixed-use to 13.77%for health care properties. Of these, 43.91% are performing, while a little over10% are either in REO, or with a special servicer.

When you break the numbers down further, the8 counties of Northeast Ohio show slightly different trends. The countiesinclude; Cuyahoga, Geauga, Lake, Lorain, Medina, Portage, Stark and Summit. Together,these 8 counties show 318 loans outstanding. The total current loan balance is $3,644,225,489 with a total appraisedvalue of $3,148,872,425, for a deficit of approximately $500 million. Thisregion has a lower percentage of REO and special servicer loans - a bit lessthan 5%. There is a higher percentage ofRetail Anchored loans; 37% vs. the 30% state average.

Next, let’s look at a breakdown by county:

Cuyahoga County: Betterstatistics than the state overall

185 loans outstanding
Current Outstanding loan balance: $2,519,600 vs. an appraised value of$2,099,672
33% of the loans are Retail Anchored
39% are performing
Interesting note - all cap rates across all property types is sub 9.75% cap

Geauga County: Warning!! Greatest difference between appraised value and loan balance

Only 5 loans
$83,735,000 is the total outstanding balance, with an appraised value of only$44,085,000 - a huge percentage difference between loan balance and appraisedvalue
92% of the loans areperforming, and 91.30% are retail anchored
The cap rate for the largestloan is about a 6% cap rate. If this cap rate moved up to a more realistic salecap rate, the appraised values would go down, making the deficit greater

Lake County: Thenumbers do not tell the whole story

15 loans made
50% are retail anchored with an average cap rate of 5.73% ; which is a remarkablyaggressive cap rate, and perhaps rather unrealistic
Cap rates range from the lowof 5.73% up to 8.85%
None are in REO, or with a special servicer, but - but - but - 62% are in aGrace period
Only 23% are performing, much lower than the state and regional average

Lorain County: Similarto the state averages

13 loans
$51,665,000 total current loan balance with an appraised value of $40,365,000 ;almost $11 million dollar short fall
Aggressive cap rates for this older industrial county
75% of the loans are either with a special servicer or in a Grace period - amuch higher percentage than the state or the region - which is a bit alarming
Currently none of the loansare classified as "performing"

Medina County: Countywith the least number of loans

1 loan currently outstanding
Loan balance and the appraised value are the same $6,600,000
The one loan is a Retail Anchored center with a cap rate of 6.36% cap rate andit is currently classified as "Late"

Portage County: Stronglending county for Mobile Home Parks

17 loans
$133,900,000 Total Current Loan balance with an appraised value of $128,450,000
Highest percentage of loans is in the Mobile Home category - 38.85% of allloans. This percentage is the highest percentage of Mobile Home loans of any ofthe 8 counties and much higher than the state average.
Cap rate for the mobile homesis 7.26 - which is a rather conservative cap rate. Mobile Home parks usuallycarry an even more aggressive cap rate, so the loan balance and the appraisedvalue for this county may be closer to even than the numbers show.
About 32% are either in REOor special servicer - a much higher percentage than the state or the region

Stark County: Industrialloans are most plentiful in this county

21 Loans
Total Current Loan Balance: $91,225,000 with an appraised value of $92,124,489- one of the few counties in the black
38.03% are for industrial properties, much higher than the state or regionalaverage with a cap rate of 9.22%
20% are performing with almost 20% either in REO or with a special servicer -again higher than the state or region

Summit County: Highest percentof Retail loans in the region & higher than the state average

60 loans
$646,900,000 Total Current Loan balance with an appraised value of $632,835,000
More than 50% are for retail anchored centers and 22% for office buildings withcap rates of 7.27% and 9.40% respectively
36% are performing
Only approximately 5% are in either REO or with a special servicer

For more information, please feel free to contact me at 216-453-3001.

Caldwell Building - Perfect Facility for Utica and Marcellus Shale Activity

2012-01-02T10:25:00.027-05:00

The Utica and Marcellus shale region frenzy is all the buzz, appearing in the news, papers, magazines and online. The demand for building/warehouse and office space in the shale area is great, and with that in mind, 17226 County Road in Caldwell, Ohio has incredible potential. The 233,000 SF facility is located in Noble County, and could possibly serve as an operations center to the Utica and Marcellus shale region. Formerly used as a manufacturing facility, this building can accommodate the needs of pipe and drilling companies, and offers an on-site waste water treatment facility. Power, sewer, gas, water & telecom are all on-site. The cost of the facility is 80% less than the cost of reconstructing the building. Growing interest and demand for building space in the Utica and Marcellus shale region make this Noble County facility a hot commodity.

AmTrust Financial To Occupy 800 Superior

2011-12-19T21:45:00.000-05:00

Great news for downtown Cleveland! AmTrust Financial Services announced it will be occupying between 250,000 – 300,000 sf of the former Key Bank Center office building, located at 800 Superior Ave., in Cleveland. New York based AmTrust plans to create up to 1,000 jobs over the next three years, and move its current Seven Hills employees as well. Lower vacancy rates downtown and new jobs being created; all positive news for the city of Cleveland. How will this effect nearby neighbors? It’s speculated that the East Ohio Gas Building at 1717 East 9th St. will likely be redeveloped and/or sold for apartments. Currently the building is unoccupied. Both buildings are located in the NineTwelve District, whose goal is revitalizing the business and residential area.

Former Rubbermaid Facility Vacant

2011-12-12T14:39:00.012-05:00

The former Rubbermaid facility, 1147 Akron Rd., located in Wooster, Ohio is again vacant. The huge facility has a lot to offer; 1,316,428 sq. ft., 22' -80' ceiling height, and 78 docks. I wouldn't be surprised if the building was re-occupied by a competitor. The building is a fantastic manufacturing facility, ready to be occupied again. It has a 200,000 sq. ft. of office area, as well as 675,199 SF warehouse, and rail access.
The initial sale of the former Rubbermaid warehouse was the largest in Northeast Ohio's history, and it sold after being on the market for just 60 days. Only time will tell, but I have a feeling Rubbermaid's biggest competitor may be calling this facility home.

Transaction of the Week -11/28/11

2011-11-22T08:31:00.007-05:00

DiGeronimo Companies Lease Valley View Office Building

Grubb & Ellis Company is pleased to have assisted DiGeronimo Companies in the
lease of the property located at 5533 Canal Rd., in Valley View. The 17,843 square foot office building is fully leased to SupportCare/ViaQuest. Significant upgrades are being made to the facility, which was built in 1973. Terry Coyne and Jeff Kennedy, of Grubb & Ellis Company, represented the landlord, DiGeronimo. ViaQuest was represented by David Hollister, Grubb & Ellis Company.

Transaction of the Week -11/14/11

2011-11-14T09:09:00.005-05:00

Grubb & Ellis is pleased to have assisted DonDa, LLC in the lease of the property located at 14301 Industrial Ave. N, Maple Heights, Ohio. Starmax Resources, LLC signed a 3 year lease at the former 7-UP building. The 114,900 sq. ft. industrial building was built in 1963 and features 6 docks, 2 drive-in-doors, and 13’-17’ clear ceiling height. Terry Coyne, Grubb & Ellis Company, represented the lessor, DonDa, LLC. Starmax Resources, LLC was represented by David Sternberg of MetroSpace Realty.

Transaction of the Week - 10/24/2011

2011-10-24T11:03:00.003-04:00

First Interstate Properties, Ltd. purchased 90 acres of land from Oakwood Club. The land, formerly part of Oakwood Country Club in Cleveland Heights, sold for $2,200,000. The land will be developed into senior living, green space and retail use. First Interstate purchased 63 acres of the former Country Club in December, 2010. Terry Coyne, Jeff Cristal and Bob Nosal, Grubb & Ellis Company, represented the seller, Oakwood Club.

Transaction of the Week - 10/17/11

2011-10-17T12:55:00.004-04:00

PB IL OREO, LLC Sells Industrial Space at Former Lucas Aerospace Facility

Grubb & Ellis Company was retained by PB IL OREO, LLC in the sale of the industrial area known as Unit No. 2, Parts A & B of the Former Lucas Aerospace Building. The property, located at 777 Lena Dr., Cleveland, sold to Stuart Lichter and Chris Semarjian, dba Lena Commerce, LLC for $1,700,000.

The Former Lucas Aerospace facility was built in 1989, and features 21’6 ceilings, 4 docks with levelers and 2 drive-indoors. The building sits on 28.37 acres. In 2006, Commercial Turf relocated its headquarters into 83,000 square feet of the warehouse area of the same facility. Read the full story on Crain's Cleveland.

