Cleveland—More and more people are moving to the Cleveland metro area, attracted by the steady economic growth and the new development in the city’s downtown, where developers are building everything from hotels, to retail, to housing. These projects have made the area more popular with young adults looking for the live-work-play lifestyle. According to Marcus & Millichap’s Cleveland Apartment Market Report, for the second quarter of 2014, the downtown population has increased more than 50 percent over the past 10 years and is expected to reach 15,000 by 2015.
The growing need to live downtown has motivated developers to start construction on residential projects. But development isn’t restricted to the city’s core. It is also taking place in other submarkets. Marcus & Millichap reports that apartment construction in the area has reached a five-year high, with more than 1,850 units currently under development. Developers have completed almost 600 apartments over the past four quarters and about 1,450 units are expected to be completed this year, increasing inventory 0.9 percent.
The near future will see even more interesting and impressive projects break ground in Cleveland. The $700 million lakefront redevelopment project is definitely one of them. It was recently approved by the city and calls for the construction of more than 1,000 apartments, as well as parking spaces, offices and retail. Just as impressive is the $130 million One University Circle. It will break ground in the summer of 2015 and will deliver a 25- to 28-story apartment tower, the first to be developed in the city in more than 40 years. The 280-unit building will be ready for occupancy in mid-2017.
The surge in new completions will increase metrowide vacancy. It will climb to 6.2 percent by the end of the year. However, rents will also continue to climb. After last year’s 2.6 percent increase, average rents will continue to grow this year, although slower. They will tick up 1.3 percent to $805 per month.
The growing rent and the stable economy have also attracted investors to the Cleveland area. But, in spite of the rising demand for apartment assets, transaction velocity remains subdued as owners hold onto properties awaiting further gains. The limited amount of for-sale inventory has resulted a 4 percent dip in sales activity during the past year. According to Marcus & Millichap, buyers have paid an average price of $44,000 per unit over the last 12 months.
Charts courtesy of Marcus & Millichap.