Commercial real estate activity in the Cleveland office market held steady during the second quarter of 2020, despite the stresses placed upon the local economy by the COVID-19 pandemic.
That bit of good news comes from the second quarter Cleveland Office Market Report recently released from Newmark Knight Frank.
According to the report, the Cleveland office market saw 145,803 square feet of positive net absorption during the second quarter.
That’s a solid number considering the pandemic. But researchers with Newmark Knight Frank warn that the steady numbers of the second quarter should not proivde false hope for the coming months. As Newmark Knight Frank says, office absorption numbers in the Cleveland market will certainly suffer because of the pandemic. The market has already seen what Newmark calls a lackluster amount of office leases signed during the second quarter.
The absorption number for the second quarter is also significantly down from the numbers Newmark charted during the beginning of the year. According to Newmark, the Cleveland office market saw 402,086 square feet of absorption during the first quarter of the year.
For the first half of 2020, then, the Cleveland office market has recorded 547,889 square feet of absorption.
The vacancy rate for this market dropped, too, 40 basis points from the first quarter to end the second quarter at 16.5 percent for all office properties. Average asking rents, though, did fall in the second quarter. Newmark Knight Frank reported that this figure slid by 15 cents a square foot across the greater Cleveland office market, finishing the second quarter at $18.03 a square foot for all class types.
The outlook for the rest of the year? Newmark says that this is uncertain. Building owners, leasing brokers and tenants have gotten creative, the report says. Some owners have worked with tenants to defer lease escalations into renwewal terms. Newmark pointed to one client that borrowed its own security deposits that it will later pay back.
The city’s East submarket remained the tightest, with the office vacancy rate here falling 100 basis points to 11.5 percent. The submarket saw 85,895 square feet of positive net absorption. On the negative side, rental rates in the East submarket fell in the second quarter to an average of $17.86 a square foot.
Newmark said that there weren’t many big sales or leases in the Cleveland office market during the second quarter. But there was the sale of 29225 Chagrin Boulevard, a 34,380-square-foot ofice property that sold for $4.8 million. Also in the East submarket, 24075 Commerce Park sold to Retina Associates of Cleveland for $1.5 million. The 19,440-square-foot building will become the headquarters of the eye surgery company.
Another solid sale in the second quarter was the 36,000-square-foot 20820 Chagrin Boulevard property. Cellular Technology Limited bought the building for $1.25 million.