Transaction of the Week - 10/10/11

2011-10-10T10:51:00.005-04:00

Harbor Group purchased the garage at the corner of short Vincent and Euclid from AmFin R.E. Investments Inc. This property has been developed with hopes of expanding it upwards to accommodate condominiums on an additional 5 to 7 floors. The property is well positioned to take advantage of the growth around both east fourth and the new medical mart. Occupancy rates are up in this neighborhood for both office and apartments. And this acquisition positions the buyer to take advantage of rising parking rates with the possibility of building on top of the garage for apartments or condos. The garage was built for future expansion. Rumors of its initial cost were around $25 million. So the buyer likely got a steal. It also has retail space on its first floor. As you may be aware, Harbor Group also owns the building formerly known as the BP building, now named 200 Public Square in Downtown Cleveland. Harbor Group International bought the property from the court reported receiver. Harbor Group was represented by Richard Sheehan, Bob Nosal, and myself in this transaction.

Positive Effects of Former Chrysler Stamping Plant

2011-07-21T14:10:00.017-04:00

The demolition of the Former Chrysler Stamping Plant has had quite an affect on Northeast Ohio vacancy rates. Just recently, vacancy rates were at 12.7%. With over 1,400,000 sf of the former stamping plant now leveled, vacancy rates have decreased to 11.9%! The Southeast market experienced an even greater decrease, with vacancy rates dropping to 10.8% from 13.6%.

The complex was purchased by The DiGeronimo Cos. and Scannell Properties. Plans for the former Twinsburg plant include redevelopment into a brand new industrial park, with aggressive city incentives located between Interstates 480 & 271.The modern manufacturing and distribution facility will feature 24’ clear ceiling height, a highly sought after commodity in this tight market.

A Look At Cleveland's 100,000+ SF, 24', & ESFR Industrial Market

2011-03-04T11:17:00.061-05:00

Cleveland's industrial real estate market continues to weather the Great Recession. Buildings with over 100,000 SF, which represent almost half of all square footage in the market, currently have a vacancy rate of 10.5%. But not every building is created equal. Features like ceiling height, sprinkler system and location tell a more detailed story.

As a model of the entire market, we'll investigate the Southeast submarket, Cleveland's largest. Buildings with a clear ceiling height of 24' or greater are better suited for distribution purposes than those with lower ceiling heights. Taller racks can be assembled and inventory stacked higher in buildings with higher ceilings. Structures with 24' clear ceilings make up just over 23% of the entire Cleveland market.

The Southeast submarket, which includes the cities of Solon, Aurora, Streetsboro and Twinsburg, has one third of all 24' clear buildings in the Cleveland area. While the market vacancy rate in these buildings is 18%, in the Southeast it is a slightly lower 17.4%. Nearly half of the vacant space in the Southeast's 24' clear data is a result of the Chrysler Stamping Plant's closing in 2010, however.

Another factor that disting-uishes buildings is sprinkler system type. The Early Suppress-ion Fast Response (ESFR) system is designed to put out fires quickly, whereas most sprinklers take longer to detect fire and spray less water. This system is useful in distribution buildings, especially when flammable materials are being stored. The ESFR system is relatively new, and not many buildings have it; buildings of 24' clear ceilings with ESFR make up just over 4% of the Cleveland market. The Southeast submarket has 55% of these buildings.

The Southeast submarket is Cleveland's largest, and it has a disproportionate number of distribution facilities, with more large and up-to-date distribution sites than any other Cleveland submarket. This may reflect a growing trend, and more distributors may soon realize that Cleveland's low costs and central location make it an ideal site for distribution purposes.

Early Stage Venture Capital and NE Ohio Real Estate

2011-01-14T21:30:00.006-05:00

At the annual Grubb & Ellis forecast event, held Thursday January 14th at Cleveland State University's new student Center, Ray Leach, the CEO of JumpStart, a not for profit, early stage venture company spoke about his organization.

One of the more interesting statistics highlighted by Ray Leach was the amount of space absorbed by companies which have received funding by JumpStart. There 57 companies which were included in the survey - and they have leased or purchased almost 800,000 square feet. This space is spread out over all of Northern Ohio, so its impact is not easy to see. If you were to divide 800,000 square feet by 5 years, which is about the time Jumpstart started to actively fund companies, it equates to roughly 13,000 square feet per month.

I do not think any of the companies have been huge winners yet, so imagine the impact if a few of these break out and grow rapidly? Real estate owners need businesses, and businesses to capital. Jumpstart and the overall growth of outside venture capital will end up being a boom to our real estate market.

Baker Building on Cleveland's East 6th Street Sells

2011-01-03T21:23:00.009-05:00

The new year started off quickly with the sale of the Baker building located at East 6th, between Superior and Euclid. The building is best known as the home of Moriarty's Pub. The building was in receivership and sold to an entity controlled by Scott Scheel.

Scott is a local real estate investor, but is better known as a real estate investment trainer and speaker. He hosts classes across the country and, in this transaction, he put his money where his mouth is, and bought a beautiful old building which needs significant upgrades and improvements. It is well positioned in the path of growth between East 4th and the new Medical Mart.

The property sold on January 3rd, for $450,000.

Museum of Contemporary Art (MOCA) Purchases Land for New Museum

2010-12-26T12:11:00.029-05:00

The Museum of Contemporary Art, currently located at 8901 Carnegie, in the old Sears department store, closed on its one-half acre of land at the corner of Euclid and Mayfield Road as the new location for the museum. According to Cuyahoga County records, MOCA paid Case Western Reserve $1,000,000, for the half acre piece. The land, formerly known as permanent parcel number 120-29-001, was split into two one-half acre parcels. The transaction closed on December 17, and created a new permanent parcel number 120-29-005, now owned by MOCA.

The Maron family, who is developing their Uptown Development adjacent to this site, is responsible for the demolition of the existing structure. Demolition is currently underway by the Maron's sub-contractor, Andy's Empire. The museum has been designed by world famous architect, Foreign Office Architects, FOA. The building will be approximately 34,000 square feet and its design is sure to spark discussion.

Steve Litt wrote about it on December 26 in the Plain Dealer as one of the highlights of 2010.

The new museum is another example of the amazing activity occurring in the "new downtown" of University Circle. This sale price equates to more than $45 per square foot, and continues the price increases in this burgeoning area.

And I would argue that the price paid by MOCA was actually lower than it should have been given that this land is among the best locations in North East Ohio. Adjacent to the Maron's Uptown Development and in the center of University Circle, it would be hard to find a more prominent site, ripe for development.

On a per square foot basis, the only other recent transaction in the area which is greater is the Maron's purchase of the Brunswick Florist property on Carnegie, adjacent to the Maron's Tudor Arms Hotel, currently under construction at the corner of East 105th and Carnegie, which sold for $1,550,000 in September of 2009. This piece was just shy of half an acre and sold for $73.90 per square foot (on the land basis), or $3,29,084 per acre. Seller was Brunswick Limited Partnership and buyer was Tudor Arms Hotel, LLC. If CWRU had sold this property on the open market, like the Brunswick Florist, a private developer likely would have paid much more. But thankfully, Case Western Reserve University was farsighted enough to know the addition of MOCA would be helpful to the entire community and was reasonable in its sale price.

A few years ago it was common to pay $1,000,000 per acre, but now $1,000,000 only buys you half an acre, if you are lucky. Rapid price increases - something the average Northeast Ohio resident will likely find surprising.

Congratulations to Jill Snyder, Executive Director, Scott Mueller and Stuart Kohl, MOCA board members, and the capital campaign co-chairman on achieving this milestone. We look forward to the groundbreaking, scheduled for February 8th!

Top Ten Commercial Real Estate Highlights for 2010

2010-12-19T18:58:00.024-05:00

1. Rosetta's Relocation from Beachwood to Downtown

I was retained by Rosetta to assist them with their search for new, larger offices for the company formerly known as Brulant. The executives told me from the beginning that moving downtown was a possibility. Having moved many companies out of Cleveland, I thought it was a long shot. But after an exhaustive search through out the entire region, the company decided to move into the former National City Bank building at 629 Euclid. Taking almost 80,000 square feet and bringing more than 300 technology jobs to a downtown that is not used to winning. The symbolic impact of a growing technology company relocating into an area where other large companies have chosen to leave, can not be be underestimated. Rosetta's relocation has caused many other companies to consider moving downtown. Only a few months after Rosetta's announcement, windmill developer Juwi relocated into the building, rather than move out of Cleveland into the suburbs.

