Economic and Demographic Update
Population: The population in Cleveland in the 1Q of 2021 was 2,032,897. This represents a decrease in total population of 10,830 over the course of the last year. During 2020 Q1, the Cleveland population stood at 2,043,727. The number of people employed rose to 998,587 in 2021 Q1 from 984,922 over the last quarter, an increase of 13,665 or 1.39% for the period.
Median Income: The median household income for Cleveland in the 1Q of 2021 was $59,572. At this time last year, the median household income was $57,805. 2021 Q1 median income represents a quarter-over-quarter increase of 0.15% and a year-over-year increase of 3.06%. Cleveland has a median household income lower than the U.S. average, which is $69,277.
Current and Historical Data Review (Rates PSF, Vacancy)
Office leasing: Overall office base rent rates have increased by $0.02/SF. Rates went from $17.10/SF in 2020 Q4 to $17.12/SF in this most recent quarter. Office rates grew in 2021 Q1 when compared to last year’s quarter, when office base rent was $17.04/SF.
Vacancy rates also went from 7.40% to 7.80%. They stood at 7.00% this time last year. During that same period, the vacancy rate is expected to change from 7.80% to 8.00% next quarter.
In the Cleveland market’s central business district (CBD) specifically, 2021 Q1 base rents stood at $20.92/SF, a slight decrease from $20.93/SF in 2020 Q4. When compared to last year’s quarter, CBD office rates increased from $20.52.
CBD vacancy rates went from 8.29% to 8.45%. Throughout 2021 Q2, the CBD vacancy rate is expected to increase to 9.31%.
Office Sales Metrics (Cap Rates, Volume, Average Price PSF)
For investors, the cap rate during 2021 Q1 was 14.70%, compared to the previous quarter’s cap rate of 10.62%. The cap rate was 9.00% this quarter last year.
In terms of transaction volume, there were 29 sales transactions during the period. That’s a decrease compared to the 40 transactions in the previous period. Last year at this time, there were 41 transactions. In terms of transaction amounts, office transactions were valued at $42,896,240 in 2021 Q1. That’s an increase compared to $23,095,280 of transaction value in the previous period. Last year at this time, office transactions were valued at $490,284,576.
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 decreased by $0.02/SF. It went from $5.20 in 2020 Q4 to $5.18/SF in this most recent quarter. Warehouse and distribution rates grew in 2021 Q1 when compared to last year’s quarter, when industrial base rent was $5.05/SF.
Warehouse and distribution vacancy rates decreased from 4.90% to 4.70%. Next quarter, the vacancy rate is expected to reach 4.80%.
Industrial Sales Metrics (Cap Rates, Volume)
For investors, the industrial cap rate during 2021 Q1 was 9.40%, compared to the previous quarter’s cap rate of 9.28%. The cap rate was also 9.40% this quarter last year.
In terms of sales volume, industrial transactions were valued at $117,295,888 during the quarter. That’s a decrease compared to $170,010,080 of transaction value in the previous quarter. Last year at this time, industrial sales transactions totaled $53,124,892.
