Cleveland-area offices shrinking, growing, moving and uncertain

Uncertainty is the word describing the future of corporate office sizes,
locations and design in Cleveland in the post-pandemic era. There are
 many things up in the air when it comes to that future. But every chal-
lenge has an opportunity, including designing offices to be more like
home or even building residential for employees next to or within new
office developments. One of Cleveland's best known office designers
is Vocon Partners. This is their new offices on Prospect Avenue in
Cleveland's MidTown neighborhood (officelovin.com).
CLICK IMAGES TO ENLARGE THEM

UPDATED OCT. 10

The real estate market is divided into four basic end-users -- residential, hospitality, retail and office. Although the retail market has been shrinking for years, it is basically on hold during the pandemic with some exceptions. The hospitality market is pretty much in a coma but it will probably return healthy once it regains consciousness. Only the residential market has shown a great deal of resiliency throughout the pandemic.

And then there's the office market. If there ever was a period of uncertainty for any end-user market, it's the office sector.

You will also find some very strong feelings from some people about the future of the market, even though no one has seen the future. Yet, you will find some who are certain of what the future holds -- that notion of commuting to work in the morning, laboring in an office building all day, and then commuting back home in the evening is a pandemic fatality. "Or at least that's the way it should be, dammit!"

"Place-based work culture mattered before the pandemic, it matters now, and will matter post-pandemic," countered Downtown Cleveland Alliance Executive Vice President of Business Development Michael Deemer in an Oct. 10 tweet. "Endless screen time can’t match the productivity, collaboration, innovation, and mental health benefits that comes from in-person interaction."

The 3rd Quarter 2020 Cleveland office market report from Newmark Knight Frank takes a middle approach, especially when discussing the downtown Central Business District (CBD) market.

The Cleveland CBD is still considered a desirable location for prominent local, regional and national companies, though it is estimated that Downtown Cleveland has seen an 80 percent reduction of office workers during the pandemic. Office trends, such as unassigned seating, coworking and large "bullpens" of worker cubes, have companies rethinking safe reoccopation strategies, and leasing activity in the CBD from April through September was as sluggish as it has ever been. This past quarter's statistics already bear out that it might become more expensive to lease space in the future, especially at the Class A and B levels. As office employees will want to work from home more often, companies might considering (leasing) more space per person to keep germs from spreading. The outlook for the rest of 2020 is uncertain.

The biggest potential office development in Cleveland is the upcoming
announcement about Sherwin-Williams' new global headquarters down-
town. Word is that it could rival the height of Key Tower, Ohio's tallest
skyscraper. This is an official massing of the Sherwin-Williams HQ, as
seen in orange in the center of this image (Geowizical).

And that's the one-word takeaway when it comes to the office market -- uncertain. Add to that the large number of companies that are prepared to make moves in the next year or so and you have a lot of pieces thrown up into the air. How and where they will land will be incredibly interesting to watch.

One of the largest companies that will be making a move is Sherwin-Williams. The 154-year-old company takes a long view towards its business. Its CEO John Morikis recently eased concerns about the possibility of having more of its office employees work from home and thereby shrinking the size of its new global HQ.

"We recognize that the development, engagement and sense of community our employees share has been essential to our success for more than 150 years and would be difficult to sustain over the long-term with a remote-based workforce," Morikis said.

There are more reports coming out about Sherwin-Williams' new HQ building on Public Square. NEOtrans reported that the HQ will be one of Cleveland's four tallest, reaching about 45-55 stories high. According to some suppliers, they were told by the HQ's construction manager Welty Gilbane that the new skyscraper could rival Key Tower. Morikis reportedly considers the new HQ's location and design as essential to attracting young talent to the company.

Another old and large Cleveland company, 173-year-old Cleveland-Cliffs, is also facing an office space crunch at its downtown Cleveland headquarters at 200 Public Square. It just bought two steelmaking firms larger than itself -- Cincinnati-area-based AK Steel and Chicago-based ArcelorMittal USA.

After Cleveland-Cliffs' recent buying spree, it may have become too
large to remain in its current headquarters in 200 Public Square. But
it is soon to know where its new home might land (Google).

Absorbing those two firms over the coming years will likely prompt the firm to move out of its crowded 46-story tower on Public Square. Where could Cleveland-Cliffs and its roughly 300,000 square feet of potential office space needs land? It will probably be a year or more before that question is answered.

The Newmark Knight Frank office market report noted two reasons why office needs might shrink (remote working) and why they might grow (social distancing). But neither of those may be enduring, long-term trends.

A trendsetting change that could endure is what CrossCountry Mortgage is seeking. Relocating its HQ to downtown Cleveland from the suburbs (Brecksville) isn't the trendsetting move. Many companies are going downtown to lure more young talent to their workforces. Recently, Goldwater Bank announced its move from Beachwood to downtown, shortly after digital marketer Fathom said it is moving from Valley View to the Flats. 

The trendsetting move by fast-growing CrossCountry Mortgage is to add a residential component to its HQ plan for renovating several historic warehouse buildings on Superior Avenue in the East 20s. The apartments will be marketed first to HQ employees, according to a presentation to the city by Vocon Partners, architects hired by a joint venture led by CrossCountry Mortgage CEO Ron Leonhardt.

Imagine working from home but next door to your office building. It offers the productivity and collaboration benefits of working at the office while also giving employees the privacy of working from home -- with an incredibly easy commute regardless of the weather or traffic. The city and CrossCountry are finalizing a deal for $2 million in public incentives for the first phase of the six-acre development.

Site plan of the proposed first phase of CrossCountry Mortgage's
new Cleveland headquarters. North is to the left in this image, as
is Superior Avenue with Payne Avenue to the right and East 21st
Street at the bottom. The shaded building to the lower left will
be converted into apartments and marketed first to company em-
ployees. The rest of the site is comprised of historic warehouses
to be converted into offices for 700 workers (Tyler Kapusta).

