Class A warehouses demonstrate demand in Cleveland, nationally | Real Estate

The Class A warehouse sector of the industrial commercial real estate landscape continues to be one of the hottest assets in Northeast Ohio and around the country. Class A industrial warehouses are defined as buildings that are 100,000 square feet, have a 24-foot minimum interior ceiling height and were constructed since 2000.

The Cleveland Class A warehouse market makes up 18.7 million square feet, which is 6.4% of the total Cleveland industrial market. Typical occupiers or industries of these types of facilities are e-commerce, distribution and logistics companies.

In the fourth quarter of 2021 the Cleveland Class A warehouse market had an 8.5% vacancy rate, slightly higher than the overall market’s 5.0% vacancy rate, though this asset class remained stable and desirable, and was affected by just one or two large vacancies.

Industrial properties that were under construction as the year ended amounted to over 3.5 million square feet, and if you roll in planned projects, the number is over 6.5 million square feet, the majority of which are Class A warehouse/distribution assets. Warehousing and distribution facilities for e-commerce and logistics continue to be asset classes that are the highest on the list. Cold storage facilities are also emerging as facilities that developers and tenants are considering in order to meet the consistent pandemic-era demand of grocery delivery.

One newsworthy item that happened last quarter was developers Weston Inc., Scannell Properties and the DiGeronimo Cos. joined forces again to purchase and earmark another former automotive plant for Class A redevelopment, this time the 2.1-million-square-foot former Ford Motor Company stamping plant located in Walton Hills.

Nationally, Newmark’s industrial research team reports that vacancy fell to an all-time low of 4.3%, and every tracked market posted single-digit vacancy. Some of the most important logistics hubs in the country are nearly out of space, posting vacancy rates under 2.0%. In fact, new speculative warehouses in 2021 leased up in less than a quarter after delivery on average – with many pre-leasing before completion. One wrinkle in this unprecedented demand is that there is dwindling acreage available nationally for industrial development, so developers are forced to think outside the box for expansion opportunities.

Terry Coyne is a vice chairman in the Cleveland office of commercial real estate services firm, Newmark.

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