Cleveland Industrial Investment Forecast
Cleveland Metro Area, 2018 Outlook
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Limited Development Supports Tight Vacancy; Favorable Yields Generate Investor Interest

Limited completions result in rents jumping to a cycle-high figure this year. Cleveland remains a prominent industrial hub this year as existing inventory is far above most Upper Midwest metros and vacancy stays compressed below the national measure. Manufacturing is the driving force behind the market’s strong industrial presence thanks in large part to the Port of Cleveland’s status as a primary Great Lakes haven for bulk shipments of raw materials. Although manufacturing facilities comprise a sizable portion of the metro’s industrial supply, warehouses account for the majority of 2018’s lean construction pipeline. Southwestern suburbs receive more than half of this year’s forecast total, which includes the metro’s biggest project slated for completion, a 197,000-square-foot warehouse in Strongsville. Suburbs northeast of downtown in the I-90 corridor, specifically Euclid and Mentor, also record substantial construction activity in 2018. These market trends allow the average asking rent to climb to the highest level since the start of the economic expansion.

Value-add options preserve local interest. High yields and a strengthening investment environment will lure buyers to Cleveland in 2018. In recent years, local investors were involved in the majority of trades, a trend that should continue this year as Class B/C space along I-90 extending from the CBD to Painesville becomes available. Here, manufacturing space typically sold above $30 per square foot and netted cap rates in the low-9 percent span. Warehouses in this corridor near the city center present buyers with renovation opportunities as many of the properties are older than 50 years. Class A warehouses, which are generally located in the metro’s southwestern sections, are sought after by institutional investors. These buildings capture prices that may eclipse $15 million and initial yields in the low-8 percent band.