Although the Dodge Reports say renovation work may not begin until 2022, a four-story brick building at 2110 Superior Ave. is due to become a 40-unit apartment building. The first phase of CrossCountry Mortgage's offices for about 700 employees will be along East 22nd Street in the former warehouses of Tap Packaging Solutions (ex-Chilcote Co.). Tap is a 108-year-old firm that moved its 125 jobs to Brooklyn. Construction on the office component is due to start early next year.

But CrossCountry Mortgage is in growth mode. That 700-employee figure is restrained from growing faster by the firm's small offices in Brecksville as well as by its lack of suburban marketability to younger people. In five years, after the move to larger offices in downtown Cleveland, the company expects to have 2,000 employees, according to a CrossCountry executive who spoke off the record.

Like Cleveland Cliffs, a growing Benesch, Friedlander, Coplan & Aronoff LLP is also looking to move out of 200 Public Square. Unlike Cleveland Cliffs, it knows where it wants to go -- the 25-story nuCLEus office tower proposed on a huge parking lot on East 4th Street in the Gateway District by a partnership of Stark Enterprises and J-Dek Investments. Benesch wants to be nuCLEus' anchor tenant.

Unfortunately, nuCLEus doesn't have enough office tenants yet for Stark to get a construction loan and start work. It's not for a lack of potential tenants sniffing around. Word is that at least two medium-sized tenants now at one downtown building are considering relocating to nuCLEus. Together, the two potential tenants would be a little larger than Benesch's 300 employees. But "potential" isn't nuCLEus' problem -- it's about getting enough tenants signed.

Additionally, keep an eye on Erieview Tower whose new owner James Kassouf and partners are converting 13 of the office building's 40 floors to residential. Law firm Weston Hurd LLP is moving to AECOM Centre across East 9th Street. And it probably won't be the only defection from Erieview. Look for more big tenants to step out and invest in new digs -- including possible new construction.

Between law firm Benesch and development firm Stark, the
proposed 340,000-square-foot nuCLEus office tower has about
200,000 square feet of space spoken for. But that's not enough
for Stark Enterprises to start construction. Reportedly, there
are potential office tenants considering locating at nuCLEus
that are large enough to trigger its construction (Stark).

Increasingly, downtown tenants want to be in trophy-class buildings -- not just Class A. They want top-notch finishes and technology. They want reserved spaces for executives under the same roof as their offices. They want fitness rooms and quiet, comfortable outdoor decks to think and/or decompress. And they want their company's name and logo to be on the outside and inside of the building for everyone to see. Or at least that's what real estate brokers and developer say prospective clients are telling them.

Going back to the suburbs, this time in North Olmsted, two companies are hunting for new space. The largest is Moen Inc. USA which has outgrown its 27-year-old, 141,221-square-foot office building at Interstate 480 and Great Northern Blvd. But it hasn't outgrown its 16.5-acre property, only two-thirds of which is developed and most of that is for surface parking.

More than 600 people work at Moen's North Olmsted offices which have expanded into leased office spaces along Country Club Boulevard on the other side of I-480. According to sources, Moen is looking at new construction in Greater Cleveland and elsewhere for its expanded U.S. HQ. Its landing spot is far from settled.

In the meantime, Moen will renovate its existing building to become COVID-compliant. Moen reportedly is eager to get its employees back in the office. How many more companies are similarly eager to get their employees back in the fold and what are they willing to do to achieve that?

Also in North Olmsted, FM Global, a Providence, RI-based insurance firm, is looking for a more urban setting for its 90-plus employees. It was ready to relocate to One Lakewood Place until Carnegie Management and Development Corp. walked away from the project. The city reached a settlement with Carnegie and will consider a new developer. FM Global has put its office search on hold during the pandemic.

Moen Inc. USA's headquarters in North Olmsted has more than 600
employees. The company has outgrown this building on the south
side of Interstate 480 and expanded into leased offices on the
north side of the highway. Company officials are reportedly
looking into expanding the existing building or possibly
constructing a new headquarters elsewhere (Google).

So has AmeriGas Partners L.P., which was recently acquired by UGI. As part of a corporate restructuring, AmeriGas considered tripling the number of its jobs here in Greater Cleveland to more than 300. Its offices are located in Westlake and more space has been added in Brooklyn Heights. But the jobs increase is far less than what was planned before the pandemic. In the future, AmeriGas' actions are worth watching.

On the other side of town, Beachwood-based Tremco Inc., a 92-year-old manufacturer of sealants, would like to unite its two east-side manufacturing plants and possibly its suburban headquarters into the same facility. To stay close to its existing workforce, Tremco could be a candidate for relocation to the Opportunity Corridor. But no site has been decided, yet.

The wildcard for some of the office moves around town is the completely vacant, former headquarters of Ameritech built in 1983. Called The Ellipse and located at 45 Erieview Plaza (corner of East 9th Street and Lakeside Avenue) in downtown Cleveland, the 16-story, 496,000-square-foot building was the subject of an August auction. The building has been difficult to lease because its floorplates are large, averaging 31,000 square feet.

An unidentified buyer won the auction and the chance to pay a mere $14.9 million for the property, according to a source. But the buyer walked away during the due-diligence period prior to taking title. It is not known why the purchase did not go through. 

The current owner, New York City-based private equity firm Somera Road, is back to square one in its disposition of the office building and attached parking garage. Somera Road bought the property in 2016 for $36 million nine years after MB Cleveland Erieview LLC acquired it for $53 million.

END

Flats East Bank to begin massive expansion in early 2021

 

A conceptual massing study shows a new, long-term vision for
the Flats East Bank near where the Cuyahoga River meets Lake
Erie at the edge of downtown Cleveland (DCA/Wolstein).
CLICK IMAGES TO ENLARGE THEM

Developer Scott Wolstein announced that he plans a tentative "early 2021" groundbreaking for an 11-story mixed-use building on Flats East Bank. But future phases could bring the total as many as a half-dozen residential towers with thousands of residential units in the downtown waterfront district.

