Sunday, March 13, 2016

Downtown Cleveland's next office tower is in the works

During LeBron James' playing time in Miami, residents and visitors to Cleveland got a brief insight as to the headquarters location of one of this city's most successful and enduring corporate citizens. However, the street address of that company could soon change and in a very visible way.

The paint and coatings giant Sherwin-Williams (SHW), founded in 1866 in Cleveland, isn't a flamboyant company. The only time it displayed a sign on its headquarters, telling the world what's inside, was in the final year of James' absence. The basketball star's previous 10-story-tall mural gave way to a barren, brick wall for three years. Then in 2013, a similarly sized marker was placed there by SHW. It suggested the company's headquarters was close by. Indeed, the mural hung on SHW's home -- the unfinished side of an 86-year-old collection of three buildings known as the Landmark Office Towers. That unfinished side is where a fourth building, 18 stories tall like the other three, was to be built until the Great Depression halted it.

Sherwin-Williams' vibrantly colored mural on the Landmark
Office Towers was displayed above Ontario Street for only
one year (2013-14). It read: "Our Vibrant Home Town --
Sherwin-Williams and Cleveland: Together since 1866."

SHW's giant mural pictured above gave way to a new James mural following his 2014 return to Cleveland. SHW's offices returned to anonymity, at least for those who did not already know the firm occupied most of the 900,000-square-foot Landmark Office Towers, which SHW owns. It also owns the land on which its Breen Technology Center sets on Canal Road downtown, roughly where the company was founded.

Since the Great Recession, the company has grown quickly -- from $7.8 billion in revenues and earnings per share of $4.19 in 2009 to more than $11.34 billion in revenues and earnings per share of $11.16 in 2015. That's five consecutive years of record sales and four years of record earnings. SHW has outgrown its Landmark home. Now its offices are spilling over like so much paint into a portion of the neighboring Skylight Office Building, a 12-story, 321,000-square-foot building constructed by Forest City Enterprises in 1991. That building is almost entirely full too.

In 1990, Sherwin-Williams planned to build
this 30-story office tower called "Gateway at
Landmark" where the LeBron James mural is
today. The recession of the early 1990s halted
further consideration of this skinny tower
. A
reincarnation of this tower apparently isn't
being considered because it is too small.
So SHW's Chief Operating Officer John Morikis began looking at his company's growth and measuring it against SHW's space needs. He came to the conclusion that the Fortune 500 firm needed more room to grow. The question is, should it expand into other downtown buildings or consolidate its offices into a new headquarters building. The latter was favored. So basic questions needed to be answered next such as how much space would it need, where should it be located, would SHW want to own the building or pay rent, and who would build it?

As Morikis was promoted to chief executive officer effective Jan 1, 2016, the search for a new headquarters went into high gear. Major downtown developers and property owners were contacted about constructing a roughly 40-story office building with modern floor plates averaging no more than 30,000 square feet so that open working spaces can be illuminated with natural light and foster more employee collaboration. Modern open-floor configurations also typically reduce the need for space by about 20 percent compared to the inefficient, enclosed rooms that SHW office workers are in now.

Those contacted reportedly include (see graphics at end of blog posting):
  • Geis Companies plans a low-rise, multi-building office campus called the Burke Development District at the west end of Burke Lakefront Airport that could accommodate 750,000 square feet of offices. Geis is also reportedly seeking to develop properties north and south of Playhouse Square;
  • Jacobs Group owns the parking lot on Public Square where the 60-story Ameritrust tower was to be built before the bank was acquired by Society Bank in 1991. Jacobs/Hines proposed a 21-story office building on that lot but the idea fizzled during the Great Recession; and
  • Weston Inc's conceptual plan for the Superblock in the Warehouse District, approved by the city, features two 23-story apartment towers, one hotel tower and a 37-story office tower on the NW corner of West 3rd St. and Superior Ave.

City Hall and developer sources confirmed these sites were under consideration but did not know which, if any was favored by the company. The Public Square site would certainly be the most visible, but given SHW's traditions, an identifiable headquarters building has not been a priority for this unassuming company. Whichever developer offers the best financial deal to SHW will likely win. The financial picture could also entail SHW selling or trading the Landmark Office Towers for redevelopment. It's an ideal candidate for a housing conversion.

Conceptual plans for other downtown Cleveland developments offering much smaller office leasing opportunities would have to be significantly altered to accommodate SHW. Stark Enterprises' proposed nuCLEus development north of Quicken Loans Arena features a 54-story, mostly residential skyscraper. It is proposed to have 200,000 square feet of offices. The Benesch law firm committed to 66,500 square feet of that, prompting Stark to consider altering its plans to add another 100,000 square feet of office space to "respond to demand."

Fairmount Properties/Wolstein Group are planning a small office building of roughly 150,000 square feet on Front Street as part of their third phase of Flats East Bank. Dick Pace/Trammell Crow plans only 80,000 square feet of offices in their lakefront development north of First Energy Stadium. That project's conceptual plan was recently amended to add more residential, not offices.

At one point, plans apparently were moving fast enough to spawn company-wide rumors that SHW was going to announce the new headquarters building at its national sales meeting Jan. 22-27, 2016. The event is held in late January every year in Orlando, Fla. and attended by more than 6,000 salespersons. Alas there was no announcement. [UPDATE: the reason why no announcement was made was likely due to the uncertainty surrounding SHW's pending acquisition of Valspar announced March 20.]

As recently as late February, a member of Mayor Frank Jackson's cabinet said that several downtown Cleveland sites remained under consideration by SHW. There is no information at this time to suggest that any sites outside of downtown are being considered. SHW apparently wants to stay close to its geographic roots, not far from where Henry Sherwin and Edward Williams founded the company along the banks of the Cuyahoga River 150 years ago this year.

It would be apropos if plans for a stunning new downtown Cleveland headquarters tower for this global coatings giant could be publicly unveiled in the company's sesquicentennial year. If all goes right, they will be.

Geis Companies' Burke Development District.
Jacobs Group/Hines' 21-story Public Square
tower, proposed in 2008.
Jacobs Group's 60-story AmeriTrust Tower on
Public Square, proposed in 1991.
What the AmeriTrust tower would look like if it was built as a
40-story structure, which is approximately the size Sherwin-
Williams is reportedly considering for its new headquarters.
Weston Inc.'s Superblock plan for the Warehouse District, with
the 37-story office tower being the closest structure shown.
Stay tuned!

END

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