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Are people in Cleveland miserable? Thomas Gustafson doesn’t think so. And he doesn’t care what the editors and writers at Forbes Magazine say.

Each year, Forbes publishes its list of the most miserable cities. This year, Cleveland topped the list as the most miserable metropolis in the United States. The Forbes report pointed to unemployment, weather, poorly performing sports teams, high taxes and corrupt politicians.

Gustafson, a senior vice president at Colliers Ostendorf-Morris in Cleveland, takes offense at the Forbes report. Cleveland is a wonderful place in which to live and do business, he says. It offers a wealth of museums and attractions. It is the center of a booming healthcare industry. And it boasts a low cost-of-living. Besides, the Cleveland Cavaliers have the best record in the NBA and Lebron James. That doesn’t sound like a miserable sports landscape.

“Cleveland gets a bad rap,” Gustafson said. “Forbes had no business calling it the most miserable city in the country. I don’t think they actually talked to people who live in Cleveland. The people who move here tend to stay here and never leave. This city has so much to offer, and it does it at a great cost-of-living.”

Like most major Midwest cities, Cleveland has suffered during the Great Recession. But there isn’t a metro area across the United States that hasn’t felt the economic slowdown’s impact.

But Gustafson, and other commercial real estate pros interviewed for this story, said that Cleveland is actually holding its own as far as the commercial real estate market is concerned. Things aren’t great, but they’re not dismal, either.

And in today’s economy, that’s about the best anyone can hope for.

“We have seen a lot of activity over the last several months,” said Dan Cooper, broker and president of Cooper Commercial Investments Group. “Last year was a down year for most people. But this year, things have picked up. More people are interested in making deals. We can gauge the interest level, and we see that it is picking up. People had been sitting on the sidelines, but a lot of these people are now starting to realize that this might be a great opportunity to acquire different assets that they hadn’t been able to acquire during the busier times.”

An uptick in activity

George Pofok, vice president of Cleveland’s Cresco Real Estate, said that he’s already seen a slight up-tick in commercial activity in 2010.

Pofok pointed to alternative energy as one of the surprisingly strong commercial markets in the city. His company is involved in the early phases of possibly selling a small parcel of land to a company in the wind turbine industry, Pofok said. He also cited the healthcare industry as faring well, even in this down economy.

The success of healthcare here isn’t a surprise: Cleveland is home to the Cleveland Clinic and to the well-regarded University Hospitals medical facilities. The city is also developing the massive Cleveland Medical Mart and Convention Center project, which proponents say will help revitalize the city’s convention center and a good portion of its downtown business district.

Of course, Cleveland is only truly successful when its industrial base is performing well. This sector has struggled during the recession. But there are signs that it has weathered the slow times better than the industrial markets in other cities, Pofok said.

Cresco has reported the overall vacancy rate in Cleveland’s industrial market to be about 8.1 percent. That is below the national average for industrial. In 2009, the city saw about 1.1 million square feet of new owner-occupied industrial construction, Pofok said. But there was no speculative industrial construction during the year, he said.

The big challenge facing developers in Cleveland, as it is across the country, is a lack of available financing, Pofok said.

“That is the real hard question,” he said. “The traditional banks are still holding onto their dollars and cents until their balance sheets get cleaned up. Developers are going to have to look at other means than the traditional lender to see projects get off the ground.”

Pofok cited life-insurance companies and union pension funds as some of these other alternative sources of financing. But until the banks start lending again, the city won’t see a significant amount of new development, Pofok said.

There are challenges in Cleveland’s downtown, too. The city had been trying to revitalize its downtown when the recession hit. That has slowed these efforts. It has also left several vacancies in the downtown office market, Pofok said. There is hope, though: The Flats area of downtown Cleveland, the city’s artsy side, has attracted some investment and interest, Pofok said.

Looking ahead, Pofok said, vacancy rates will probably continue to rise in all commercial sectors during much of 2010. After that, though, the market should stabilize and begin to grow again, Pofok said.

“I think there is some pent-up demand in some of the market sectors,” Pofok said. “There are folks out there who do have cash. They are going to want to take advantage of the opportunities in 2010 that are coming.”

Activity on the waterfront

In December of 2009, the Cleveland – Cuyahoga County Port Authority earned approval from the City of Cleveland Planning Commission for its conceptual plans for an ambitious lakefront improvement plan.

The plan calls for improving access to the city’s lakefront, developing new lakefront residential and commercial developments and bringing the residents of Cleveland to its waterfront area.

Eric Johnson, real estate director with the port authority, said that the hope is to break ground on the project in two to three years.

“The intent is to have public access first. This isn’t just about real estate,” Johnson said. “It’s about creating a new street grid and adding parks and promenades. We are committed to having this all open to the public by 2012.”

Cooper, from Cooper Commercial Investments Group, also has hopes that Cleveland’s downtown rejuvenation might perk up again as the economy gradually recovers.

“There is a kick to get the downtown area going again,” Cooper said. “There is a lot of interest in the Flats and in Midtown. There are the plans for the convention center. There’s even talk of casinos. People thought a lot of this was going to take place a few years ago. It was all halted in its tracks, of course, when the recession hit. There were a lot of public and private owners who were well funded and were making it their goal to do different projects. They all got stopped in their tracks. Their attention was diverted elsewhere. Now we are seeing that interest come back again.”

Cleveland’s downtown has never been one where people congregate after the work day ends, Cooper said. It’s never been a lifestyle-center downtown.

City officials, though, want this to change. They want to see people spending time at downtown restaurants and entertainment venues. They want to see them spending time walking the streets after Cleveland Indians games.

“Cleveland’s downtown has always been a place where people come in to see a game or a play and then head back home,” Cooper said. “It never has had the retailers or the grocery stores for people to shop at. It will be nice to see if Cleveland can pull it off downtown and develop the lakefront area.”

Tags | Cleveland, CRE, Forbes, Office

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