The next phase of development, which Wolstein as CEO of the Wolstein Group has been pursuing with Chicago-based Akara Partners, is a building featuring apartments along West 11th Street between Main Avenue and Front Street called Kenect Cleveland. Kenect is Akara's brand of development products.

The plans were revealed Oct. 8 during Downtown Cleveland Alliance's Episode 22 of its "Downtown Now!" Webinar. Wolstein followed up his presentation in an e-mail interview with NEOtrans today.

"The buildout in the Flats will take several years," Wolstein said in the e-mail. "The potential exists for upwards of 1,500 to 2,000 additional units and we would never bring in more than 300 new units on the site at one time. We hope to break ground on the first 300 units early next year."

With a groundbreaking targeted for early 2021, the next phase of
development for Flats East Bank would feature more than 300
micro-unit apartments over coworking office spaces and retail.
This view looks southeast, with Front Street on the left and
West 11th Street on the right (DCA/Wolstein).

For that next phase, Wolstein and Akara originally planned 325 micro apartments, a 48,000-square-foot cinema, 25,000 square feet of Kenect coworking space, 22,000 square feet of ground-floor retail and structured parking within a 12-story building. Everything but the theater is being retained.

"The theater deal died because of industry issues," Wolstein said. That follows the Aug. 31 permanent closure of the 10-screen Tower City Cinemas. It and other movie theaters closed temporarily in March because of the pandemic.

Later phases of Flats East Bank would be added based on demand and market conditions and be valued at about $550 million. In the 2010s, Wolstein and his original Flats partner, the Fairmount Group, built nearly $500 million worth of buildings, streets, boardwalks and supportive infrastructure. In other words, at full buildout, the total investment in the Flats East Bank could exceed $1 billion.

"I'm excited about the future plans for growth in the Flats East Bank and the continued improvement and revitalization of our riverfront," said Ward 3 Councilman Kerry McCormack. "We've got to continue opening up our waterfronts to people, housing, business and visitors. We've got to maximize the potential of our God-given assets."

The scale of investment in past, current and future phases of Flats
East Bank development is shown here. Phase 1 consisted of the
21-story Ernst & Young office tower plus 8-story Aloft Hotel. In
the second phase were 20 restaurants topped by a six-story apart-
ment building. The third phase is underway with a $17 million
expansion of restaurants and clubs along the river. Next will be
a $200 million, 11-story, mixed-use building between the first
and second phases starting in early 2021 (DCA/Wolstein).

At the same time, Wolstein is seeking to double the length of the district's existing, 30-year tax-increment financing deal enacted in 2009. The purpose of the extension is to increase the financial liquidity of the existing Flats East Bank development. The city has yet to approve it.

"It's being considered but the two (TIF extension and next phases of development) have nothing to do with each other," McCormack said.

In the Downtown Cleveland Alliance's webinar, Wolstein said recent changes in the residential market nationally are affecting Cleveland. He said that live-work-play opportunities like Flats East Bank and other developments in the city are making Cleveland more attractive to young people.

"I have four millennial children," he said. "It was in vogue for children of that age to pick up their roots to go Chicago, New York, San Francisco and so forth. I think we've gotten to the point where people are giving a second look to Cleveland: 'You know what, I really don't need to leave. I can live here and make a good life in Cleveland.'"

This is an updated site plan for Flats East Bank with emphasis on upcoming
phases of development, primarily along the lakefront railroad tracks and
the Waterfront Line light-rail to Shaker Heights. The Greater Cleve-
land Regional Transit Authority proposed to expand the route as
a downtown loop but dropped the idea during the early 2000s
 recession despite the loop's feasibility (DCA/Wolstein). 

Downtown Cleveland's population has grown to 20,000 people with more developments on the horizon. Most of the residential products downtown have been carved out of historic, obsolete office buildings subsidized by historic tax credits. That's starting to change as rents grow and the availability of old, underutilized office buildings for conversion dwindle.

Increasingly, more downtown residential inventory is coming from new towers like The Beacon, The Lumen and, soon, The City Club Apartments. The latter, which is due to start construction in December, will feature smaller, more affordable apartments -- a trend that Flats East Bank's next phase will embrace.

"In the last five years downtown Cleveland's population has grown 48 percent," said Mike Deemer, executive vice president of business development at the ‎Downtown Cleveland Alliance. "The fastest growing suburb (Westlake) in Cuyahoga County has grown 3 percent."

The first phases of development at Flats East Bank by Wolstein and Fairmount Properties included the 21-story Ernst & Young office tower in 2012 -- downtown Cleveland's last new-construction office tower. It also featured an eight-story Aloft Hotel and a six-story apartment building over or next to 20 restaurants.

Looking west along Front Street from West 9th Street, up to five
high-rise apartment buildings above shops and townhouses are pro-
posed in later phases of the Flats East Bank project (DCA/Wolstein).

The Flats East Bank development is next to a station on the Greater Cleveland Regional Transit Authority's Waterfront Line -- an extension of the Blue-Green light-rail lines from Shaker Heights. 

"The Flats East Bank project really led us out of the last recession," Deemer said.

Wolstein reportedly is involved in the embryonic stages of another downtown Cleveland mixed-use tower, this time in the Warehouse District near the site of the planned Sherwin-Williams headquarters. In contrast to the Flats East Bank development's next phases, he refused to comment on the tower.

"Unlike a lot of developers, I prefer not to discuss future projects unless and until I have all the pieces in place," Wolstein said in the e-mail to NEOtrans. "Timing depends on a variety of issues including market demand, entitlements, subsidies, availability of financing, etc."

END

Could Cliffs' acquisitions bring another downtown tower?

Although Cleveland-Cliffs' name adorns the atrium of 200 Public
Square, its headquarters plays second fiddle to the building's lar-
gest tenant -- Huntington Bank. Cleveland-Cliffs may not remain
in this tower much longer as it continues to expand with a pair of
recent, significant corporate acquisitions (Google).
CLICK IMAGES TO ENLARGE THEM

When you look at several critical aspects behind Cleveland-Cliffs Inc.'s recent acquisitions of AK Steel and ArcelorMittal USA, you can see how it's possible, if not probable, that Cliffs won't be a tenant of 200 Public Square for much longer.

