Q1 2015

1

2015Q1

Q1 2015

2I n s t a g r a m . c o m / D w n t o w n C L E@ D o w n t o w n C L Ef a c e b o o k . c o m / D o w n t o w n C l e v e l a n d A l l i a n c e Yo uTu b e . c o m / D w n t w n C L E

1010 EUCLID AVENUE, THIRD FLOOR, CLEVELAND OH. 44115

THE GRAND OPENING OF HEINEN’S, DOWNTOWN’S LARGEST GROCERY STORE, LEAD AN INFLUX OF 15 DOWNTOWN RETAIL COMMITMENTS.

Q1 2015

3

DOWNTOWN CLEVELAND MARKET UPDATE - QUARTER 1 SUMMARY

QUARTER SUMMARY

Downtown Cleveland Alliance’s work helped continue momentum in the region’s employment capital and fastest growing residential neighborhood. Office tenants and retailers alike continue to seek out locations close to Downtown’s rapidly increasing population of millennials and baby boomers. Q1 highlights include:

•  Major employers like Spero-Smith Investment Advisors and Fox Sports Ohio announcing moves from suburban locations to Downtown Cleveland

•  DCA member Benesch recommitting to Downtown, becoming the first announced office tenant for nuCLEus, a planned $300 million mixed-use development in Downtown’s Gateway District

•  Demand for downtown Class A office space out-pacing demand for suburban locations

•  The grand opening of Heinen’s, Downtown’s largest grocery store, in the historic Cleveland Trust Rotunda, leading an influx of 15 downtown retail commitments

•  97 percent occupancy rate in market-rate apartments, with more than 400 additional residential units projected to come online in 2015

Vibe, A Wellness StudioHeinen’s at The 9 Santorini Taverna

NEW RETAILERS OPENED/COMMITTED TO DOWNTOWN CLEVELAND IN Q1

Fox Sports Ohio/SportsTime Ohio

MAJOR DOWNTOWN WINS IN OFFICE RETENTION & RELOCATION

Spero-Smith Benesch

15Including: Vibe, A Wellness Studio; A Kitchen and Bar; Heinen’s at The 9; Santorini Greek Taverna; Barrio Gateway; Equal Exchange Coffee; Johnnyville Woods; Cleveland Fray; Happy Hour Collection; FlapJacks; Chicago’s Home of Chicken and Waffles; C’est Macarroon; Cathy’s Creamery; Blue Edge Small Box; Rocket Fizz

Q1 2015

4

RETAIL MARKET UPDATE

RETAIL OVERVIEW - RETAIL OPENINGS AND COMMITMENTS SHOW DOWNTOWN GROWTH

Fifteen retailers opened or announced commitments to Downtown Cleveland in Q1. In addition to Heinen’s, 8 retailers opened: Vibe, A Wellness Studio; Santorini Greek Taverna; Barrio Gateway; Johnnyville Woods; Cleveland Fray; Happy Hour Collection; A Kitchen and Bar; and Equal Exchange Coffee.

See our retail spotlight on page 5 to learn more about Heinen’s first eight weeks operating in Downtown Cleveland.

In addition to the opening of nine retail locations in the beginning of 2015, six retailers made commitments to open in Downtown Cleveland. These announcements will add an ice cream shop, a candy store, a furniture store, two restaurants and a gift and beauty supplies shop to Downtown’s retail offerings. Starbucks also announced plans to open a seventh downtown location in 2015.

DOWNTOWN’S RETAIL AUDIENCE

Downtown Cleveland’s aggregate spending power is increasing with downtown’s residential population, which is projected to reach over 20,000 within 4-5 years based on the recent demand trends. Since 2000, Downtown’s purchasing power has increased by over $100 million.

