How hot is the multi-family market in Cleveland, specifically the city’s downtown?
Gary Cooper, senior vice president and principal with the Cleveland office of Colliers International, says it best: “If there’s one thing on fire in downtown Cleveland, it’s multi-family.”
The reason for this is a simple one: People want to live in downtown Cleveland.
Marcus & Millichap, in its second-quarter 2014 report on Cleveland’s apartment market, said that during the last decade, the downtown population in Cleveland increased by more than 50 percent. Marcus & Millichap predicts that 15,000 residents will be living in downtown Cleveland by 2015.
This, of course, has led to greater demand for apartment units in the downtown area.
According to the Marcus & Millichap report, developers will bring about 1,450 new apartment units to the Cleveland market by the end of 2014. That is more than double the five-year average for new apartment units in the Cleveland market.
Because of this new construction, vacancy should rise a bit by the end of 2014, with Marcus & Millichap predicting a multi-family vacancy rate for the Cleveland market of 6.2 percent, a rise of 70 basis points from the end of 2013.
Rents should grow, though, with Marcus & Millichap predicting that after climbing 2.6 percent last year, effective rents in the Cleveland market will rise 1.3 percent to $805 a month by the end of 2014.
A bustling downtown
Cooper said that the renewed vitality is what is driving people to seek out urban living in downtown Cleveland.
This makes sense. More people across the country – and not just young people – are choosing to rent apartments instead of to buy homes. And many of these consumers want to live in urban areas in which they can walk to public transportation and bike or walk to restaurants, movie theaters, parks and businesses.
Downtown Cleveland offers all of this. And developers have added such attractions as a casino and new park space to the CBD.
This has encouraged area residents to seek their urban-living experience in downtown Cleveland, providing the incentive that developers needed to build new apartment units here.
“Everyone is pretty much fat and happy when it comes to multi-family,” Cooper said.
Cooper said that apartment vacancies in the downtown core of Cleveland are now standing near an incredible 98 percent. And new apartment buildings are filling up quickly after opening their doors.
“The products coming online are leasing very well,” Cooper said. “There is an incredible amount of pent-up demand for downtown multi-family product.”
What is most exciting to Cooper is that the demand for multi-family in downtown Cleveland is coming from such a wide group of consumers.
It’s tempting to think of downtown apartment residents as all being young people, just getting their start in the working world. But in downtown Cleveland, this isn’t the case. Cooper says that he is seeing people of all age and economic groups flocking to the city’s downtown core.
“In the past where you had a very young population in downtown Cleveland, now we are seeing empty-nesters, professionals in their 40s and 50s and entry-level employees making downtown a choice because of all the development and activity happening here,” Cooper said.
Developers are adding new apartment units to downtown to serve these clients. But Cooper said that the influx of new apartment units is happening at a steady and reasonable pace. Because of this, he’s not concerned that the market will be overwhelmed by new product.
“This is not Columbus in the late 1990s where we saw 30,000 new apartment units dumped into the market,” Cooper said. “This has been a relatively small number of apartments added to the market when you look at the big picture here.”