The critical aspects behind the acquisitions include the post-assimilation staffing needs of the combined company measured against the office space vacancies in Cliffs' headquarters building. The data for populating this equation were gathered from online sources and by interviewing Cliffs staffpersons, real estate brokers and others familiar with Cliffs and its acquired companies.

Cleveland-Cliffs is an old company in an old line of work. It was founded by Samuel L. Mather in 1847 -- back when ironmaking and later, steelmaking, were high-tech industries. That was back when Cleveland, Youngstown, Pittsburgh, etc. were the places where raw materials like iron ore from the northern Great Lakes and coal from Appalachia collided to create metals, incredible population growth and economic wealth. 

As we all know, steel faded under the strain of aging mills, foreign competition, increased use of plastics and environmental protection. The Great Lakes-Northeast industrial belt, with some of the highest blue-collar wages in the world, soon decayed into the Rust Belt.

Cliffs is one of the survivors of that downsizing, focusing on mines and shipping that delivered raw materials to the mills. Its second-largest customer is AK Steel of West Chester, OH, near Cincinnati. Cliffs acquired AK Steel, completing the transaction in March. The firm has roughly 700 employees at its West Chester headquarters.

Earlier this year, Cleveland-Cliffs finalized the acquisition of AK
Steel, headquartered in this West Chester building in the northern
suburbs of Cincinnati. Most of the roughly 700 employees in this
 building have yet to move to Cleveland-Cliffs' HQ (Google).

By creating an integrated company, from mining to shipping to steel production to marketing, Cleveland-Cliffs has greater control over its market. AK Steel also was the only remaining U.S. manufacturer of electrical steels that form the cores of electric motors, transformers and generators. They are easy to magnetise and demagnetise, resulting in lower temperatures that reduce power loss.

Cleveland-Cliffs continued shopping last week, acquiring a majority of the U.S. operations and assets of its largest iron ore customer -- ArcelorMittal, based in Luxembourg. ArcelorMittal has its US headquarters in downtown Chicago plus a regional headquarters in Richfield, between Cleveland and Akron. In the two offices they have about 300 employees -- although the official numbers cited for the Richfield office may be low.

With this latest acquisition, Cleveland-Cliffs will become the largest manufacturer of flat-rolled steel in the USA. This steel is used primarily in automotive markets -- a similar area where AK Steel excelled, albeit for engine components.

And that's what these acquisitions are all about -- the automotive industry or, more specifically, the future of it. That future includes new government fuel economy standards that take effect in 2025, requiring the production of stronger, lighter steel in cars. It also means increased production of electric cars, and Cleveland-Cliffs is now the only U.S. maker of electrical steels.

Steel produced in blast furnaces is much higher quality than that which is produced in electric arc furnaces (typically remelts scrap metals). Blast furnaces, like those that Cleveland-Cliffs just bought, are ideal for producing steel for the cars of the future. And those blast furnaces will become cleaner and more efficient under Cleveland-Cliffs ownership.

ArcelorMittal USA's regional headquarters occupies a signifcant
part of an 82,217-square-foot building built on 8 acres of land in
1996 on Kinross Lakes Parkway in Richfield, OH (LoopNet).

Cleveland-Cliffs feeds blast furnaces from its iron mines and shipping. Its first hot-briquetted iron production plant, under construction in Toledo for $700 million, will position the firm as the dominant player and sole supplier of merchant iron units to blast furnaces in the Great Lakes.

Cleveland-Cliffs has done a lot more than just make itself the second-largest Fortune 500 company headquartered in Greater Cleveland (Cleveland-Cliffs' annual revenues of $2 billion; AK Steel's $6.3 billion, and ArcelorMittal USA's $10 billion = $18.3 billion), trailing Progressive Insurance's $39 billion. The integrated firm is now positioned for growth.

Despite its revenues, Cleveland-Cliffs doesn't have a huge staff in its downtown Cleveland corporate headquarters. By some estimates, it's just over 600 employees. The firm is spread out among three floors (6, 33 and 34) in 200 Public Square, the former BP America tower.

Those are large floors however. The sixth floor is about 50,000 square feet which Cleveland-Cliffs uses for training and conferences. The floor plates in the main part of the tower offer about 29,300 square feet of usable space. Cleveland-Cliffs had more space in the tower until it downsized by half in the early 2010s, and subleased the 31st and 32nd floors to the Gottlieb Group, Northern Trust and AML RightSource.

A breakdown of available spaces in 200 Public Square
as reported in a brochure about the property (Colliers).

Parts of the 32nd floor remain open. So while Cleveland-Cliffs hasn't moved AK Steel's staff up to Cleveland yet, it is replacing departing AK Steel administrative employees in West Chester with new hires in Cleveland. Part of that delay in assimilation is due to the coronavirus pandemic. But is also due to the fact that 200 Public Square has only three open floors (10, 13 and 41), a large fourth floor that is mostly available, a few half-empty floors (12, 26 and 38) and a smattering of vacancies elsewhere.

In a big building, companies want contiguous office spaces, not offices scattered all over the place. So while Cleveland-Cliffs could move employees from its acquired companies into 200 Public Square today, it wouldn't be in a very efficient or orderly way.

How many employees might it add? When a company acquires or merges with another, it typically reduces total employment by 10-30 percent. So when Cleveland-Cliffs acquired AK Steel, the total office employment exceeded 1,300. Considering these were dissimilar companies, the reduction in office staff was probably closer to 10 percent, dropping the combined office staff to about 1,200 people.