Between

The aggregate income of Downtown Residents increased

2000-2013

119%

CHANGES IN DOWNTOWN’S PURCHASING POWER

$150

DOW

NTOW

N AG

GREG

ATE I

NCOM

E (IN

MILL

IONS

)

$200

$250

$300

$350

$100

Years

2013

2010

2000

M I L L E N N I A LS

7 6 %I N C R E A S E

B A BY B O O M E R S

9 8 %I N C R E A S E

O V E R A L L P O P U L AT I O N

7 0 %I N C R E A S E

2 0 0 0 - 2 0 1 3

S O U R C E : 2 0 0 9 -2 0 1 3 A M E R I C A N C O M M U N I T Y S U RV E Y F I V E Y E A R E ST I M AT E S

S O U R C E : U . S . C E N S U S B U R E A U ; 2 0 0 9 -2 0 1 3 A C S F I V E Y E A R E ST I M AT E S

Q1 2015

5

RETAIL MARKET UPDATE

RETAIL SPOTLIGHT: HEINEN’S BOOMS IN FIRST 8 WEEKS DOWNTOWN

Heinen’s at The 9 opened with fanfare on February 25, 2015. The local, third generation, family-owned grocer renovated the historic Cleveland Trust Rotunda at E. 9th and Euclid Avenue. Covering more than 22,000 square feet, the store is stocked with national brand grocery items along with the highest quality produce, freshly made prepared meals, full service meat and seafood counters and an award-winning wine and cheese department. Specialty departments in the downtown store include prepared foods, deli, artisan cheese, seafood, meat market and produce.

The second floor of the historic rotunda features the beer and wine department including 1,000 varieties of wine and 40 wines in self-serve wine dispensers. The selection also includes more than 400 craft beers, 8 beers on tap and the option to create Build-Your-Own 6-packs.

After eight weeks in operation, Heinen’s has reported highest dollar sales are completed on Saturdays and the highest number of individual shoppers visit on Wednesdays.

During Downtown Heinen’s first eight weeks of operation:

More than 118,000 customer transactions were completed

More than 16,000 salad bar purchases were made

More than 6,000 containers of soup were purchased

More than 14,000 sports and nutrition bars were sold

Q1 2015

6

QUARTERLY TRACKING OF OFFICE SPACE NET ABSORPTION & VACANCY

OFFICE MARKET UPDATE

NET ABSORPTION (SF)

Cordell & Cordell Fifth Third Center

Signet Capital Advisors Hanna Building

AT T R A C T ION RE L OC AT ION RE T E N T ION E X PA NSION / RE NE WA LMA JOR TRANSACTIONS

Sources: CBRE, Colliers International, Downtown Cleveland Alliance, JLL, Newmark Grubb Knight Frank, Xceligent

Intellinet

Park Plaza

Law Offices of Cleveland

50 Public Square

7,948 SF

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

25,000

20,000

15,000

10,000

5,000

0

-5,000

-10,000

-15,000

-20,000

Sherwin Williams

Skylight Office Tower

Spero-Smith Investment Advisors 50 Public Square

Boma Greater Cleveland 200 Public Square

2,920 SF

19,985 SF

Penton Media, Inc 1100 Superior Ave.

Source: CBRE Office MarketView Q1 2015

MARKET COMPARISON BY CIT Y (CL ASS A & B SPACE)

ClevelandIndianapolis Cincinnati Detroit

WB Doner & Company 1100 Superior Ave.

Alexander Mann Solutions 1301 E. 9th Street

Newman & Company 1801 E. 9th Street

Everest Land Title 323 W. Lakeside Ave.

3,354 SFSubleasing

14,305 SF

27,033 SF

10,000 SF

27,088 SF

13,000 SF

4,981 SF

18.8%

18.7%

18.6%

18.5%

18.4%

18.3%

18.2%

18.1%

18%

18.4%

18.5%

18.7%

18.6%

18.4%

NET A

BSOR

PTIO

N (S

F)

OFFI

CE V

ACAN

CY (

PERC

ENT)

Downtown has enjoyed positive net absorption in 4 out of the last 5 quarters. Vacancy held steady at 18.4 percent.

Downtown Cleveland commanded higher lease rates than similarly sized downtowns in Q1.