2. Carnegie Body Being Saved by Ed Crawford

The owner of a small truck repair company, Carnegie Body, met with me one day this past summer to assist him with the sale of his building. Carnegie Body is a well respected name in the truck repair business, and has been around for more than 50 years. The owner had run into difficult times and his lenders were calling their loans and effectively shutting the business down. A receiver had been put into place and had been retained to sell the company, but had been unsuccessful in his efforts. The day I met the owner was the last day Carnegie was operating. As I walked around the building I met quite a few men who had worked at the company for over 30 years. Hard working, honest, strong men, working at jobs which would be gone forever if the company was closed. And for many of these men, getting another job at similar pay and benefits would be virtually impossible. I have been involved in quite a few building sales where the companies had gone out of business, and it was never enjoyable. And for whatever reason, this one really hit me hard. So rather than offer to sell the building for the owner, I told him I was going to call one guy who I knew could bring this business back to life, Ed Crawford, the CEO of Park Ohio. Ed is an accomplished businessman who runs a billion dollar, publicly traded, manufacturing conglomerate. And despite the demands on his time, he is always accessible. I called him and he picked up his own phone. I told him that he should save this business as a favor to the men who worked there, and because I thought, if run correctly, it could make money. It was a long shot. Within 5 days of my phone call, Ed was able to work out deals with the lenders - which was not an easy process, but Ed is an old hand at buying troubled companies, and restart the business. Now, solely because of Ed Crawford, Carnegie Body is operating, the employees are back, and the company is profitable again.

3. Midtown Tech Park Getting Funded and Under Construction

Two years ago a partnership in which my family is involved acquired land on Euclid. It was purchased with the expectation that a building would be built for a specific tenant. When that deal died, the use of the property was unknown. Thanks to the efforts of Midtown Cleveland, the city of Cleveland (specifically Chris Warren and Tracy Nichols), the Cuyahoga County development department, the state of Ohio's development department, and the folks at the Geis companies, the partnership was able to secure both equity and debt in an amount which enabled the development of 128,000 ft. speculative office and lab building. It is currently under construction and is slated for completion in June 1 of 2011. The Health Tech corridor is a growing area, and of this development hopefully will spark much more activity. The goal is to mimic areas like those that surround the University of Pittsburgh and the University of Pennsylvania where there is abundant job creation and a growing real estate market.

4. Cleveland Clinic Medical Summit Success

I had never attended at the Cleveland Clinic's annual medical event held at the Intercontinental Hotel. While this event did not have any relationship to my day job in real estate, I was amazed at the number of people who came in from around the world, and the general positive feeling being generated from the Summit. You would never get the feeling that Cleveland wasn't doing well if you attended any part of the affair. It continues to get larger and more successful every year and is a great advertisement for our region.

5. Simply Canvas Expansion in the Old Lockheed Martin Building

Adam Freid, the owner and president of Simply Canvas, hired me to help him find a larger home for his business. Adam had relocated from Chicago to Tallmadge and was occupying about 12,000 ft. I helped him move from Tallmadge to the old Lockheed Martin manufacturing facility where he expanded into nearly 50,000 ft. He is a transplant who has grown his business from one employee to 40 employees; in a business which did not exist four years ago working with a technology which did not exist five years ago. It is an example of the creative destruction of capitalism benefiting Northeast Ohio.

6. Continuing Absorption of Class A Industrial Space

Over the past 12 months there has been a positive absorption of space in warehouses with ceiling heights of 24 feet or higher. These buildings are considered class A, and such leases as MAT Holdings, Winston Products, Cleveland Steel Container, and Curbell Plastics, are all examples of this trend. Northeast Ohio has among the lowest vacancy rate for modern distribution facilities in the country, and has lease rates that are as expensive as such areas as Los Angeles or New Jersey. I expect this trend will continue, and by the end of 2011 are market will have tightened to the point where people are considering building new speculative warehouses.

7. Sale of 5777 Grant Avenue, Cleveland Ohio

This property is located on Grant Avenue in Cleveland and is visible from I-77. For a period of time there were large trailers advertising its availability. The building was recently sold to Cleveland Corporate Services, a Cleveland-based education technology company. The buyer could have easily moved their business to the suburbs, but invested in this property retaining quite a few well paying jobs in the city of Cleveland. This purchase was an expansion allowing for further growth and was a story that never received any publicity, but it is very good news.

8. Wine Trends Sale

Sandy Earl, the former owner of Wine Trends, a wine distributor located in Streetsboro, sold her business to Heidelberg Distributors and was left with her building. The property is approximately 32,000 square feet and was built in 2004. It is probably the nicest building in its size range in north east Ohio. Our team was retained to sell her building and we placed a high asking price on it. We began the marketing at the bottom of the market, but we held out for the right buyer and the right price. It took us almost 18 months, but we successfully sold the property to a local manufacturing company which was willing to pay us a premium for the building. While this is a small transaction, it signaled to me that the market had turned.

9. Expansion of Vox Mobile

Vox Mobile is a mobile services business, spun out of MCPC. It has been in business for approximately 4 years and has moved four times. Their growth has been dramatic. They started in free space in Middleburg Heights, relocated to the Magnet building in downtown Cleveland, then moved into a flex property in Independence, and this year are relocating to a multi-story class B. office off of Rockside Road. The company is young, growing, dynamic, all of those attributes needed to help Northeast Ohio redefine itself. Four years ago they did not exist, and now they employ more than 40 people and are growing.

10. Youngstown Incubator's Continued Expansion and Success

The week before Thanksgiving my father and I went to Youngstown to meet with Jim Cossler, the Executive Director of the Youngstown Incubator. About 10 years ago Jim was brought on board to help create the incubator. Now, 10 years later, the incubator occupies more than 35,000 ft.² and houses 350 employees. Jim and his team created a strategy and focused on that strategy to remarkable success. It appears as if activity begets activity, and the incubator is likely going to expand into more buildings as more jobs are created. This is an excellent model for all of northern Ohio to mimic, and was truly an inspiring morning walking around with Jim.

Good Holiday News!

2010-12-17T10:57:00.003-05:00

After slipping by 3.6 percent to $304 billion in 2009, charitable giving stabilized in the first nine months of 2010 according to a report released last month by the Nonprofit Research Collaborative. Of the 2,500 organizations responding, 36 percent said total giving rose compared with the same period in 2009 while 37 percent said giving fell, and the remainder reported no change. Most organizations were hopeful about 2011 with 47 percent increasing their budgets, 33 percent planning to maintain their current level of expenditures, and only 20 percent anticipating a lower budget.

Former Bard Building Sells

2010-12-16T17:12:00.006-05:00

6091 Heisley Rd. (Mentor, OH), sold on 11/16/2010 for $3,000,000 or $43 per square foot on a 69,000 square foot building. The building was owned by Mentor Bard Properties, which is an entity related to the Osborne's of Mentor. They acquired previously for $2 million. The building was acquired by United States Endoscopy, which is located across the street. Given the features of the building it is an excellent fit for the new buyer. $3 million is below replacement cost but still an excellent price for this property. This sale is yet another sign that the market is recovering.

Swagelok Sells Willoughby Building

2010-12-14T21:16:00.019-05:00

Swagelok sold their manufacturing building located at 4800 East 345th street in Willoughby to 4800 East 345th, LLC for $1,920,000 or $28.51 per square foot. We called the city of Willoughby to inquire who was moving into the building. According to City Hall, the new occupant of the building will be Marketing Communication Resource, Inc. of Mayfield Village.

This sale is a good sign for the ongoing recovery in our market. The property is 67,342 sf, built in 1974, and located on 4.99 acres. Some of the building features include 20'-38' clear ceiling height, 2 docks, and 1 drive-in-door.

CoyneReport.com - New Format Debuts

2010-11-26T21:52:00.012-05:00

I have redesigned the CoyneReport.com and have unveiled its new look today. I started the CoyneReport.com as a way to distribute free commercial real estate sales information. The site has been tracking all sales over $1,000,000 for all commercial properties in a 16 county area for the past two years. We try to report them as soon as public records make them available.

The updated site includes a new feature, a video blog, also known as a vlog, which will cover a new topic each month. This month's vlog is a 3rd quarter office and industrial real estate market update. Other vlogs will cover various topics related to the Northern Ohio real estate market.

