CLEVELAND, Ohio – Like many industries, the real estate world was subjected to the whims of an unpredictable pandemic in 2020.
The coronavirus affected everything, from how developers obtained financing to the price of construction materials to who exactly would live and use buildings new and old.
Regardless of the pandemic, though, many of the projects in the works before this year moved forward. Developers cited myriad effects on their work that pushed back timelines previously put in place. But the work is getting done. In Cleveland, that means new apartments are set to continue to pop up downtown and in neighborhoods such as Ohio City and University Circle.
But it’s hard to tell what 2021 will bring. So much of real estate is tied to the economy’s health. While more people are back to work now than in April, after the pandemic forced many businesses to shut down, the unemployment rate in Ohio was at 5.6% as of November, with claims beginning to rise again. The scope of the pandemic’s impact on the housing, rental and commercial real estate markets is still up in the air.
Here are the top five real estate stories of 2020, in no order:
1. COVID and the office life
By mid-March, coronavirus had fully arrived in the United States. Companies with offices in Northeast Ohio rapidly started moving their employees from offices to homes and having them work remotely.
By the end of the month, Gov. Mike DeWine’s administration enacted a stay-at-home order, which required many businesses to either close or have employees work outside the office. There were exceptions the state carved out for what it deemed “essential businesses.”
Regardless, downtown Cleveland hollowed out for months. What was, in any other time, a bustling business district turned into a ghost town with less traffic and empty sidewalks. Retail businesses, at least the ones that could stay open, rely on foot traffic. They suffered as a result, and landlords said they worked with them to ensure they didn’t fall behind on their rent.
As government restrictions lifted in May, some workers returned to offices. But many have not and continue to work from home.
As the end of the year approaches, a question remains: how will coronavirus affect the future of offices? Nobody is certain.
Some say companies will determine that employees are just as productive, and they can save money that would otherwise go toward paying rent. Others say there is no replacing in-person collaboration and that businesses will return to normal when it is safe to do so.
Companies had allowed employees to work remotely long before the pandemic, part of a trend that went into overdrive this year. What’s also unclear is how offices in Cleveland will react to such a trend.
A December report by the Chicago-based real estate services company JLL said that the vacant subleased space in downtown Cleveland is up. However, it remains well below the historical average for the area.
2. The home-buying boom
After the economy tanked in March through May, something unexpected happened: home sales went through the roof. Cleveland and its surrounding suburbs became a competitive market.
Sellers told stories of accepting an offer within 24 hours of their house being listed, while buyers said the competition forced them to make snap decisions.
In Cuyahoga County, real estate agents said the most historically desirable areas – such as Rocky River, Solon, Lakewood – saw competition, with buyers going thousands over the asking price to seal the deal. However, other suburbs such as Parma, Garfield Heights and Maple Heights saw increased activity as well.
Agents said their clients cited several reasons why they wanted to buy now. The Federal Reserve’s decision to slash interest rates to the lowest rates in half a century was a big one. So was the need for more space after working from home for so long.
The sales boosted the housing industry in 2020. Local real estate workers have said the Ohio industry didn’t take as much of a beating during the initial lockdowns because DeWine’s administration deemed it “essential.”
However, homebuying was down compared to 2019 earlier in the year. Eager buyers and sellers more than made up for the slower months later in the year.
In November, 1,302 houses sold in Cuyahoga County, up from 1,229 in the same month last year. The number of homes sold so far in 2020 is up 3.6% from the same point last year.
3. Sherwin-Williams HQ
As projects continued to move forward, by far the biggest one is that Sherwin-Williams will move from its Huron Road headquarters in downtown Cleveland to a newly constructed building a few blocks away. The paint giant announced its plans in February following months of speculation.
In addition to a 1 million-square-foot building at the west end of Public Square, the company plans to build a 500,000 square-foot research and development facility off Interstate 77 in suburban Brecksville on a property that once housed a U.S. Department of Veterans Affairs hospital.
The project’s cost is a combined $600 million, though local governmental bodies have awarded it grants and tax incentives, and it may receive more.
Some insiders speculated that the paint giant might alter plans due to the pandemic and allow some or many of its employees to work remotely. So far, that has not been the case.
