The cornerstone of Cleveland’s skyline has sold this week for $268M to a local owner. What does it mean for the local office market?
The Key Center, a 1.3M SF office tower sporting 57 stories and Class A status has been sold by national office REIT Columbia Property Trust to a Cleveland-based multifamily property and development firm. Built in 1991, the Key Center anchors a deal that includes a nearly 1,000-space parking garage as well as a ten-story bank building.
The anchor tenant in the tower is a regional banking power. KeyCorp, a holding company that owns the 18th largest bank in the US, lends a significant chunk to the tower’s 95% occupancy at sale time. The new owner, Ohio’s Millennia Companies – a group of real estate operations and development firms – intends to move operations into the tower, further bolstering the Cleveland CBD strong net absorption numbers, reported in Xceligent’s 4Q2016 Cleveland Market Report as the city’s leading absorption submarket with over 75KSF absorbed.
A Peek Around The Neighborhood
The deal takes place against Cleveland’s backdrop of declining office vacancy and modest levels of new construction. From Xceligent’s most recent Market Report:
- During the 4Q 2016 the Cleveland office market has absorbed 104,105 square feet (sf) of space.
- At 12.0% the regional vacancy rate has continued to decline, showing improvements from the 4Q 2015 at 13.1%.
- The Cleveland CBD submarket observed the greatest positive net absorption totaling 75,222 sf during the 4Q 2016.
- The Cleveland Office development pipeline had 67,000 sf under construction during the fourth quarter
Cleveland, In Fact, Rocks
If nothing else, the Key Center deal is a strong show of local commercial confidence in the face of a city’s commercial history that has suffered from capital flight, at times resulting in “rust belt” perception. It’s the duty of CRE professionals to look past such cliches, however. Industry players who might shadow the principals in this deal — such as financial support services or real estate service companies who have or seek profiles in the Midwest — can indulge their interest in low-barrier office markets such as Cleveland’s with a quick and easy look at Cleveland CBD’s comparable and nearby office properties. To view a live query at CommercialSearch of office properties listed for lease or sale in the shadow of the Key Center, click here.
Get Xceligent’s 4Q Cleveland Office Market Report
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