Midtown Tech Park Announces First Tenant - Jumpstart

2010-11-09T07:57:00.012-05:00

The owners of Midtown Tech Park at 6900 Euclid in Midtown Cleveland are excited to announce the signing of the first tenant, Jumpstart, a locally based, but nationally recognized, not for profit venture capital firm. Jumpstart is currently located across the street from Progressive Field, and will be relocating to Midtown Tech Park in the summer of next year, when construction is completed.

Midtown Tech Park is currently under construction with steel being erected as we speak.

Jumpstart is the leading community based, venture capital firm in the country, providing both financial support, but more importantly, professional assistance and mentoring to fledgling companies other equity sources typically ignore due to the risk involved. Jumpstart is a remarkable community asset and is at the forefront of job creation in an ever evolving economy. Big companies with lots of employees were once small. And Jumpstart is helping to find and grow companies which could transform Northeast Ohio.

MTP, when completed, will be a 128,000 square foot, office and lab building located adjacent to Galucci's and across the street from the Dunham Tavern. MTP is building on the success of other developers, such as Dick Pace, and his Baker building redevelopment, which is now fully occupied.

Because of Jumpstart's lease, the owners have decided to build a small incubator space, adjacent to Jumpstart where companies can lease fully furnished offices, with desks, phones, internet connections and common conference areas with a receptionist. The owners believe that Jumpstart will create its own ecosystem of companies, both start ups and venture capital partners, desiring to be located near Jumpstart, and the landlord is trying to accommodate such demand.

Along with Jumpstart moving into the facility, One Community will be providing fiber to the development which will give the building abundant fiber with virtually unlimited capacity. An advantage to companies transporting large amounts of date across the web. The property will also have a back up diesel generator in the event of a power outage, which is critical to medical research firms and data centers.

Grubb and Ellis is marketing MTP and so far the demand has been strong. Jumpstart is the first lease to be announced, but we expect to have more signed leases before Geis Construction has completed its work in the summer of 2011.

The owners would like to thank Ray Leach, Doug Weintraub, Duke Jankura, Cathy Belk, and Ben Keller for their assistance in this transaction.

Read the full story on cleveland.com.

2010 Medical Innovation Summit

2010-11-06T17:32:00.017-04:00

This past week I spent time at the 2010 Medical Innovation Summit held by the Cleveland Clinic at the Intercontinental Hotel. I did not know what to expect, but had seen previous summits advertised and it seemed to get bigger every year. This year's event focused on obesity. The speaker list included CEOs of Stryker, Medtronic, Eli Lilly, and Sanofi-aventis and many others.

I popped in each day and was amazed by many things. First, the attendance. The summit was packed and most of the people came from out of town. It was a good three days for the taxis in Cleveland because the hotel taxi stand was as busy as a New York City Hotel during the holidays. Second, the type of attendee. The population of registrants ranged from doctors and PHD researchers, big company CEOs, venture capitalists to members of the press, including MSNBC, CNBC, and the Wall Street Journal. Third, the content. At 7:00 am, Wednesday, I attended a live video feed of three gastric bypass surgeries. Performed by three doctors who were as relaxed as visitors to a Starbucks on a Sunday morning. I had trouble eating breakfast after the surgeries, but it was amazing to see.

I had a great conversation with three venture capital companies, all from Boston. They flew in with no contacts and no previous attendance history. All three came in looking for opportunities to fund spin off companies from the Cleveland Clinic. The Cleveland Clinic Innovations staff had set up one of the largest booths and had it staffed with employees who were there to talk about portfolio companies. The staff was actively working the crowd seeking out any venture capital prospect. Buttonholing them and introducing CCI and what it could offer venture capital companies. It was impressive. These companies need money and the CCI staff is determined to find capital to help them grow.

If you wanted to feel good about the future of Cleveland, attending this conference would have made you feel great. At least one venture capital company asked me for help in finding them offices for their local Cleveland office. They have decided they want to be closer to where they perceive the action is, here in Cleveland. The ideas coming out of this conference and the vibrant feeling you got just being there was invigorating. This year's conference was apparently larger than previous years, maintaining the trend over the past 4 years. Chris Coburn and his staff is to be commended for growing this summit to be among the most important in the country for health care.

University Circle: Resurgence of a 2nd Downtown

2010-11-05T09:59:00.007-04:00

Cleveland commercial real estate broker Terry Coyne comments on the re-growth of the University Circle/Midtown area. Visit us at the CoyneReport.com for information on the Northeast Ohio commercial real estate market.

2010 3rd Quarter Market Update

2010-11-05T09:55:00.009-04:00

Terry Coyne, SIOR, CCIM, of Grubb and Ellis Cleveland, comments on the industrial, office and investment markets as a service of the Coyne Report. Visit the CoyneReport for market updates, recent transactions and sales comps in Northeast Ohio.

3rd Quarter Market Update

2010-10-27T10:20:00.008-04:00

The research department at Grubb and Ellis just released the third quarter market report for both the office and industrial sectors for the Greater Cleveland area. And while the numbers are not the most optimistic piece of news you will read, looking a little deeper shows some interesting trends.

First, the industrial market took a hit this quarter because the Chrysler Stamping plant in Twinsburg is now included in the statistics for the region. Prior to this quarter, our research department did not included the stamping plant in our numbers. With Chrysler's departure, the market vacancy rate for the entire market increased nearly 70 basis points and the vacancy rate for the the particular submarket where the property is located increased nearly 200 basis points. The re-use of this property is still uncertain and it is possible that the building could be partially, or completely torn down and redeveloped as a well located industrial park.

Digging deeper into the numbers you see the story of two markets. Our region is known as a heavy manufacturing region and our buildings reflect this heritage. We have an approximate 300,000,000 square foot market, which is dominated by old, lower ceiling, somewhat functionally obsolete buildings. The vacancy rate for such buildings approaches 20 percent. However, the newer, modern, distribution buildings with features such as 24 foot ceiling heights or higher, modern sprinkler and lighting systems, and current dock packages, are experiencing vacancy rates sub 8% with increasing rents. The vacancy rates for such properties is among the lowest in the country and fetches higher rents than similar product in cities such as Chicago and Atlanta.

On the office side, the interesting trend not clearly shown by the numbers is the offer of free parking included in downtown office rents. The first landlord to offer this amenity, the Maron family at 629 Euclid, now known as the Rosetta Center, have been met with strong early success. The Marons own their own parking facility, so they have a unique situation, but I think you will see an alliance between downtown building owners and parking lot operators offering one price with dedicated parking. This option makes it easier for a tenant to compare its options between downtown and suburban choices. Typically the cost of parking adds $3 to $4 per square foot in rent and makes the comparison between the two markets difficult for a tenant. Consolidating the two costs and presenting it as one package to a tenant will likely happen more as the vacancies in downtown increase.

Commercial RE Market Tightening

2010-10-06T10:05:00.005-04:00

Having just assisted Diamond Center One lease 110,000 sf to Winston Products, LLC, I am noticing that the market is tightening, and this lease is another example of that. A second tenant also signed a lease at the same facility, which is located at 30339 Diamond Parkway. The building totals 400,000 sf, and at this point more than 180,000 sf of Class “A” space has been absorbed in under 30 days (133,000 sf is still available). With no new space currently being built, I'm noticing the market is slowly shifting back toward equilibrium.

MidTown Tech Park Project - New Construction Biomedical/R & D Facility

2010-09-16T15:30:00.032-04:00

The Coyne Family is thrilled to be working with developer Geis Companies on the MidTown Tech Park project. It is an honor to be involved with some of Cleveland’s finest organizations including:

University Hospitals
Cleveland Clinic
Greater Cleveland Partnership
CWRU
BioEnterprise
CSU
Cuyahoga County Ohio
Cleveland Foundation
City of Cleveland
MidTown Cleveland

The LEED Green Certified building is aimed toward biomedical, R & D, and technology companies, featuring ample office, laboratory/research space and ample parking. MidTown Tech Park is centrally located in the Cleveland Health-Tech Corridor, already home to numerous high-tech organizations, biomedical companies, and large health care systems.

Construction has begun, and will continue through 2011. Interest in the project has been very strong and we expect to be announcing a few new tenants in the near future.

Read more information on the MidTown building specifics. If you have any questions, please feel free to contact me at 216-453-3001.

Vacancy of Cleveland Buildings Built After 2000

2010-07-13T15:14:00.007-04:00

According to Grubb & Ellis Research, as of the first quarter 2010, the overall vacancy of properties built since 2000 is 1.07%.