But when Cleveland-Cliffs acquired most of ArcelorMittal USA, its 300 office workers in Chicago and Richfield will probably get reduced to about 200 people. That makes the reduction closer to 30 percent given the redundancies with AK Steel and given the fact that Cleveland-Cliffs didn't acquire ArcelorMittal's tubular plants, its Calvert, AL mill and its research center in East Chicago, IN. 

ArcelorMittal USA's HQ is located in One South
Dearborn, a 39-story, 828,538-square-foot tower
 built in 2005 in The Loop (IP Design Group).

In total, Cleveland-Cliffs headquarters staff may amount to roughly 1,400 people by the time everything shakes out. And that doesn't take into account the business growth that Cleveland-Cliffs is counting on as a result of these acquisitions.

"We don’t acquire to cut, we acquire to grow," said Cleveland-Cliffs CEO Lourenco Goncalves.

Considering that Cleveland-Cliffs is taking a long view on its business, it may not be unreasonable to assume a 20 percent growth factor in its office employment going forward. A headquarters staffing count of perhaps 1,700 people in the next 5-10 years is possible. At 150 to 200 square feet per employee, that's 255,000 to 340,000 square feet total. There is only about 207,000 square feet available at 200 Public Square -- again, scattered throughout its 46 floors.

And that's why Cleveland-Cliffs probably can't stay where it is.

Where could it go? Potentially, anywhere. But if anything, the company has been committed to Cleveland for its entire 173 years, supporting local civic and charitable initiatives. And of course, it would be blasphemous for a company with Cleveland in its name to be headquartered anywhere but in Cleveland.

The Steamship William G. Mather, now a floating museum, is named
after the son of Cleveland-Cliffs founder Samuel L. Mather. William
was Cleveland-Cliffs' president and chairman from 1890-1947 (KJP).

Practically, however, its corporate executives aren't as dependent on international air service as other local companies such as Sherwin-Williams, a global company that chose to build its new HQ in Cleveland. Most of Cleveland-Cliffs' customers and operations are within a day's drive or at most a couple hours flight from Cleveland.

On the other hand, it's less clear as to whether a consolidated, growing Cleveland-Cliffs could warrant the construction of a new office tower in downtown Cleveland. Consider these numbers...

Downtown Cleveland office towers built in the last 30 years have average floor plates of 20,000 to 25,000 square feet. If Cleveland-Cliffs needs 255,000 to 340,000 square feet of office space in the coming years, that could require an office building measuring anywhere from 10 to 17 stories high -- not exactly a skyscraper.

There aren't any existing Class A office buildings downtown that could easily accommodate Cleveland-Cliffs' office needs in contiguous spaces. One that could -- The Ellipse, the completely empty, 496,000-square-foot, 16-story former Ameritech Building constructed in 1983 at 45 Erieview Plaza -- had its lease listing deactivated from some Web sites last month. It has been the subject of auctions and could be subjected to another. If so, it could be a suitable building for Cleveland-Cliffs including an unobstructed view of Lake Erie which its ships plied since the 19th century.

But if we want to dream, perhaps Cleveland-Cliffs could be the anchor tenant someday in a trophy-class tower it shares with other, smaller tenants and reach 20 to 30 stories high. It wouldn't stand up to the possibly Key Tower-rivaling height of the new Sherwin-Williams headquarters. But it might add to the city's skyline and get rid of another windswept, life-sucking surface parking lot in the process.

END

Dream Hotel development delayed more than a year

Construction of a 19-story Dream Hotel next to the Masonic Temple
at 3615 Euclid Ave. has been delayed by more than a year (Bialosky).

Given the current state of the pandemic-ravaged hospitality industry, it probably shouldn't come as a surprise that the proposed 19-story Dream Hotel next to the Masonic Temple in Cleveland's Midtown has been delayed.

According to the construction database The Dodge Reports, the delay will be more than one year. The site reported that design work on the hotel will be on hold until Summer 2021. That means the earliest construction could start would be Summer 2022, it said. Last spring, officials at New York-based Dream Hotels hoped to start construction in early 2021.

Dream Hotel spokesperson Megan O’Malley, who works for Rubenstein Public Relations in New York, was out of town an unable to comment on the report. A secondary contact at Rubenstein, Kati Waldenburg, did not respond to an e-mail prior to publication of this article.

MidTown Inc. Executive Director Jeffrey Epstein confirmed the news today by e-mail, saying he was aware of the delay.

Site of the proposed Dream Hotel and Masonic Temple (Google).

When the $60 million project was announced in May, Epstein said the Dream Hotel and adjoining Masonic Temple, 3615 Euclid Ave., could be a destination unto itself. In other cities where Dream Hotels are tied into Masonic halls, visitors come to see unique musical and theatrical performances, enjoy on-site meals and nightlife, and stay the night in the adjoining hotel.

Beaty Capital Group of Fort Smith, AR acquired Cleveland's 99-year-old, 2,300-seat Masonic Temple and an adjoining parcel for $725,000 in 2017. It renovated the auditorium last year for $8 million and plans another $10 million worth of improvements. That activity attracted attention.

Epstein said real estate investors began proposing projects in the surrounding area, although he could not identify the projects several months ago because they were in early development. He still can't identify them now because the projects remain active despite Dream Hotel's delay.

"Everything else we’re working on is still full steam ahead," he said.

One development project could be a renovation of the 10-story University Hotel and Suites, across the street from the Masonic Temple at 3614 Euclid. An affiliate of Crimson Rock Capital acquired the property last year and may renovate the 56-year-old building by tapping historic tax credits. That part of MidTown, from the Inner Belt to East 55th Street, was recently designated by the City Landmarks Commission as an historic district.

Another view of the proposed Dream Hotel, this time looking
west with the Masonic Temple directly behind it (Bialosky).

Crimson Capital's Web site says it "invests in properties for experiential travelers in emerging neighborhoods and up and coming U.S. domestic markets." It is a global company based in Atlanta.

Other developments in the surrounding blocks may include new-construction mid-rise apartment buildings. Renovations of additional historic and post-war, international-style office buildings are already under way. One of the largest is an eight-story office building being converted into The Midtown apartments by the Inspirion Group at 3101 Euclid.

