The Cleveland-area multifamily sector continues to exceed expectations when it comes to vacancies, asking rents and plans for new apartment towers. Best of all? Two of the busier brokers working this market say that the city’s multifamily market isn’t showing any signs of slowing.
Midwest Real Estate News recently spoke with Gary Cooper, senior vice president and principal with the Cleveland-Akron office of Colliers International, and Daniel Burkons, senior managing director of the Cleveland office of Institutional Property Advisors, a division of Marcus & Millichap, about the surging apartment market in Cleveland.
These interviews are timely ones. Both Cooper and Burkons are speaking at the fourth annual Cleveland Commercial Real Estate Summit to be held June 27 at Windows on the River in Cleveland. The event, held by REJournals.com, will bring together the biggest names in Cleveland’s commercial real estate market to talk about the state of commercial sales, leases and development in Cleveland and its surrounding areas.
As a preview, we spoke with both Cooper and Burkons about what’s happening today in the apartment market in this key Midwest city. The consensus? Demand is still high for apartment living, especially in downtown Cleveland. And this demand continues to outpace the supply of multifamily units.
Developers, though, have done a good job of supplying the market with new rental units, which has provided a stabilizing effect.
“You still have a lot of demand,” Cooper said. “The biggest difference between now and 2015 or so is that you have had a reasonable amount of inventory that has come online. There are a few more options for renters. It’s not like when there was a waiting list of six to eight months.”
Another difference? While downtown Cleveland is still in high demand from renters, so are surrounding neighborhoods. Cooper pointed to such Cleveland neighborhoods as Ohio City, Detroit Shoreway and Battery Park. Each of these neighborhoods is in demand today from renters.
And Cooper expects the renters to continue to flock to them, largely because they are close enough to downtown Cleveland and each feature their own amenities such as walkable restaurants and shops.
“These neighborhoods really have a long runway for continued growth and future success because they are real neighborhoods,” Cooper said. “They are now being brought back to life. They each have a real neighborhood feeling. A lot of folks want to be there.”
Any overbuilding in this market? Not yet, according to both Burkons and Cooper.
“Everything that has been built has been absorbed,” Burkons said. “The definition of downtown has expanded, too, into the neighborhoods surrounding the CBD. Neighborhoods like Detroit Shoreway have been seeing an explosion in population growth during the last couple of years.”
Burkons says that he isn’t worried yet about overbuilding. There was a time, not too long ago, when developers weren’t adding apartment units to the Cleveland-area multifamily stock. There’s still a way to go, then, before demand even comes close to overwhelming supply, Burkons said.
“Really, what we have added isn’t much in the grand scheme of things,” Burkons said. “Having these new multifamily developments is a good thing for the city. It is helping to bring people to downtown. Then, as more people live downtown, more amenities come to the downtown areas. People now are doing whatever they can to live downtown. It’s becoming a snowball effect. It’s a very good thing.”
Cooper points to the One University Circle multifamily development in Cleveland’s University Circle neighborhood as an example of a modern apartment tower that has been a rousing success in the city.
The development features a 2,800-square-foot fitness center; fifth-floor rooftop deck with swimming pool, outdoor kitchens, community garden, private cabanas and firepits; 20th-floor sky lounge with demonstration kitchen; business lab; 24-hour concierge services; and pet-wash station.
These amenities are representative of a trend in apartment design today. More focus is placed on the common areas of newer apartment developments. And what’s most interesting? Residents are actually using and gathering in these areas, just as developers and owners intended.
“I have friends who are moving to One University Circle,” Cooper said. “They are selling their homes and moving to One University. They’re doing this because of the amenities. The building is located between the medical and cultural institutions, too. It’s near all the food and entertainment. This is what a lot of people want today.”
Cooper says that developments like One University Circle are “quasi-hotels.” They boast hotel-level amenities such as state-of-the-art fitness centers, yoga rooms, spinning rooms and communal cooking areas.
“Part of the draw of new buildings today are the community amenities they offer,” Cooper said. “Before, when people would think of amenities, they’d think of interior space. What does the interior of the units look like? That’s still important, but today, residents have a lot of questions about the other areas of the buildings. They want to know what common-area features they have.”
Burkons said that while developers are adding modern features to their multifamily developments, the amenities race here isn’t quite as intense as it is in, say, Chicago. When developers first started building new apartment projects in the downtown area, they provided nice, modern apartments. They didn’t include the latest and greatest of amenities, though.
“The base of the amenity level was never very high,” Burkons said. “The amenity was living downtown. Maybe you had a fitness center.”
That has changed, especially as a growing number of developers from outside Cleveland have entered the market, Burkons said. The increased competition in the market has brought more comprehensive amenity packages with it.
What does the future hold for Cleveland’s apartment market? Cooper says that construction in this sector isn’t slowing. Developers continue to bring new apartment units to downtown Cleveland.
This is encouraging a retail boost in downtown Cleveland, too, with new restaurants and shops popping up in the CBD.
Burkons points to Euclid Avenue, which has become home to stores that aren’t just selling necessities. Retailers have opened sporting goods stores or are selling general retail, a sign that downtown Cleveland is steadily attracting new residents, and shoppers, to the area.
“No one is opening a big-box Target or T.J. Maxx downtown,” Cooper said. “But we are seeing a growth in the number of smaller, unique offerings. We are seeing yoga studios and spinning studios that we hadn’t seen in the past. We are seeing new bakeries. We are cautiously optimistic and bullish about the multifamily market continuing because of the activity we are seeing downtown. I’d think that any slowdown is more about a reasonable amount of supply coming online instead of a lack of demand.”
Want to hear more about the apartment — and the industrial, retail and office sectors — market in Cleveland? Be sure to attend REJournals’ Cleveland Commercial Real Estate Summit on June 27. You can learn more about the conference and register for the event here.