150 Keep Court in Elyria sold on behalf of Community Health Partners

2010-02-28T18:28:00.004-05:00

Mike Petrigan and Terry Coyne represented Community Health Partners in the sale of 150 Keep Court, Elyria. The building was approximately 100,000 square feet, and was unoccupied at the time of sale. The building property was originally acquired by CMH for purposes of expansion for its adjoining cancer center. Expansion plans were modified and no longer included this property, at which point CMH retained Grubb & Ellis to market and sell the asset. The buyer is a partnership led by commercial real estate broker, Kevin Kelly. Kevin's group will reposition the property for lease.

La Dolce Vita sells in Little Italy, Cleveland, Ohio

2010-02-06T10:25:00.008-05:00

The building which houses well known restaurant, La Dolce Vita, in the Little Italy neighborhood of Cleveland, Ohio, sold on Tuesday, February 2, for $725,000 to a partnership led by restauranteur and tenant, Terry Tarantino.

The building is located at 12110 Mayfield, at the corner of Mayfield and Murray Hill, and houses the restaurant and 10 apartment units above it, with attached parking. The new ownership group expects to spend significant money upgrading the property.

The former owners, JDI Murray Hill, had retained Terry Coyne of Grubb and Ellis to sell the property. JDI Murray Hill had formerly been the lender, but had foreclosed on the building and had taken ownership in the December of 2009.

Mark Nasca, a Senior Vice President of JDI and a partner in the deal said, "Terry Coyne and his team were outstanding in implementing and executing the sale process. It was smooth and well run and concluded with an outcome which made our partnership very happy."

For more information on the property, visit http://www.terrycoyne.com/ourproperties/detail.asp?id=238

Rosetta Relocation to East 6th and Euclid Avenue

2010-01-30T10:59:00.007-05:00

Our team assisted Rosetta relocate its Cleveland area offices to the former New England building built in 1920, on the north side of Eucld at 629 Euclid. It was most recently known as the National City Center, located one building to the west of the current National City Headquarters, now PNC, on the corner of East 9th and Euclid. Founded in 1998, Rosetta has rapidly become the largest independent interactive agency in the US. AdAge ranks it amongst the top ten digital agencies and the fastest growing agency within the top 50.

Rosetta searched the suburbs and the city, but focused on the city, specifically the east 4th street area due to the vibrant neighborhood created by the Maron family. The employees will be housed in the top 6 floors, which will also include a new glass enclosed penthouse, on the 17th floor.

The East 4th Street district is moving from a residential and retail district into its next phase as a true mixed used, commercial, residential, and retail district, attracting companies which want to be located in an area offering so many diverse free time activities. Floors 2 through 10 of the Rosetta Center, which is the new name of the building, is being marketed by our team. We are focusing on other companies which want to be in unique, cool space and be surrounded by an eclectic, creative, and diverse workforce.

www.terrycoyne.com/ourproperties/detail.asp?id=241

The Euclid Corridor, from Public Square to CSU is quickly taking shape with announcements of new developments occurring at an increasing pace. The one area which needs a kick start is between East 10th and East 12th streets on both the north and south sides of the street. Buildings such as the former CAC building hold great potential, but need a developer willing to take a significant risk on redevelopment. Hopefully attracting Rosetta and other companies will help push the development down Euclid and kick start that section of Euclid.

1/01/2010 – Simply Canvas Signs Long-Term Lease at Former Lockheed Martin Complex

2010-01-13T08:50:00.002-05:00

Grubb & Ellis is pleased to have assisted Simply Canvas in the lease of 43,621 sf at the former Lockheed Martin Complex, located at 1210 Massillon Rd. in Akron. Simply Canvas , specializing in printing custom sized canvas prints, will relocate from their current facility in Kent. The company started up 4 years ago in Tallmadge, and is growing rapidly, with over 30 employees currently. Simply Canvas' CEO, Adam Freid is thrilled to be moving into the City of Akron, after much searching throughout northeast Ohio.

"We used Terry to assist us in our relocation and expansion of our headquarters and manufacturing plant. He secured us a space 4 times as large at the same cost we were formerly paying", stated Adam Freid.

Terry Coyne, of Grubb & Ellis, represented the lessee Simply Canvas. The lessor, LMA Commerce, LTD, represented themselves in the transaction.

12/31/2009 – Select Medical Sells to Health Care REIT For $20.5M

2010-01-04T15:08:00.004-05:00

Grubb & Ellis was retained by Legacy II, LLC to assist in the sale of the Select Medical building in Akron, located at 200 East Market Street . Health Care REIT of Toledo purchased the medical facility for $20,500,000, or $376.50 per square foot. Health Care REIT, Inc. is a real estate investment trust, which invests in health care real estate, senior housing, and provides property management and development services.

With a CAP rate of just under 9%, this investment property generated much interest, and remained on the market for just a short time before going under contract. The 54,448 sf long-term acute care hospital (LTACH) features a pharmacy, treatment room, radiology area, and administrative offices. Not only has Select Medical been the only LTACH to ever sell in Northeast Ohio, it is also the largest medical facility sale in the area in fifteen years.

Terry Coyne, of Grubb & Ellis, represented the seller Legacy II, LLC.

Hollywood Video Relocates Corporate HQ to Rosemont, IL

2009-10-28T09:59:00.004-04:00

Grubb & Ellis Company was retained by Hollywood Video to assist in the relocation of from Wilsonville, OR to Rosemont, IL. Hollywood Video, the nation's second largest movie and game rental company, will occupy 18,000 sf of the Columbia Centre II Office Building located at 9450 Bryn Mawr Ave.

Terry Coyne, of Grubb & Ellis Cleveland, and Craig Cassell & Jim Ward of Grubb & Ellis' Rosemont office, represented the lessee Hollywood Video.

Midwest Air Technologies Holdings Expands To Ohio

2009-10-23T12:39:00.007-04:00

Grubb & Ellis Company, was retained by Midwest Air Technologies Holdings to assist in the lease of 177,000 sf located on 30339 Diamond Parkway. Illinois based MAT Holdings, Inc., a manufacturer and supplier of home improvement centers and equipment service providers, will be expanding to the Diamond Center One facility located in Glenwillow, Ohio. The expansion to Ohio will create up to 100 new jobs for the area. Diamond Center One was completed in 2008 and consists of 400,000 sf on 25+ acres.

Terry Coyne, of Grubb & Ellis Company, and C.J. Kuehl, of Lee & Associates, represented the lessee, MAT Holdings, Inc.

Northeast Ohio Industrial Snap Shot

2009-10-21T08:38:00.003-04:00

1. Market Size
Total square feet in the industrial market equals 299,371,198.

2. Overall occupancy
88.9% occupancy

3. Available SF
33,226,163 square feet

4. Absorption for 2009
(1,376,239 square feet)

5. Historical Average Absorption
2008—1,708,432
2007—1,533,866
2006—4,625,433
2005—6,884,086
2004—5,727,082
2003—3,029,652

6. Construction in the market
Currently under construction, there is 460,000 square feet in the southeast market.

7. Notable market activity (big deals, big exits, announcements, anything that has had or will have a big effect on market activity)
• Automobile companies closing down plants and facilities. Chrylser plant in Twinsburg is vacating 2,400,000 square feet of manufacturing space.
• Out of state company moving to Glenwillow (southeast) in 2010 into 180,000 square feet.

8. Sales activity
Slow. Since January 1, 2009, there have been 57 industrial transactions over $1,000,000.

9. Cap rate trends
9%--10% and higher

10. Who is in the market, what are they looking for any why?
• Out of state company moving to Glenwillow (southeast) in 2010 into 180,000 square feet. Combining offices into a central location.
• Medical Specialties—35,000 square feet, southeast market. Looking for better rates
• International client—40,000 square feet, southeast market, 35-ton crane. Need a Midwest presence.

11. Variations between submarkets, any unusually good or bad?
East of 77 has much more activity.

Fannie May Confections to Open New Facility in Cleveland

2009-10-20T14:12:00.007-04:00

Grubb & Ellis was retained by Equity Industrial Properties to assist in the lease of 177,000 sf located at 17000 Rockside Rd., in Maple Heights. Chicago based Fannie May Confections, owned by 1-800 Flowers, will use the facility to house the Harry London Chocolates division of Fannie May. The facility will employ approximately 20 employees initially, with that number expected to grow over time.

Bruce Levine, of Equity Industrial Properties, stated, "Terry found this company through a good old fashioned cold call. He knew they could be a good tenant, and through his persistence, we were able to secure a tenant for the specialized part of our building and get full value for it."