Dream Hotel officials propose a 207-room lifestyle hotel including restaurants, nightlife venues, a fitness center and 100,000 square feet of meeting and event space. The project, called TempleLive, will also include a 400-space parking deck. Beaty Capital Group acquired the auditorium and adjacent property via an affiliate named TempleLive Cleveland LLC.

"It is exciting to look beyond this recent period of anxiety and uncertainty to bring such an iconic project to MidTown Cleveland," said Lance Beaty, president of Beaty Capital Group, in a written statement last May.

END

Seeds & Sprouts XI - Early intel on real estate projects

This is the Eleventh edition of Seeds & Sprouts - Early intelligence on Cleveland-area real estate projects. Because these projects are very early in their process of development or just a long-range plan, a lot can and probably will change their final shape, use and outcome.

UPDATED OCT. 8, 2020

The proposed, 23-story City Club Apartments tower is on schedule
to break ground before Thanksgiving, according to a recent
notice sent out to potential subcontractors (Vocon/CPC). 

City Club Apartments tower sets groundbreaking

A specific date for a groundbreaking of the 23-story City Club Apartments, 720 Euclid Ave., has been scheduled -- as has an important date that confirms the downtown Cleveland project is getting close to the start of construction.

Notice went out via The Dodge Reports this week that a Dec. 1 groundbreaking has been tentatively set. And, last week, Dodge and other construction industry media reported that subcontractor bids for all related trades are to be submitted to the project's construction manager Cleveland Construction Inc. by 4 p.m. Oct. 14.

Last month, City Planning Commission gave unanimous approval of final designs for the high-rise, market-rate apartment building. Prior to the arrival of the global pandemic, the project was on track to start construction this past summer. There were rumors that the project might be delayed until early 2021.

"The developer is doing everything they can to start construction in November," said Denver Brooker, a principal at Vocon Partners LLC, the project's architect, at the last month's City Planning Commission meeting.

However, the latest estimate according an update this week from The Dodge Reports is that construction of the apartment tower's foundation will start in December. The work will involve the pouring of a thick mat concrete foundation to support the tower above.

The 250,000-square-foot City Club Apartments tower is designed to reach to 241 feet in structural height but a rooftop decorative element could bring that to about 250 feet. The apartment building is named after the Michigan-based developer City Club Apartments, not the 108-year-old debate forum next door in the 13-story, 117-year-old City Club Building, 850 Euclid.

This would be the tallest, all-new building built by Cleveland Construction from the foundation up. It built the 22-story AC Hotel and Residence Inn Charlotte City Center in North Carolina 2018. But those 22 stories include a pre-existing, five-story podum and foundation on which the new tower was built. It also was responsible for the interior work at the 20-story Broward County Courthouse in Florida.

City Club Apartments will offer about 313 market-rate units, roughly half of which will be 400-square-foot studio apartments. The smaller units will be marketed to younger residents who have been priced out of the downtown market. According to a recent WEWS-TV report, the downtown Cleveland residential market appears to be weathering the pandemic pretty well.

Landmark Management's proposed apartment complex on the lakefront
east of downtown Cleveland is shown in this site plan as the backward-
facing 4. It would add to its existing The Shoreline residential offerings
which is at the left with the planned five-story complex (CPC/Vocon).

Lakefront apartment project shelved

Landmark Management's efforts to develop 214 apartments on the lakefront at East 55th Street and Interstate 90 in Cleveland have been shelved but not abandoned, according to an update this week in the construction database The Dodge Reports.

The reason for the move was not reported. E-mails sent to Landmark's Managing Partner John J. Carney and to Vice President Michael Carney were not responded to prior to publication although Michael Carney acknowledged receiving the e-mail.

It is possible that Landmark may revisit developing here or partner with others. In December 2019, the company paid $1.67 million for 4 acres of lakefront land for the development, originally called Shoreline Apartments Phase II and later named Landmark At The Lake. It is next to The Shoreline apartments, a converted warehouse called Quay 55 which Landmark bought in 2017 and expanded the next year with 29 more apartments.

Landmark usually doesn't pursue new-construction projects. Instead, it renovates historic buildings into apartments or buys and updates already converted buildings. It also renovated the Colonial Arcade into the Colonial Marketplace two decades ago before selling its interest in the property in 2012. It is now part of the 5th Street Arcades.

The area where the apartment complex was proposed is the subject of a planning effort by the Cleveland Metroparks to improve lakefront between Burke Lakefront Airport and the Dike 14 at Gordon Park. Called the Cleveland Harbor Eastern Embayment Resilience Study (CHEERS), it is due to be completed next summer.

Site plans were submitted to the city last week for the Cleveland
Foundation's new headquarters in Midtown (B&H).

Cleveland Foundation HQ project advances

Site plans for the Cleveland Foundation's new headquarters facility in Cleveland's Midtown neighborhood were submitted to the city last week for zoning reviews. The submission was one of the first public signs that the project is moving forward following recent litigation.

The plans confirm an earlier concept for the development. They show a three-story, 50,500-square-foot building at the northeast corner of Euclid Avenue and East 66th Street. The first phase of the development site is just under two acres and touch on adjacent properties, including the Dunham Tavern Museum land. But zoning reviews show side or rear setbacks may not be needed.

Cleveland Foundation proposes to relocate its offices from the Hanna Building at Playhouse Square to Midtown in 2023. Future phases of development include civic and community uses on both sides of East 66th, expanding north to Chester Avenue.

However, a surface parking lot is proposed as an interim use on the southwest corner of East 66th and Chester. Plans show there will also be a 52-space underground parking garage below the new office building as well as bicycle parking.

Property was acquired for the office and civic development in December 2019 following the dismissal of a lawsuit filed by several members of the Dunham Tavern Museum who contested the property transaction.

Ground-floor commercial space at Centric is visible from this view
looking northeast from the intersection of Mayfield Road and Circle
Drive in University Circle. Little Italy is just east of here (Google).