Fox Sports Ohio/ Sports Time Ohio

200 Public Sqare

23,000 SF

OFFICE VACANCY %

$21.00$20.50$20.00$19.50$19.00$18.50$18.00$17.50$17.00$16.50$16.00

Q4 2014Q1 2014 Q2 2014

$18.

28

$19.

02

$20.

78

$18.

56

$18.

13 $18.

48

$18.

23

$17.

84

$18.

19

$18.

86

$18.

41

$18.

34

Q3 2014

$18.

22 $1

8.89

$20.

79 $16.

97

Q1 2015

$18.

22

$19.

05

$18.

92

$18.

56

Q1 2015

7

OFFICE MARKET UPDATE

OFFICE MARKET OVERVIEW - NINETWELVE DISTRICT MOMENTUM GROWS

Downtown Cleveland Alliance hosted its annual NineTwelve District Business Forum at the Residences at 1717 in Q1, giving businesses and residents an opportunity to hear from and share feedback with DCA, the City of Cleveland, and the Greater Cleveland Partnership. American Landmark, owner of Oswald Centre, shared plans for upgrades to the recently acquired 1111 Superior.

Attendees received an update on the NineTwelve District’s progress. Since the Financial District was rebranded as the NineTwelve District four years ago, ten new world or regional headquarters—including Alexander Mann Solutions, BrandMuscle, Britton Gallagher, and Gas Natural--have located in the district. AmTrust Financial and National General Insurance alone have delivered over 1,100 jobs to NineTwelve and are continuing to hire. Major downtown employers like Oswald Companies, Penton Media, Osborn Engineering, Hartland & Co., and Grant Thorton have recommitted to NineTwelve. In Q1 of 2015, NineTwelve led all downtown districts with 18,470 square feet of positive net absorption.

The NineTwelve District’s growth coincides with the renovation and activation of Perk Plaza at Chester Commons. In order to provide food amenities to district office workers and demonstrate a market for restaurateurs and retailers, DCA created Walnut Wednesday, a weekly food truck event that occurs May through September. Walnut Wednesday has grown from 10 food trucks to a rotation of over 50 and attracts 1,500 people per week. Since Walnut Wednesday began, employers have committed over 5,500 jobs to NineTwelve and two office buildings have been converted to residential use.

VACANCY RATES OF CL ASS A OFFICE SPACE IN THE CLEVEL AND AREA

Downtown Cleveland Vacancy rate

15.1% $23.36Lease Rate PSF

Suburbs of Cleveland

16.4% $22.38

Downtown’s Class A vacancy and lease rates outpaced Cleveland suburbs in Q1, indicating that employers value the power of a downtown address to recruit and retain talent and connect with business development opportunities.

Vacancy rate Lease Rate PSF

Sources: JLL

vs

Q1 2015

8

STARTUP CORNER

Downtown Cleveland serves as the hub for Greater Cleveland’s ascendant startup and entrepreneurial culture. Downtown attracts tech-savvy talent and start-ups with the help business accelerators FlashStarts and Bizdom, events like TechPint and StartUp Week, and the fastest commercially available fiber optic connectivity in the United States.

Since 2012, Downtown accelerator programs Bizdom and Flashstarts have bolstered 62 startup companies who have attracted over $5.6 million dollars in investment.

Downtown Cleveland Alliance is supporting FlashStarts’ effort to establish StartMart, a central location which will allow young and seasoned entrepreneurs to work side by side in a diverse setting by provide co-working space and additional resources.

On May 15, Downtown Cleveland will host the TechPint Startup Summit for the second year in a row. The event connects the startup community with investors from across the region. Last year, the Summit brought 350 startup founders and investors from across 5 states to Downtown Cleveland. The full day summit features prominent speakers and entrepreneurs from across the country. Attendees will have opportunities to connect and collaborate with fellow founders during the programming.

STARTUP CORNER - TECHPINT TO BRING STARTUPS AND INVESTOR TOGETHER IN DOWNTOWN CLEVELAND

DOWNTOWN START-UPS MAKE NEWS:

•  Crowdentials, a FlashStarts graduate based in Downtown Cleveland that verifies accredited investors online and expedites the accreditation process, was recently recognized as one of the area’s “coolest emerging companies” in New York’s Guest of a Guest

•  Flashstarts graduate Koalaha Co. launched a web-platform for games with real-money stakes offering an alternative to the traditional app store.

