An analysis of Sherwin-Williams' HQ news: it's just the beginning

Sherwin-Williams will likely build more structures in down-
town Cleveland as part of its new headquarters than they've
let on in today's big announcement (KJP file).
CLICK IMAGES TO ENLARGE THEM

Up in the 90-year-old Landmark Building, where Sherwin-Williams' (SHW) headquarters has been growing and expanding for the duration of that Art Deco beauty's lifetime, the employees' response to The Big News appeared to be less than big.

"There seems to be little to no reaction here today," said an employee in SHW's Performance Coatings Group (PCG). "I can tell you one thing, no one is throwing a party or jumping for joy."

And that seems to be the same reaction to SHW's HQ announcement today across social media or among the urbanistas on the forum at UrbanOhio. It was also my reaction -- at first.

To some, SHW's proposal appears timid. To me, it is intentionally incomplete.

I'm overjoyed that downtown's Cleveland largest parking crater, embarrassingly located on our central square, is publicly marked for death. The nearly 7 acres of parking lots owned by the Jacobs and Weston groups was privately threatened, or at least part of it was, when SHW last considered a new headquarters in 2014-15. That was before it made the bold move to acquire Minneapolis-based rival Valspar.

Sherwin-Williams official maps showing sites for new
HQ and R&D facilities, as well as their current
facilities in downtown Cleveland (SHW).

SHW put its HQ plans on hold as the 154-year-old paint company absorbed Valspar's employees into its ranks and, just as importantly, into its facilities. It couldn't add them into its already full John G. Breen Technology Center on Canal Road. Nor could it add them into the 900,000-square-foot (SF) Landmark Building of which SHW occupies nearly 90 percent. The rest is leased to other tenants.

SHW in 2015 had already overflowed its Landmark cup into the neighboring Skylight Office Tower, leasing 52,000 SF there. So SHW leased a flex office space on Hinckley Industrial Parkway in Cleveland, renovating part of it for at least $740,000 according to public records. There, it put up to 250 employees, some of them Valspar staff relocated from Minneapolis.

At first it seemed like SHW's HQ plan was responding to its spatial needs pre-Valspar. Back then, SHW pursued a new HQ when it outgrew Landmark and expanded into Skylight. Together, those spaces total about 950,000 SF.

As of today, SHW's proposed new HQ is an announced 1 million square feet. It will not accommodate Hinckley. It will not accommodate Valspar staff left in Minneapolis for lack of space here. According to a company e-mail sent this morning, SHW will relocate some of its office staff from Breen and the automotive/PCG facilities in Warrensville Heights into the new HQ.

An unofficial conceptual massing of what SHW's new HQ,
shown in yellow, could look like when built on the Jacobs
and Weston lots next to Public Square (Geowizical).

Then there's the R&D facility. Sure I hate to see several hundred R&D jobs leave downtown Cleveland for the 100-acre former Veterans Administration site in Brecksville to be developed by the DiGeronimo Companies as Valor Acres. But the city of Cleveland is being more than compensated. It will enjoy the addition of thousands of construction jobs as well as SHW's projected increase of 400 permanent office jobs resulting from near-future corporate growth.

Some of you were worried several months ago that SHW was bound for Dallas or Atlanta. Or we could have been in Greater Cincinnati's shoes today. Ask Macy's HQ employees who are being relocated to New York City or AK Steel's 1,000+ HQ employees who will be moved to Cleveland as a result of AK's acquisition by Cleveland Cliffs. Greater Cleveland has been enjoying some HQ wins lately. More may be coming, including from Brecksville.

The loss of the R&D jobs are not Cleveland's fault. Cleveland and the State of Ohio offered to clean up SHW's favored R&D site on Scranton Peninsula. But they couldn't force the property owner to be responsive to SHW's overtures. Similarly, SHW couldn't be forced to locate the R&D on a more complicated and expensive site on the other side of the Cuyahoga River, below Tower City Center.

"While it is far too early in the process to comment on the project specifics, we look forward to sharing our enhanced vision for Valor Acres and the surrounding area when it is appropriate to do so," said DiGeronimo Companies spokesperson Stacey Kirth.

So the only true loser in this whole thing is Warrensville Heights. It will lose several hundreds well-paying jobs from SHW's 100-acre, 389,000-SF former Sohio/BP research facility. Much of that site is still undeveloped 20 years after SHW acquired it from BP. SHW is one of Warrensville Heights' biggest and best employers.

SHW's 100-acre Warrensville Heights property is outlined in
yellow in this satellite view. Most of the site is undeveloped
as it is covered here with dark-green vegetation (Google).

With all of these changes, it becomes clear that the amount of new HQ+R&D facilities, totaling 1.5 million square feet, is less than what has been discussed privately over the past half-year. The number that's been discussed was 1.8 million SF. But the HQ number is smaller at 1 million SF announced vs. 1.45 million SF previously discussed. And the R&D number is larger, at 500,000 SF announced vs 350,000 SF previously discussed.

So what about the possibility that SHW is not done?

A few days ago, a source said their company is under contract with SHW as part of its HQ project for the next five years. Consider that it should take about a year to plan and design the new HQ and another two years to build it.

The type of work performed by this source's company is on the front-end of a real estate development. Their contract term strongly suggests that there are more facilities coming. There is more to this HQ project than what SHW has let on so far.

Large areas of the Weston lots near Public Square were
cordoned off last November as geotechnical crews on
behalf of SHW gathered soil samples from deep below
the pavement. Some of the crews are visible in the back-
ground, in front of the historic Warehouse District build-
ings dominated by the Rockefeller Building at left (KJP).

Another source said it is likely that SHW may yet consolidate Hinckley and/or Minneapolis employees to the new HQ, requiring additional construction. But it will be three years before that happens. If SHW announced relocations now, it could lose a lot of employees in the next few years because they have the chance to look for another job close to home. It would be difficult for SHW to fill those openings prior to relocation.

Large companies would rather get their project moving first, securing all the government approvals and incentives for the site, add more facilities for "future growth" and then quietly shift employees around as needed.

Everyone should pay closer attention to SHW's site plans once they are released for the new HQ. Look to see if they will feature a greenspace or two set aside for future development. Or, possibly, portions of parking decks could be proposed atop concrete pads or caissons so that office structures can be added above the parking decks to accommodate future expansion.

Furthermore, there is likely to be some significant spin-off development resulting from SHW's new HQ downtown and R&D in Brecksville. This project isn't ending with this announcement. It's just beginning.

So if you're not throwing a party yet in your office at one of SHW's half-dozen local offices in Northeast Ohio, or at Cleveland City Hall, or at a real estate-related company in the area, that's understandable. But I would keep an eye out for where to buy the cake, ice cream and party poppers in the coming months and years.

END