Centric to add ground-floor office tenant

Two years after opening, the mixed-use Centric development in Cleveland's University Circle will build out its office space for a new tenant. The move comes as office users worldwide are taking a hard look at their office space needs.

The tenant, according to permit applications submitted last week to the city, appears to be Midwest Development Parters and Five Forty Investments LP. The two companies share a number of executives and functions, namely real estate development and investment. The tenant will fill a 9,130-square-foot, ground-floor space at the southwest corner of Centric, 11601 Mayfield Rd.

Ryan Fair, manager of construction and development at Five Forty and at Midwest, did not return an e-mail seeking more information but did ackowledge receiving the e-mail. Fair also briefly worked as an owner's representative at Chicago-based White Oak Realty Partners in 2019 -- the same firm that proposes to build a 24-story apartment tower at Midwest's Circle Square development.

Although employment data is unavailable, the permit application shows that the space has a maximum occupancy of 92 people. Midwest has its offices at 2191 Murray Hill Rd. in Cleveland's Little Italy while Five Forty's offices are currently split between Midwest's location and Eton Tower, 28601 Chagrin Blvd., in suburban Woodmere. It appears that these offices will be consolidated at Centric.

Centric was a $50 million development that opened in late-2018. It features 272 apartments that leased out in one year despite top-of-the-market rents. The development also has a ground-floor cafe for residents, a Tremont Athletic Club fitness center plus a 360-car parking garage. The development is next to the new Little Italy Red Line rail station.

Five Forty is led by Principal Morry Weiss, formerly chairman of American Greetings Corp. as well as by Chief Operating Officer for Real Estate, General Counsel and Secretary Steve Rubin. Centric was developed by Midwest Development Partners, a collaboration led by Rubin, Elie Weiss and Zac Ponsky.

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CityBlock at Tower City is back on track

 

Efforts to redevelop Tower City Center into a entrepreneurship
hub called CityBlock were put on hold in recent months. But
the effort has been reactivated. This is a conceptual rendering
of the Prospect Avenue entrance to CityBlock (Vocon).
CLICK IMAGES TO ENLARGE

Bedrock Real Estate Services' planned remake of The Avenue shopping mall at Tower City Center into an entrepreneurship hub is showing signs of life again.

Chatter surrounding the proposed $110 million redevelopment of the 350,000-square-foot downtown Cleveland retail center had gone silent since last winter, and the global COVID-19 pandemic wasn't the primary reason why.

"Bedrock had another management change, which set us back," said tech entrepreneur and City Block promoter Bernie Moreno. "But they are fully committed to moving forward."

Matt Cullen departed as Detroit-based Bedrock's CEO in July to lead Cleveland-based JACK Entertainment LLC, which will continue to operate the Cleveland casino adjoining Tower City and Thistledown Racino in suburban North Randall following their 2019 sale to VICI Properties Inc. for $843 million.

Also departing Bedrock was Mark Dunkeson, who was recently president and chief operating officer of the real estate company founded by billionaire Dan Gilbert. Bill Emerson stepped in as Bedrock's interim CEO July 2, holding the position for a second time within a year.

Conceptual rendering of the interior of The Avenue shopping
mall at Tower City Center, redesigned as CityBlock (Vocon).

Then, on Sept. 21, Emerson was replaced by Kofi Bonner, formerly of California-based FivePoint Holdings LLC and was executive vice president and chief administrative officer of the Cleveland Browns. 

"I look forward to working with him to positively impact Detroit and Cleveland," Gilbert tweeted on Aug. 26.

The changes followed Gilbert's ischemic stroke in the right side of his brain over Memorial Day weekend 2019. Gilbert has since recovered. But the corporate stabilization that appears to be occurring at Bedrock wasn't guaranteed to reactivate plans for CityBlock.

According to sources close to Bedrock who were not authorized to speak publicly, Ken Till, Bedrock's vice president of development for Cleveland, considered alternatives to City Block in recent months. They included conventional office spaces, retail and other uses. But Moreno's proposed entrepreneurship hub retained their interest.

Till could not be reached for comment.

The CityBlock plan would redesign the interior of the existing The Avenue shopping mall with collaborative workspaces plus more strategically placed escalators and ramps while getting rid of its hidden elevators. The goal is to make the 1990-reconstruction of the former Cleveland Union Terminal railroad station more easily navigable.

"Ironically, COVID helps as there is no need for elevators!" Moreno joked.

This view shows what a Riverside portion of the CityBlock
redevelopment could look like. This scene along the Cuya-
hoga River could be the result of a future phase (Vocon).

Sources said Bedrock tried to lure Sherwin-Williams' (SHW) new headquarters plus research and development (HQ+R&D) facilities. But when SHW chose to put its HQ on the west side of Public Square downtown and its R&D facilities in Brecksville, Bedrock lost out on landing a major anchor tenant for CityBlock.

The same sources said that SHW's decision are what caused Bedrock to review its options about the CityBlock project, especially the Riverside phase, and to suspend pre-development planning work. Moreno disputed that in February, contending that Bedrock was following up on securing letters of intent from potential tenants.

Since then, more businesses have closed at The Avenue including the Brooks Brothers high-end clothier and the 10-screen Tower City Cinemas. By some estimates, the mall is about half empty although no official data could be located. Some retail will likely be retained in CityBlock.

Technology companies continue to grow in Greater Cleveland, however. For example, the Flats West Bank has become a mini tech hub in recent years with small but growing businesses like BoxCast, EmployStream, Fathom, Kloud9, Snip Internet and TPI Efficiency establishing offices within a few blocks of each other.

Fledgling biotech firms like Athersys Inc. and Abeona Therapeutics Inc. are growing locally too. Also, a Lakewood-based life sciences collaboration firm called Within3 just raised $100+ million in capital for expansion.