Speakers include:

•  Paul Singh, formerly of 500 Startups;

•  Guy Turner, Hyde Park Venture Partners;

•  Tanisha Robinson, Print Syndicate.

Registration information can be found at summit.techpint.org

Q1 2015

9

Downtown Cleveland’s status as a travel and tourism destination contributes to office and residential development. DCA partner Destination Cleveland reported in Q1:

•  33 percent of new residents first visited the city as a tourist;

•  37 percent of site selection executives say business trips influence their perception of a city’s business climate;

•  15 office tenant jobs are created for every 100 tourism-related jobs that are created

In addition, marquee events like the NCAA Division I Men’s Basketball Regional Tournament and the Rock & Roll Hall of Fame Induction Ceremony generated an estimated economic impact of over $25 million.

HOSPITALITY MARKET OVERVIEW

DOWNTOWN CLEVELAND EVENT SPOTLIGHTS

HOSPITALITY MARKET UPDATE

•  NCAA Division I Men’s Basketball Championship: The NCAA Men’s Basketball Championship brought March Madness into Downtown Cleveland. With three of the four participating teams within a 350 mile drive, Cleveland saw a greater economic impact than any other city hosting a regional game. Basketball fans flocked into Downtown, stayed is hotels, ate at restaurants, and visited bars and spent an estimated $10 million dollars.

•  The 39th Annual Cleveland International Film Festival: This year’s Cleveland International Film Festival (CIFF) broke the record for attendance with 100,204 people taking part in the festival. This is a 186 percent increase from attendence in 2003. CIFF was also named the second best film festival in America by the readers of USA Today.

•  The 30th annual Rock and Roll Hall of Fame Induction Ceremony : The Rock and Roll Hall of Fame’s annual Induction ceremony brought celebrities and notoriety to Downtown Cleveland. The event sold out Cleveland’s historic Public Auditorium and drew 1,100 additional guests to the live simulcast at the Rock and Roll Hall of Fame museum. The induction ceremony, held every 3 years in Cleveland, brought the region an estimated $15 million in economic impact.

AVERAGE DAILY RATE REV. PER AVAILABLE ROOM

HOTEL OCCUPANCY RATES

2014

65.0%

74.9%

2015

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

March 2014

June 2014

Sept. 2014

Dec. 2014

March 2015

74.6%

52.0%

67.4%

HOTEL MARKET RATES AND REVENUE

MARC

H 20

14

MARC

H 20

15

MARC

H 20

14

MARC

H 20

15$119.21 $129.85 $77.54 $87.48

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10

Developers continue to work at keeping up with demand in Downtown Cleveland’s white hot housing market. The Residences at 1717 finished construction with 100 percent occupancy and a waitlist of 70 people. The market continues to absorb new units as quickly as they become available, indicating that the only limit on how much the downtown residential population can grow is how quickly developers can deliver new product.

Although downtown lease rates have risen from an average of $1.15 per square foot in 2013 to $1.33 in 2015, downtown living remains affordable to a high number of Greater Cleveland residents. Over 500,000 Cleveland metropolitan area residents are able to afford the average $1,000 per month one bedroom apartment.

DCA released the 2015 edition of Downtown Digs, in partnership with Live Cleveland, featuring residential opportunities in Downtown’s six districts.