This lease is the largest industrial lease in Northeast Ohio this year. Terry Coyne of Grubb & Ellis Company represented the lessor, Equity Industrial Properties.

Essco Signs Lease at Twinsburg Facility

2009-10-15T12:34:00.005-04:00

10/2009 - 1933 Highland Road LLC, has leased 62,200 sf to Essco. Essco, a locally owned company started in 1925, is a distributor of vacuum cleaner spare parts. After acquiring a competitor from Denver, CO, relocation to a larger facility was necessary. Terry Coyne, Grubb & Ellis Co., represented the lessee, Essco.

"Without Terry's help, we could not have found this building, negotiated a below market lease rate, and taken occupancy - all in under 60 days. He was strategic in his thinking, and always put the needs of Essco first. I would recommend him to anyone considering a relocation." - Tom Bianco, President, Essco

LifeBanc Purchases Land For Relocation

2009-10-15T12:20:00.011-04:00

10/9/2009 - LifeBanc purchased 4.3 acres of land from Hemingway Development, Ltd. The Richmond Rd. land was formerly part of the Saint Jude Campus. LifeBanc will be relocating their headquarters from Shaker Heights to the new Warrensville Heights facility. Terry Coyne and Bill Saltzman, of Grubb & Ellis, represented the buyer, LifeBanc.

"Terry and Bill guided my management team and board from initial planning to site selection, builder interviews and selection, New Market tax credit financing, and contract negotiations. Their assistance was critical in our successful relocation from an old inefficient office building to a new office building owned by LifeBanc, with highway exposure, all for not much
more than we were paying in old offices." - Gordon Bowen, CEO, LifeBanc

Manufacturing Index Values

2009-08-10T15:36:00.005-04:00

ISM Manufacturing IndexValues > 50 = Expansion
August 10, 2009
Source: Institute for Supply Management, Grubb & Ellis

The Institute for Supply Management’s purchasing managers index kept its string of monthly increases this year intact, rising to 48.9 in July. (Values above 50 indicate that the sector is expanding.) Details of the report were encouraging. New orders rose above 50 even as businesses continued to liquidate excess inventories, suggesting that manufacturers will need to ramp up hiring and production in the near term. The gap between new orders and inventories is at its highest level since April 2004. Production has already risen to 57.9, and the employment index, though still below 50, has risen to 45.6, a sign that the long slide in manufacturing job losses could be winding down. The “cash-for-clunkers” program and a recent turnaround in exports are contributing to the improvement. A recovery in the manufacturing sector is good news not only for manufacturing properties, it translates into more goods flowing through corporate supply chains, which will support demand for warehouse/distribution space.

Vox Mobile expands and signs lease

2009-08-09T19:44:00.005-04:00

Vox Mobile, one of the premier wireless service companies in the US announced its recent expansion into new space in Valley View last week.

Vox Mobile, a spinoff of MCPC of Strongsville, formerly occupied space in the CAMP building on 25th and Superior. Due to fantastic growth, Vox required more than double their current space. A company of less than 5 employees three years ago, Vox has taken enough space to accomodate its expected growth to upwards of 40 employees.

We were retained by Vox to assist them with their site selection and lease negotiations.

1241 Superior Avenue, Cleveland Sale

2009-08-05T16:25:00.009-04:00

In February of this year, the Bowne Company retained our team to assist in the sale of their three story, 50,000 sf, office and warehouse building on 12th and Superior. This property had been formerly listed with a competing real estate firm, who had marketed the property for over a year.

Within less than a month of being retained by the seller, we had a signed contract to sell the property, in the depth of this recession, for $605,000 to a neighbor , Telos Systems, located less than 10 blocks away on Superior.

The buyer and the buyer's broker were not aware that the building had been listed prior to our involvement and were close to purchasing another building for more money and less square feet. They had found our building on line, where it had not been posted previously.

The transaction closed on July 29, 2009, only five months after receiving the listing.

For more information on the building,

www.terrycoyne.com/ourproperties/detail.asp?id=217

Chrysler Plant Closing in Twinsburg - Some Thoughts

2009-07-31T09:08:00.005-04:00

There are 27 buildings in Northeast Ohio with 1,000,000 square feet or more with a total square footage of 52,083,208 and vacancy rate of 8.0%.

If the Chrysler stamping plant in Twinsburg closes at the end of 2010, the vacancy rate of theses buildings will increase to 12.6%.

This plant consists of 2,400,000 square feet and sits on 165 acres.

At its employment peak in 1999, this facility employed 2,188 people.

Average asking lease rate of these building with available space is $2.50/sq ft, triple net.

The few sale comps on public record of these buildings are below:

4300 E. 49th Street, Newburgh Heights (Charter Steel) 1,740,000 square feet;

sold 2/27/02 for $3,200,000 ($1.84/sq ft)

5400 Baumhart Road, Lorain (former automotive plant) 2,500,000 square feet;

sold 12/18/06 for $2,527,181 ($1.01/sq ft)

20001 Euclid Avenue, Euclid (Euclid Business Park) 1,138,236 square feet;

sold 5/2/01 for $9,117,000 ($8.01/sq ft)

23555 Euclid Avenue, Euclid (Argo Tech) 1,750,000 square feet;

sold March 2007 for $5,700,000 ($3.26/sq ft)

2509 Hayes Avenue, Sandusky (Kyklos Bearing Plant) 1,321,947 square feet;

sold 8/7/08 for $25,500,000 ($19.29/sq ft)

The average sale price for buildings in this size range is $9,208,836 ($6.45/sq ft)

As of right now there are five that are STILL automotive facilities:

GM Corporation: 5400 Chevrolet Blvd, Parma-3,000,000 square feet

Ford Motor Company: 5600 Engle Road, Brook Park-5,200,000 square feet

Ford Motor Company: 650 Miller Road, Avon- 1,300,000 square feet

Ford Stamping Plant: 7845 Northfield Road, Walton Hills-2,100,000 square feet

If the Chrysler building were to become vacant, it would be the the best located and most modern of these 1,000,000 + facilities. Having said that, it is unlikely the lease rate for the building would be much higher than the average lease rate of $2.50, triple net. Large manufacturing plants are expensive to maintain and are typically constructed for a specific use which is not easily refitted for different uses.

The value in this property is both the land and the building, which was not the case in the most recent automotive plant sale in Lorain, where the land had little, if any value.

Twinsburg land is worth around $100,000 per acre for end users, and $30,000 per acre if sold in bulk, or just under $5,000,000. Unless sold to the perfect end user, the building is not likely to be worth more than $12 to $14 per square foot, and depending on the condition of the inside, perhaps closer to $6.00 per square foot. And would likely be sold to a redeveloper who would sell large pieces of the plant as scrap, sell off or redevelop the land on 82, and lease out the vacant space in the balance of the building. Because it was a stamping plant, the building probably does not have enough docks for today's needs, and ceiling heights of varying heights, but not the minimum of 24 feet which is standard today.

The former Lorain Ford plant has had a dampening impact on lease rates and values not only in Lorain, but in the surrounding markets as well. And that plant has yet to attract any large employer companies, despite having a paint plant in excess of 500,000 square feet with state of the art amenities and less than 10 years old.

One could argue that the best long term value for the Twinsburg stamping plant would be to buy it, scrap the plant for as much money as possible, and redevelop the site as an industrial park. Selling land to end users who will build their own properties will create more value and jobs than keeping the building up.

165 acres equals 7,187,000 square feet of land and at about 20% building to land coverage that equals 1,437,480 square feet of new construction. New building costs hover around $45 psf which translates into approximately $64,000,000 in real estate value. A higher ground coverage will increase the $64,000,000, but we can use the lower number to be conservative.

Last year the property paid $660,000 in real estate taxes. At $64,000,000 in value the property would generate annual real estate taxes of $1,280,000. Assuming an absorption rate of 10 years, the property would generate double the amount of taxes in ten years than it did last year.

It is not likely that the development will ever employ as many people at Chrysler did at its peak, but assuming one job per 1,000 square feet, the job count would be around 1,400. The impact of the income tax loss will never be fully replaced. But even if a manufacturing company were to use the entire building in its existing condition, it is unlikely the peak employment number would ever be reached again.

The loss of the Chrysler building is devastating to Twinsburg and North East Ohio. But the demand for modern warehouse and manufacturing space remains high. The vacancy rate in our market for buildings built since 2000 is under 1%, which is among the lowest vacancy rates in the US. Companies prefer newer, more efficient properties. Rather than leaving the buildings up and fighting for deals based solely on rent, differentiating the site through quality of buildings and attractive park amenities will attract better paying employment.

