Rico Pietro, principal with the Cleveland office of Cushman & Wakefield|CRESCO Real Estate, has been selling commercial properties in this Midwest city for more than 20 years. Today, he specializes in Cleveland's office market. And, as he says, this is the healthiest he's seen this sector here in two decades.
Pietro will share his thoughts on the office sector during the 4th annual Cleveland Commercial Real Estate Summit held by REJournals at Windows on the River in Cleveland on June 27. He’s one of several industry leaders speaking at the event, which has, throughout its history, attracted hundreds of commercial real estate professionals.
Midwest Real Estate News spoke to Pietro earlier this month about the strength of the office sector in Cleveland, the amenities that companies are seeking and the strong pull that downtown Cleveland is having on companies that were formerly happy doing business entirely from the suburbs. Here is some of what he had to say.
Midwest Real Estate News: I know this is a broad way to start this interview, but just how strong is the downtown Cleveland office market today?
Rico Pietro: It is incredibly healthy. It is as healthy as I’ve seen it in my 20 years in Cleveland. There is a new interest in downtown office space from the professional services sector. Recommitting to the CBD seems to be a common theme. We have always had tech companies, for instance, interested in downtown. But now there’s a new interest in downtown from accountants, lawyers and consultants. They are all trying to meet the desires of the Millennial employees who want to work in a CBD, to have the amenities that come with a more densely occupied area of commerce.
MREN: How long has this trend been going on?
Pietro: It has been a pattern for the last five years here. This has been happening in all the major metropolitan markets. Cleveland has lagged a bit behind in the professional services area. But now we are seeing lawyers and accountants looking to be more competitive when it comes to attracting the best talent. They have to offer a different kind of venue than they have in the past to compete against companies in Chicago and other major cities.
MREN: Will this demand lead to new office construction in downtown Cleveland?
Pietro: The Class-A office vacancy rate in downtown Cleveland is at record lows today. You do hear whispers from developers that there might be a new office tower coming to downtown. It will not be built on spec, though. It will require an anchor occupier. There are some institutions in Cleveland that are rumored to be looking for a downtown headquarters. It could be a government-led tower with a state, city or county agency in it. Or it could be one of the major businesses in town leading the charge for a new product coming to market.
MREN: Is it getting difficult for companies to find modern Class-A office space in downtown Cleveland?
Pietro: There is a lack of inventory of Class-A space available. But the bigger lack of space in my mind is the adaptive space, the restoration of historical properties into office space in well-located areas. More companies in the suburbs are interested in moving to downtown. But they are not just interested in downtown. They don’t just want the ivory towers that have always been considered. They want to locate in the historic beam-and-brick structures that were once other uses. They want to create authenticity for their space, to use it as a marketing tool to recruit the best and the brightest recent college graduates or employees from their competitors.
MREN: How important is this kind of office space to younger workers?
Pietro: There’s been a big shift in the office market, both suburban and urban. Companies are looking for more amenities beyond just the 2,000-square-foot workout area and the shared conference room. They want onsite fast-casual eating opportunities. They want wellness and fitness centers that workers can use as an alternative to a gym membership. They want lounge areas for brainstorming and creative thinking. They are looking for amenities like electric charging stations for vehicles and bike racks for those who don’t want to have a vehicle. It’s important, too, that offices have easy access to public transportation and that they be near cultural amenities like riverfronts, city parks and waterfronts. It is now about these amenities rather than what floor a building they are on.
MREN: These are some pretty major changes hitting the office sector.
Pietro: There are disrupters, just like what has happened in the retail world with Amazon. Disruptions are happening in the office world, too. Workers today may want to start work later in the day. They want to stay later in the office. There has been a seismic shift in the market. The development community is now listening to the employee, not just the c-suite leadership. It’s not just about bricks and mortar. It’s about creating a sense of place, a culture for a community. Companies need this approach if they want to recruit the most talented and educated workers. That’s an important goal for companies. When they have the best workers, they can increase their productivity significantly.
MREN: Have there been any big company moves to downtown Cleveland that show just how strong this trend is?
Pietro: Electronic Merchant Systems, a credit-card processing company, signed a lease in the 250 West Huron Building at Tower City Center. That is a sign that companies want to operate out of downtown. Companies want to bring the benefits of a better culture at work during the day to their employees. That is what is leading this charge.
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