The company in September made several announcements, including the firms that will design the buildings. It also disclosed that the pandemic forced the company to push back its timeline for its completion. Sherwin-Williams is now aiming for 2024 instead of 2023.
However, the statement did not indicate that the buildings would be smaller than initially planned. Chairman and CEO John Morikis said in the release that more than 3,500 employees would work at the two sites and made clear that remote working is not part of the company’s long-term future.
Spokeswoman Julie Young said in an email on Dec. 16 that she did not have information on when the company would break ground, as it is still designing the building.
News of the company’s new headquarters has also provided a boost for developers looking at projects downtown. A developer who plans to renovate and add apartments to the historic Rockefeller Building on West 6th Street, across the street from the Sherwin-Williams site, said it wouldn’t hurt to have the giant headquarters across the street.
4. Adding more apartments downtown
The trend in recent years has been away from office buildings and toward more apartments, and it appears that trend won’t end any time soon. Groups such as the Downtown Cleveland Alliance tout downtown as a great place to live, something that has only gotten easier in recent years with the addition of the Heinen’s grocery store.
This year was no different. More apartments came online. That included opening the new Lumen building in Playhouse Square and the renovations on the Historic May Co. building on Euclid Avenue near Public Square.
In a report in November, the DCA said that developers added more than 1,900 new apartments to the district in 2019 and 2020.
In addition to the Rockefeller Building, developers plan to add apartments in other buildings, including 75 Public Square, the former Huntington Building, and the Tower at Erieview. Plans for a newly-constructed apartment building next to the City Club of Cleveland at East 9th Street and Euclid Avenue – called the City Club Building, but the developer has no relation to the public forum space next door – were also approved.
Like just about everything else business-wise, the coronavirus affected the downtown apartment market. While renters haven’t fled the central business district in droves, occupancy is down.
In the third quarter of 2020, 84.3% of units were occupied in the third quarter, according to the DCA’s November report. That’s down from 90% in the third quarter of 2019 and slightly down from 86.3% filled in the second quarter of this year.
The organization said the coronavirus led to a drop in the occupancy rate, but so did the number of new apartments available in the market.
5. Beech Brook
While the proposed development of the Beech Brook property and public opposition may not have had the regional impact outlined in the other top stories, it was an excellent example of what can happen to developers in the face of motivated residents who reject their plans.
Beech Brook, a behavioral health services nonprofit that called Pepper Pike home for nearly a century struck a deal with developer Bryan Stone of Axiom Development Group in 2019 to sell its 68 acres of land. Stone, who lives in the well-to-do eastern suburb, envisioned building houses, townhouses, offices and retail space on the property. He wanted to create a sort-of Main Street feel and a public square.
Opposition to the plans arose not long after Stone made them public. It ramped up considerably this year, as the suburb’s City Council held meetings on whether to rezone the property to allow for the development Stone envisioned. Many in the opposition want to see the property turned into a public preserve and park.
The rancor got heated, resulting in online bickering, contentious town hall meetings, threats of defamation lawsuits and even unused condoms left at Stone’s home.
It only got worse when Stone, with Beech Brook’s support, pulled petitions and had a rezoning measure placed on the ballot for the Nov. 3 election. Residents Manny and Judi Naft, who formed the “Say No to Rezone” political action committee in September 2019, distributed hundreds of yard signs throughout the city with slogans such as “No to Mixed-Use.”
It proved to be too much. Stone withdrew from the deal with Beech Brook in September, putting an end to his vision.
“We will not move forward and invest time and energy on an idea that has been completely removed from the realm of civil discourse,” he wrote in a news release.
Beech Brook executives decided not to withdraw the ballot measure from the Nov. 3 election. Pepper Pike voters overwhelmingly shot down the proposed rezoning, with just 16.7% of residents voting in favor of it. The site’s fate is now unclear, though some in the real estate world said no potential developer would ignore what happened to Stone if they think about buying the property.
Beech Brook CEO Tom Royer said in an email that the nonprofit is still marketing the property and has received some interest in it. He also said the organization is looking at ways to use the property under the way it’s currently zoned and in ways allowed by what could be an addition to the zoning code by city officials.
Beech Brook opposes the proposed zoning changes. Royer said they are restrictive and could “have a chilling effect on potential buyers for the property.”