With patience and planning this site can be reutilized to the benefit of the city, former employees and tax payers through out the region.

Recent Recessions & Jobless Recoveries

2009-07-28T08:42:00.004-04:00

Length of Recent Recessions & Jobless Recoveries
July 27, 2009

With an end to the recession in sight, the strength of the recovery is the next big topic of discussion. Most analysts expect a tepid rebound, and recent history supports this outlook. The term "jobless recovery" came into usage after the 1990-91 recession to describe the condition where GDP was growing but not fast enough to encourage businesses to hire. Payroll employment languished after that recession ended, failing to rise above even its end-of-recession level for another 14 months. Employment did not surpass its pre-recession peak for another nine months after that. The jobless period lasted even longer following the 2001 recession, with employment failing to rise above its end-of-recession level for 29 months. It was another 10 months after that before employment rose above its pre-recession peak. If recent history is any indication, commercial real estate leasing conditions will be moribund for at least the next year and probably longer, particularly given the risk-averse credit markets. However, employers are running their businesses at very lean levels, having been quick to cut both inventories and payrolls beginning last September when the credit markets nearly shut down. Labor productivity remains unusually strong for a recession, and second quarter corporate profits were surprisingly resilient. This raises the possibility that even a modest increase in demand could prompt employers to resume hiring, which would shorten the jobless recovery and hasten a true labor market recovery – a hopeful outcome for commercial real estate. Source: U.S. Bureau of Labor Statistics, Grubb & Ellis
Robert Bach, Senior Vice President, Chief Economist, has 30 years of professional experience in real estate market research, consulting and city planning. His commentary on the real estate markets is provided here on a weekly basis.

Recession - An Update

2009-07-27T08:40:00.002-04:00

Six-Pack of Good News

The Conference Board's index of leading indicators increased 0.7 percent in June, its third consecutive monthly gain and the sharpest three-month rise since 2003. The index is a weighted average of 10 key variables designed to forecast economic conditions six to nine months in advance. The latest reading is a clear sign that the recession is drawing to a close.
Dismal Scientist, part of Moody’s Economy.com, identified 23 metro areas where the recession is moderating. Click here to view the list and read the article.
The Dow Jones Industrial Average ended yesterday above 9000 for the first time since early January thanks in part to a $2.3 billion quarterly profit reported by Ford Motor Company. Although the profit was attributable to debt restructuring, Ford stock rose 9.4 percent on the news.
Existing home sales rose 3.6 percent in June, the third consecutive monthly increase and the longest string of gains since 2004. Condo sales increased by 14 percent while single-family sales gained 2.5 percent.
Last month Goldman Sachs repaid the $10 billion it received in TARP funds, and now the company has paid $1.1 billion to repurchase the stock warrants issued to the U.S. Treasury. Taxpayers made an annualized return of 23 percent. Click here to read an article from The Associated Press.
THE RECESSION IS OVER… in Canada, reports the Bank of Canada. Click here to read the article in The Globe and Mail.

Commercial Vacancy Rates & 2009-Q2 Industrial Market

2009-07-23T16:12:00.006-04:00

Commercial vacancy rates for the four core property types increased significantly in the second quarter. The industrial market ended the quarter with 10.7 percent of its space empty, an eye-popping 120 basis-point increase in a single quarter. This was by far the largest quarterly gain since 1986 when Grubb & Ellis began tracking national market data. The office vacancy rate moved higher by 100 basis points to end the quarter at 16.6 percent. Both property types could be on track to exceed their peaks of the early 1990s. Retail and apartment vacancy rates also increased but at a more modest pace. Look for leasing market conditions to bottom out late next year or the first half of 2011, followed by a sluggish recovery. While the four core property types are expected to ride through this cycle together, the industrial market may be positioned slightly ahead of the pack; the industrial construction pipeline empties out more quickly due to the shorter construction times, while a pick-up in global trade led by emerging markets could help support demand for light manufacturing and distribution space. Source: Reis, Grubb & Ellis

U.S. Industrial Market First Look: 2009-Q2
· The pace of softening intensified in the second quarter as the vacancy rate soared by 120 basis points to end the quarter at 10.7 percent. This was by far the largest one-quarter gain in the 22-year history of Grubb & Ellis’ survey, easily breaking the record of 70 basis points set in the prior quarter. Vacancy was lowest in Los Angeles County at 3.1 percent, although the availability rate of 8.3 percent indicates that the vacancy rate will rise as leases expire. Vacancy was highest at 19.7 percent in Kalamazoo, Mich., a region that is working hard to shore up its industrial base.
· Net absorption was mired deep in the red for a second consecutive quarter, registering negative 43 million square feet on top of the 40 million square feet vacated in the first quarter. The silver lining was that only 13 million square feet was completed, the lowest quarterly total in nearly five years. Users in Northern and Central New Jersey gave back nearly 9 million square feet of space, far ahead of second-place Atlanta where just shy of 6 million square feet was returned. Twelve of the 58 markets tracked by Grubb & Ellis did manage to stay in the black, led by Denver with 813,000 square feet of positive absorption.
· Space under construction plunged to 27 million square feet at the end of the second quarter, its lowest level since at least the early 1990s. The Greater Philadelphia region, encompassing Central and Eastern Pennsylvania, led all markets with 4.1 million square feet yet to be completed, followed by second-place Houston with 2.6 million square feet. Southern California’s Inland Empire, a longtime construction leader where nearly 22 million square feet was delivered in 2007, ended the second quarter with just 1.6 million square feet in the pipeline.
· The average asking rental rate for all types of industrial space offered on the market at the end of the quarter was $5.54 per square foot per year triple net, a decline of 2.7 percent from the year-ago quarter. The average effective rental rate declined by 22 percent over the past four quarters, driven lower by generous periods of free rent and other concessions to tenants.

Forecast

The industrial market is not living up to its reputation for relatively moderate swings in leasing market cycles. The 120 basis-point increase in the vacancy rate during the second quarter was the fastest pace of softening among the four core property types. The drivers of demand for industrial space – retail sales, logistics, global trade and the construction industry – all have taken big hits in the current recession. The sharp increase in the second quarter vacancy rate to 10.7 percent raises the possibility that the market may come close to the previous record of 13.7 percent posted in the first quarter of 1992. Ironically, given the rapid pace of deterioration, the industrial market could be the first to turn around. China’s efforts to rescue its economy – a $586 billion stimulus package (larger as a share of GDP than the U.S. stimulus) and a robust expansion of credit by the state-controlled banking system – appear to be putting the country on track to achieve its GDP growth target of 8 percent this year. This is a hopeful sign for U.S. exports and, by extension, demand for light assembly and warehouse/distribution space.

National Industrial Space Absorption is Negative

2009-06-15T20:59:00.001-04:00

The unprecedented decline in absorption of industrial space totaled negative 40 million square feet in the first quarter.

REIT Pricing rebounding

2009-06-14T17:17:00.002-04:00

The commercial real estate industry is still in the early innings of recapitalization of both debt and equity, but publicly traded markets are giving commercial real estate a vote of confidence. So far this year, REITs have raised nearly $15 billion through 45 public equity offerings. Moreover, REIT share prices have rallied by 60 percent from their low on March 6^th.

Cleveland Clinic Purchases Cleveland Play House Property

2009-05-23T12:09:00.001-04:00

Wednesday brought good news to the Midtown area of Cleveland with the announcement by the Cleveland Clinic that it was purchasing the Cleveland Play House and its 12 acres property

This is good news on many levels.

First, it enables the Cleveland Play House to accomplish its goal of consolidating to with Cleveland State University's drama program into the Allen Theatre at Playhouse Square.

Shedding expensive, lower quality overhead, for a higher quality, more popular destination with shared expenses is a good fiscal decision. Activity begets activity and the aggregation of all of the region's theatre companies into one district is good planning and smart business.

Furthermore, the Cleveland Play House seems to have received a hefty price for their property. 300,000 square feet of theatre space likely has little, if any value, to the Clinic, though I would expect them to be more sensitive than any other buyer to the property's heritage. Renovating the property will likely cost more than simply tearing them structures down and building new. However, without taking sides on the merits of keeping the theatres up or tearing them down, the price of $12,000,000 to $15,000,000 reflects a land value of $1,000,000 to $1,250,000 per acre, depending on the final price - which sets a new high water mark for land sales in this area.

