Real estate is typically a lagging indicator of the economy. Closure and relocation announcements typically pull employees out of jobs today and address the facility issues tomorrow. Therefore, the negative impact on Northeast Ohio's industries and slow economy with "jobless recovery" will create softness in the office, industrial, and retail sectors of commercial real estate over the next twelve months. The growing supply of real estate will place pressure on property owners to adjust their pricing structures and expectations downward. Construction is so low that costs for new facilities are also dropping to record lows in the past decade. Top all of this softness with depressed interest rates, and Northeast Ohio has created one of the best real estate markets for buyers or tenants in its history.

Due to the manufacturing nature of Northeast Ohio, companies customized the majority of the industrial facilities for specific uses, with over 50 percent dating back to original construction in the 1970s. This creates some obstacles for service-driven companies to use the facilities for distribution purposes due to the limited clear height and loading capacity. Fortunately, property owners and local communities recognize these limitations and promote creative low-cost financing, tax abatements, and other incentives in an effort to attract companies. The industrial market in Northeast Ohio possesses more than 350 million square feet with just over a 10 percent vacancy.

Northeast Ohio's overall vacancy in office space continues to move towards a 20 percent vacancy on approximately 50 million square feet. These vacancies have been steadily climbing since the technology and telecommunications downturn in early 2001. The completion of the Federal Courthouse building in Cleveland also contributed the vacancy issue as many agencies left space to consolidate into the new facility. Similar to the BP departure in 2000, the impact of vacating headquarter-type facilities for LTV, TRW, and GE Lighting may leave enormous chunks of office space which are often difficult to multitenant. As all corporations tighten their belt, the office market has been flooded with nearly 2 million square feet of sublease space.

On an opposite note, the retail market has been experiencing positive absorption with construction of lifestyle centers and other creative big box expansions. The vacancy rates continue to drop in the single digits with close to 2 million square feet of new construction and stable rental rates supported by market activity. The lifestyle centers bring higher rents from up- scale tenants such as Crate & Barrel, Z Gallery, Home Expo, and Cheesecake Factory.

Northeast Ohio presents an opportunistic time to buy commercial real estate for investors and users. The striking of lease deals reflects the slow activity with significant concessions in free rent and tenant improvements. With an uncertain stock market and below-market real estate conditions, the time to make a real estate play in Northeast Ohio is today.

Crystal Ball Conclusion:

Northeast Ohio has been preparing for the inevitable shift to a service-driven economy for the past three decades. Sure, the population growth is slower than the hot belts, and the buildings are a little dirtier, but the core industries which speared the industrial revolution made it happen through hard-working people and transportation infrastructure. The same qualities apply today. Very few places in the world offer the same level in terms of cost of living, quality of life to raise a family, and worker productivity as Northeast Ohio. The economy has created opportunity, in terms of labor, real estate, and government support, for companies and individual to capitalize on the competitive advantages of Northeast Ohio.

Kristian D. Bjorson is director, Logistics Practice Group, The Staubach Group. He can be reached at

216-937-4380.

A Look at the Residential Market

Northeast Ohio Real Estate

One constant that companies relocating to Northeast Ohio can count on is a diverse range of residential real estate options. From $500-per-month apartments to $500,000 new construction, suburban manses to million-dollar waterfront properties on Lake Erie and everything in between, residents of the region enjoy selecting from a varied choice of housing styles and pricing, as well as neighborhoods and communities.

By Christopher Johnston

Residents also relish a high quality of life that boasts numerous strong public school systems and private schools, as well as a cornucopia of cultural and recreational activities, from professional sports teams, an expansive park system, and the Cleveland Orchestra to the Rock and Roll Hall of Fame and Museum, NFL Hall of Fame, and Cedar Point amusement park.

"If you live in the suburbs and work in downtown Cleveland, we have an easy commute, because we don't have massive congestion problems, and the connections around the city are terrific," says Judy Makaryk Rosen, president, Planright GMAC Real Estate in Warrensville, Ohio. Just south of Cleveland, Akron also offers a diverse and affordable housing market and proximity to the other major cities in the region. According to Stephen Merkle, president, Akron Area Board of Realtors, the average sales price for homes sold in Summit County in July 2002 was $137,559. The market features ample new housing developments, along with existing housing and condominiums.

As for proximity, Merkle says, people describe Akron as a 20-minute town. "With the highway system that we have in Summit County, it's easy to get to opposite ends of town," he relates. "We are also 25 to 30 minutes away from Cleveland and Canton, so it's an excellent location if you're doing business in that corridor."

Commercial and residential development in recent decades has transformed nearby Canton into its own fully engaging community, with housing choices from historic homes to new construction and condominiums.

"You can live in the area and never have to travel to Akron or Cleveland, if you choose not to," says Pat Turner, CRP, director of relocation for CUTLER/GMAC Real Estate in Green, Ohio. "You're also within an easy commute of Columbus, Ohio, as well as Pennsylvania."

Just to the west of this area, Medina County continues to entice residents with its distinctive blend of rural and suburban communities combined with its proximity to the major cities in the region. The county's market for single-family homes sold is up 6 percent from 2001, and the community has experienced 30 percent growth during the past five years.

"The reason for our growth is people want to move here not only for the community atmosphere but for our traditional town square," says Michael D. Marquard, president, M.C. Real Estate, Medina. "We've maintained that historic look downtown, and while we're close to the region's attractions, we're also just far enough away."

In the northwestern portion of the region, throughout Sandusky, Huron, and Vermilion, which are between Cleveland and Toledo, there is also a selection of housing, from rural to suburban and urban, starting around $50,000. Running along the shores of Lake Erie, these counties offer lakefront homes ranging between $250,000 to more than $1 million, with the average around $450,000 to $500,000, according to William Hill, an agent with John Halter Realty in Huron, Ohio.

"The Sandusky area is also blessed with a lot of century homes that are reasonably priced under $200,000," Hill adds.

Christopher Johnston is a Cleveland-based freelance writer who frequently writes about economic development, workforce, employment, and education issues.