CLEVELAND, Ohio — The Greater Cleveland office real estate market had a tough year overall in 2022 and the industry’s fourth quarter shows that challenges may not be letting up anytime soon.
According to a report released by real-estate company Newmark, the vacancy rate regionwide grew to 19.8% for the final three months of 2022, up from 18.2% in the third quarter and from 18.9% from the fourth quarter of 2021.
This included an 21% vacancy rate during the fourth quarter in the central business district of Cleveland, and 18.9% in the suburbs.
Yet the average rental rate increased 22 cents from the third quarter to $18.82 per square foot, the report said.
Newmark attributed the vacancy struggles to the increasing popularity of the remote and hybrid work model that has become a permanent staple for many businesses in the wake of the pandemic. And with this new model, many workers have come to expect more upgraded amenities, but many of the offerings have not met that need, the report said.
Something else that has been impacting the office vacancies are increases in the availablity of space for subleasing.
For example, Newmark noted, that American Greetings offered up 250,000 square feet of sublet space at its Westlake headquarters.
There were some strength areas in the market during 2022, including the east suburban market (14.1% vacancy rate), in part because some businesses moved their offices from Cleveland.
And there were some positive developments downtown with the City Club of Cleveland leasing 14,600 of space at Playhouse Square and construction underway for the Sherwin-Williams global headquarters, which is expected to house 9,500 employees.
Newmark predicts that the slow office space sales will continue in 2023.
Megan Sims covers real estate for cleveland.com and The Plain Dealer. See previous stories at this link.
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