Making money in real estate has been and continues to have a simple formula. Acquire property in the path of job and population growth. And as surprising as it may seem to residents of North East Ohio, Midtown and University Circle are experiencing both. And recent sale prices reflect this trend. The Cleveland Clinic has proven itself to be a friendly neighbor. It would be hard to justify the price based on recent, comparable sales. But as they did with Health Space, the Clinic, out of concern for its neighbors perhaps, paid a price which no other buyer would have matched.

The Cleveland Play House won the lottery when the Clinic agreed to their price and they should be thankful that they were so lucky.

Second, the 12 acres form almost a perfect rectangle and are contiguous to the Clinic's main campus. This site enables the Clinic to expand onto a rare large site owned by one seller in the highly fragmented Midtown area. Given that the only sector in the US to add jobs in the first quarter was health care, anything which enables the Clinic or - for that matter - University Hospitals to grow is something we should all support.

Midtown and University Circle are benefitting from the growth in this industry and now the growth gets a boost in the western direction - away from University Circle - creating a new market - normally overshadowed by the more mature and dense Circle area.

One interesting spin off of this sale is the Museum Of Contemporary Art's planned relocation. Hopefully this sale will help the museum - and not hurt it - in its quest for donor's dollars for the construction of its new museum at the corner of Euclid and Mayfield. Initial reports say the relocation will not occur until 2011, giving the Museum time to raise money. Losing the vibrant Museum would be a loss we can not suffer - but I think it is safe to assume all parties in the transaction are aware of its value and will work together to assist in the relocation.

Employment Changes -

2009-05-22T10:39:00.001-04:00

New Office Park being Developed Near the Chagrin Highlands

2009-05-21T20:54:00.001-04:00

Amid all of this bad news, last week Hemingway Development purchased the former St. Jude's Catholic Parish, from the Cleveland Catholic Dioceses for $2,000,000. Hemingway will be clearing the land to make way for a 17 acre office park, and expect to announce their first new building soon.

Amid all of the bad news in the economy, it is important to note that real estate development is still occurring. The park will be an inexpensive alternative to the Jacobs Group's Chagrin Highlands development, which is just up the street, north on Richmond Road. Asking sale prices will be in the $350,000 per acre range verus Chagrin Highlands land prices in the high $500,000 range.

Cleveland First Quarter Trends

2009-05-21T11:04:00.002-04:00

Sales continue to be down while leasing remains the alternative choice for users. New credit/financing is still difficult to obtain especially with the 30% equity requirement.
In all industry classes, free rent and other concessions are being offered by landlords and in all likelihood will increase in the next year if the economy doesn't make a change. Landlords of spec space are also unable to move rents and continue to focus on concessions to increase occupancy. For buyers with good credit, now is a good time to buy good quality assets at prices not seen since the early 1990s.

Industria Marketl:
This region is not seeing over-building as many other markets across the country are seeing, which in turn means vacancy levels are staying stable. Usually this market is run by automotive and construction, which are seeing downturns, whereas aerospace continue to be at normal capacity. Many of the planned construction has been put on hold, however 460,000 square feet is currently under construction, and is taking place in the southeast submarket.

Overall vacancy for industrial in the region is 10.3% and average asking rent is $3.49/sq ft NNN.
Downtown: 9.0% $2.19/sq ft
Northeast: 9.3% $3.34/sq ft
Northwest: 17.7% $3.98/sq ft
Southcentral: 8.9% $4.84/sq ft
Southeast: 10.4% $4.81/sq ft
Southwest: 10.8% $5.38/sq ft

Office Market:
Vacancy in the region increased only 42 basis points since last quarter (negative absorption) for the first time since 2003. Some questions remain regarding the final impact of PNC consolidates in the National City Bank Headquarters. 100,000 square feet of Class A space is under construction in the east submarket.

Overall vacancy for office in the region is 19.2% (Class A: 14.4%; Class B: 21.2%; Class C: 24.9%)
Downtown: 20.2%
East: 15.5%
South: 19.4%
Southwest: 16.5%
West: 22.8%

Non-Residential Construction

2009-05-19T10:08:00.001-04:00

Article from Grubb & Ellis Research & Knowledge Center/Research Director Robert Bach

Non-Residential Construction Inflation % Change Year/Year

May 18, 2009

After several years of sharp increases, construction costs for commercial real estate are plunging, down by 4.3 percent in April compared with April 2008. Speculative construction starts have dried up along with the availability of credit, and demand for construction materials has plunged across the globe. Nevertheless, core inflation as measured by the Consumer Price Index, which excludes food and energy, increased by a comfortable 1.9 percent in the 12 months ending in April, which means that broad, economy-wide deflation is not in evidence. Some economists think that inflation, not deflation, poses a greater risk to the economy, spurred by growing federal debt and massive injections of liquidity by the Federal Reserve. While the conditions are present for inflation to catch fire, there is no match to light the fuse; wages are deflating, not inflating, as employers eliminate jobs, a trend that is likely to persist into 2010. Most analysts expect the recovery, when it comes, will be gradual at first, which should provide a window for the Fed to remove excess liquidity by selling off the Treasuries, mortgage-backed securities and other bond instruments it has been buying recently. The decline in construction costs is good news for landlords and tenants who need to refit their spaces. A moderate increase in inflation might be considered good news for commercial real estate owners and investors; in the 1970s and early 1980s, when inflation was high, real estate was viewed as an inflation hedge along with gold and commodities.
Source: U.S. Bureau of Labor Statistics, Grubb & Ellis

Robert Bach, Senior Vice President, Chief Economist, has 30 years of professional experience in real estate market research, consulting and city planning. His commentary on the real estate markets is provided here on a weekly basis.

First Quarter 2009 Sales

2009-05-14T15:16:00.001-04:00

Every quarter, we keep track of the commercial sales in the ten county region, over $1,000,000, and post this information at the CoyneReport.com.

As you can see from the information below, the market has consistently slowed each quarter since the 4th quarter of 2007, which was the high water mark for the most recent boom market.

This trend reflects not only a decreased demand, but a lack of liquidity in the market. The leasing market has recently experienced a resurgence, as the sales market has slowed. More information on the leasing market will be coming next week.

The number of sale transactions are down 34% from the previous quarter and down 69% from this time last year.
The total amount of sale volume is down 57% from the previous quarter and down 83% from this time last year.

Medical Mart alternative

2009-05-06T20:40:00.001-04:00

Rather than ask where the Medical Mart and corresponding convention center should be located with our sales tax bond issuance, wouldn't it make more sense to ask if that is the best use of our money?

If there is no other use for our investment, than it is difficult, in these uncertain economic times, to argue against a large public works project, and the subsequent increase in tourism and downtown retail activity.

However, if the money could be earmarked for the investment with the highest return, would a Medical Mart and convention center be the first choice? Considering both are guaranteed to lose money even in the rosiest of scenarios, the answer is clearly no. Yet we pursue it as if it will solve the region's problems. The money should be treated as if it were in our own wallets - which it is - yet we are letting people invest it with the express purpose of losing money.

Were I in charge, where would I invest the money?

I would mimic the Kalamazoo Promise and create the Cleveland Tomorrow Scholarship Program. The rules would be simple. Any four year graduate of Cleveland Public high schools would be granted a college scholarship, equal to the cost of in state Ohio universities average tuition, for every semester they successfully complete. Whether they attend for one semester or receive a degree, they would qualify for the scholarship.

If parents knew their children could receive free tuition to college, it is likely that the response would be positive. People would move into Cleveland, rather than out, driving up home sales, lowering crime, increasing the quality of the schools. Foreclosure rates would drop and real estate tax values would stabilize or increase - providing more money to the schools.

I have not run the numbers to understand if the bond issuance is enough money to support free tuition for every student - but I bet it is close. $400,000,000, plus $9,000,000 annually to support the Medical Mart's annual loses would go a long way toward scholarships. Furthermore, the increasing real estate tax value could likely assist with supporting any shortfalls in scholarship amounts.

And if one student, who attended a college using this incentive program, decided to move back to Cleveland and started the next Google, the results would be spectacular - far more inspiring than a Medical Mart or Convention Center and perhaps a much greater return on our money.

Terry Coyne Introduction

2009-05-06T09:03:00.001-04:00

Terry Coyne, SIOR, CCIM, has been assisting clients resolve their real estate problems in the Greater Cleveland area since 1995. Buying, selling, leasing or building, Terry has helped clients with requirements from 5,000 square feet to 649,000 square feet and from 1 acre to 340 acres. Terry has been the frequent Top Producer at Grubb & Ellis-Cleveland.