Projected Downtown Cleveland apartments coming online in 2015 include:

•  Flats East Bank

•  Schofield Building

•  Ivory on Euclid

•  The Creswell

HOUSING MARKET OVERVIEW

AVERAGE MONTHLY RENT FOR 1 BEDROOM APARTMENT

HOUSING MARKET UPDATE

Q1 20

15 97.2%occupancyQ1

2014 94.5%

occupancy

Flats East Bank Apartments

NUMBER OF RESIDENTS WHO CAN AFFORD A 1 BEDROOM DOWNTOWN

in the Greater Cleveland Area**Cleveland Metropolitan Statistical Area, including Lorain, Medina, Lake, Geauga and Cuyahoga Counties

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11

HOUSING MARKET

Q1 2014 Q1 2014Q1 2015 Q1 2015

$1.15 Number

Sold17

Avg. Sale Price

$210,135 PSF For Sale

$189.14

TOTAL UNITS880

TOTAL UNITS

5,565 Occupancy

97.2%* $1.15

Number Sold14

Avg. Sale Price

$197,112PSF For Sale

$181.06

TOTAL UNITS880

$1.33

HOUSING MARKET UPDATE

Lakeside Avenue

East 9th Street

East 18th Street

Quicken Loans Arena

Progressive Field

Public Square

Euclid Avenue

Prospect Avenue

Superior Ave.

St. Clair Ave.

East 14th Street

Carnegie Avenue

Euclid Avenue

East 6th Street

Ontario Street

East Mall Drive

W. 9th Street

W. 6th Street

W. 3rd Street

Huron Road

teerts dr3 .W

First Energy Stadium

Chester Avenue

Flats East Bank (Phase 2)

The Malls

16

4

5

6

7

119

2322

25

17

14

12

2

102220

9

8

11

13

2418

15

21

11

3226

27

28

30

329

3133

TOTAL UNITS5,19694.5%

Avg. PSF Rental$1.25

Occupancy

DOWNTOWN CLEVELAND RESIDENCE MAP

OWNED RENTED

Avg. PSF Rental

*36 of 38 properties reporting

Residences PlannedUnder Construction/Renovation1. Residences at 6682. Avenue District Apartments3. Joshua Hall Building4. University Lofts Apartments5. Euclid Block6. University Lofts Condos7. University Studios8. Langston9. Lofts at Rosetta10. Residences at Hanna11. Seasons at Perk Plaza12. Reserve Square13. Residences at 171714. Residences at The 915. 2320 Lofts

16. National Terminal Apartments17. The Sphere18. Flats East Bank19. Schofield Building20. The Creswell21. Ivory on Euclid

22. Starr Gennett Building23. Park-Southworth Building24. CSU West Residential25. Superior Warehouse Lofts26. Corning Place27. Standard Building28. 75 Public Square29. Leader Building30. nuCLEus31. May Company Building32. Halle Building 33. Johnson Court

Residential Units Built Since 2007

Q1 2015

12

Asset Plus Companies, Inc., the largest privately-owned student-housing developer in the U.S., paid $4.5 million for Heritage Hall at the eastern edge of Downtown Cleveland. Cleveland State University, which has owned the building and operated it as a dorm since 2009, sold the property. The building also currently houses the Downtown YMCA, which will move to the new location in the Galleria in early 2016. According to Asset Plus Companies, the property will be renovated into an off-campus housing option for the students in the next year.

HERITAGE HALL SELLS FOR $4.5 MILLION

The $272 million Hilton Downtown Cleveland is more than a third of the way completed and is on track to be visitor ready by the Republican National Convention in July of 2016. With Phase 1 being completed at the end of Q1 2015, the construction team moved on to phase 2 in early April keeping the project on schedule. In November, high winds prevented work from being done on the hotel’s tower, but the construction team used the time to work on the lower levels of the project and were able to keep the schedule on track. With completion of the project a little more than a year away, leaders are now focusing on the hotel’s initial operations, staffing and training needs.

CONVENTION CENTER HOTEL COMPLETES PHASE 1 OF CONSTRUCTION

MAJOR INVESTMENTS & DEVELOPMENT UPDATES

The Cleveland Indians spent Q1 of 2015 prepping for the opening day of the 2015 season. On April 10th, the Indians welcomed a sold out crowd of 35,789 fans into the recently renovated Progressive field. The Cleveland Indians unveiled a new section called “The District.” Packed with CLE-centric concessions, modern structural designs and amenities, and a new two-level bar called “The Corner,” the updates bring Cleveland culture, as well as local vendors, into the park. The District includes concessions by Cleveland’s own Great Lakes Brewing Co., Dynomite Burgers, Melt Bar and Grilled, Sweet Moses, and Barrio. The $26 million investment made by the team removed a section of seats and created a new gate at center field, creating a new view of Downtown and better connecting the energy inside the ball park with the energy on Downtown’s streets.