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Sherwin-Williams HQ height to "rival Key Tower"

 

Insiders report that Sherwin-Williams' new HQ tower will rival
the height of the 948-foot-tall Key Tower on the other side of
downtown Cleveland's Public Square. This is an unofficial
massing of what SHW's HQ complex (shown in orange
at the center of this eastward-looking image) at that
approximate height could look like. Properties
shown in red are surface parking lots on
downtown's west side (Geowizical).
CLICK IMAGES TO ENLARGE

For those who wanted another skyscraper in Cleveland that approaches "supertall" status, you just might get your wish.

Ten days ago, Sherwin-Williams Co. (SHW) announced it is restarting development of its global headquarters plus research and development facilities (HQ+R&D). As part of its announcement, SHW confirmed insider information NEOtrans has been reporting for nearly a year, including SHW's HQ+R&D construction manager is a new partnership called Welty Gilbane. It was formed last year by Welty-Testa Builders, LLC of Akron and the Gilbane Building Co., a global firm with offices in Cleveland.

Welty Gilbane is already reaching out to materials suppliers in Cleveland and around the country to determine their availability, capacity and costs. For Welty Gilbane to learn that information, they have to give suppliers a sense of the scope of SHW's HQ+R&D project.

Looking south from the lakefront, Key Tower will likely continue
its reign as Ohio's tallest skyscraper. But reports are that SHW's
new HQ tower will challenge its dominance (Geowizical).

For many suppliers, the conceptual-level data that SHW has already shared publicy will suffice for now -- that the downtown Cleveland HQ will measure upwards of 1 million square feet (not including structural parking) and the Brecksville R&D facility will be about 500,000 square feet.

But when reaching out to specialty companies who might build the HQ tower and supply certain construction equipment and materials for them, Welty Gilbane had to be a little more specific. So it reportedly told them that SHW's skyscraper will "rival Key Tower" in height.

Although Key Tower, 127 Public Square, is 57 stories tall when it comes to usuable space, it also has another six stories for maintenance and equipment inside its pyramidal crown. The top of that crown reaches 888 feet into the sky. But the tower's spire brings the total height to 948 feet (290 meters) above the ground.

From far out in Lake Erie, the potential height of SHW's new HQ
tower shows it rivaling the scale of Key Tower (Geowizical).

That's just shy of what is considered to be a "supertall" -- any building that is 300-600 meters (984-1,969 feet) tall. Only a "megatall" is higher.

This information confirms a prior report published here at NEOtrans in which insiders said the main HQ building will tower 45-55 stories high. Even a building as "short" as 45 stories could rival Key Tower if its floor heights average 16.5 feet like those of Cleveland's Fifth Third Tower -- 1 foot greater than the average floor heights at Key. Also, rooftop architecture could include decorative features that dramatically increase its height, as was also done at Key.

SHW's HQ will be on the west side of Public Square on 7 acres of land now used only for surface parkings lots. Public Square is where Cleveland's three tallest towers continue their reign. In addition to Key Tower, there is the grand dame of Cleveland skyscrapers, the 708-foot-tall, 52-story Terminal Tower and the 659-foot-tall, 46-story 200 Public Square (formerly the BP America HQ).

From the south side of downtown Cleveland, the potential scale of
SHW's HQ tower is especially evident. Other new and proposed
buildings in downtown are also shown in orange (Geowizical).

Beyond the 1.17-acre former Jacobs-owned lot on Public Square, it isn't known what form the rest of SHW's HQ might look like. Insiders say that architects started their massing work on the Public Square lot and are now working their way into the 6-acre former Weston-owned Superblock bounded by Superior and St. Clair avenues, plus West 3rd and West 6th streets.

Another insider said that SHW HQ architect Pickard Chilton Architects, Inc. of New Haven, CT was hired months ago, like Welty Gilbane and the HQ's programming/interior architect Vocon Partners LLC, of Cleveland. NEOtrans also reported on SHW's hiring of Vocon more than a year ago.

Considering Pickard Chilton's hiring was made well before it was announced and that massing work has revealed the scale of the main HQ building, it is possible that renderings of the HQ could be publicly released this winter or perhaps even sooner.

Site analysis for the new SHW HQ complex dug deeper
in July, below a parking lot at the northeast corner of
Superior Avenue and West 6th Street. It exposed soil
that hasn't seen sunlight in nearly 200 years. Key
Tower soars above this scene (Ian Meadows).

Those renderings may also reveal why crews did exploratory work in July below the surface parking lot at the northeast corner of Superior and West 6th. Speculation by those in the real estate industry was SHW may construct a second large building here, potentially 20 stories or taller, as part of its HQ complex.

It is also likely that the HQ complex will be built in phases to accommodate future growth at SHW and/or future consolidations of employees. SHW has noted that the HQ+R&D will be designed to handle that growth, conservately estimated at a minimum of 400 additional employees in the future.  

Ancillary uses could also be built as part of the SHW HQ complex, including a hotel/extended-stay suites for the 100-plus person-stays per day on average from employees, salespeople and executives visiting Cleveland per day for training and skills development. There will also likely be restaurants, cafes, shops and other uses incorporated into the new HQ complex.

In 1990, while Key Tower was still under construction, this rendering
of the proposed 1,198-foot Ameritust Tower (at left) was drafted. The
new Ameritrust Tower would have been built on the same site where
SHW now plans to build its skyscraper (Evan Heintges Architects).

While Key Tower was under construction in the late 1980s by the Westlake-based Jacobs Group, a skyscraper even taller than Key was in advanced planning -- on the site proposed for SHW's tower. Jacobs planned a 63-story, 1,198-foot-tall (365 meters) supertall as the new headquarters for the Ameritrust Corp.

After One Public Square (12 stories) and 33 Public Square (13 stories) were demolished in 1990 to make way for the supertall, Ameritrust was acquired by Society Bank and then merged with Key Corp. of Albany, NY.

The combined bank was consolidated into the former Society Center tower and renamed Key Tower. That killed the proposed Ameritrust Tower project. This lot on downtown's Public Square has sat empty ever since.

END