INDIANS RENOVATE TO INCLUDE LOCAL FLAVOR

Q1 2015

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DCA OVERVIEW

Fourteen new City Advocates were announced in Q1 of 2015. The 2015 class of City Advocates were selected by a committee of DCA staff members and program alumni. The committee reviewed nearly 85 written applications and interviewed 30 finalists. These participants, each representing a broad range of professional expertise and personal interests, are the seventh class of DCA’s City Advocates. During their two-year commitment to DCA, City Advocates will become actively involved in the growth of Downtown.

CITY ADVOCATES

DCA’s Ambassador programs employs more than 60 hard-working people who are dedicated to keeping Downtown’s streets clean and safe year-round. The DCA Ambassadors can be seen patrolling Downtown’s neighborhoods by foot and by bike, acting as both mobile concierges and an incredible cleaning staff. No matter what your needs are, the Ambassadors are there to assist you quickly and efficiently.

CLEAN & SAFE

Downtown Cleveland Alliance’s Business Development Center coordinates DCA’s advocacy efforts. The Alliance enjoyed success on each of its Q1 advocacy priorities in Q1: the Ohio Historic Preservation Tax Credit (OHPTC), affordable parking, and special event permitting reform.

Downtown Cleveland projects have secured over $150 million in Ohio Historic Tax Credits, leveraging an additional $1.4 billion in private and public investment. The OHPTC was included in both the Governor’s proposed budget and the version passed by the Ohio House of Representatives. The Alliance will continue to advocate for the Ohio Senate to maintain and make improvements to the OHPTC. The Alliance also successfully advocated against a proposal to apply the state sales tax to parking. In Q2, the Alliance will advocate for these priorities, in addition to adequate state funding for public transportation.

ADVOCACY UPDATES

8 8 , 5 9 5 P O U N D SCOLLECTED

OF TRASH FROM DOWNTOWN STREETS

7 2 9 S A F E T Y E S C O RTSTO & FROM DOWNTOWN DESTINATIONS

PROVIDED

6 0 6 M OTO R I STSASSISTED

1 2 , 5 6 5 V I S I TO R SSERVED AS CONCIERGES TO

In Q1 of 2015, DCA’s Ambassadors:

Main Avenue Bridge Renovation

Downtown Cleveland Alliance has selected three finalists for the redesign of the Main Avenue Bridge underpass. Centered at the intersection of West 9th Street and Main Avenue, this project is part of DCA’s continued efforts to elevate Downtown Cleveland through Step Up Downtown. Fifty-one responses to the Request for Qualifications were received from firms throughout the U.S. and Canada. Selected from this list, the three finalists are Balmori of New York City, Latent of Chicago and PORT of Chicago.

Public Square Construction

The next step in continuing Downtown Cleveland’s momentum towards improving our vibrant, thriving urban core is to create a unique public space that links pockets of existing development and promotes further growth. With construction beginning in Q1 of 2015, the vision of Public Square is in the process of becoming reality.

STEP UP DOWNTOWN

Step Up Downtown is DCA’s vision and tactical plan for linking and enhancing downtown development districts, public spaces, and assets. Unveiled in 2014, DCA and partners in the advancement of Downtown have already made great strides towards the completion of the Quick Wins outlined in Step Up Downtown. In Q1 of 2015, two keystone Step Up Downtown projects made monumental strides:

Q1 2015

14

DOWNTOWN CLEVELAND’S HOUSING MARKET STAYED STRONG WITH A 97 PERCENT OCCUPANCY RATE IN MARKET-RATE APARTMENTS, WITH MORE THAN 400 ADDITIONAL RESIDENTIAL UNITS PROJECTED TO COME ONLINE IN 2015.