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Michael Glass

Michael Glass, regional manager of the Cleveland and Columbus offices of Marcus & Millichap Real Estate Investment Services, says that stability in the key feature of his market. And, not surprisingly, he’s pretty happy about that.

Midwest Real Estate News: I know both markets are different, but how are things going right now for commercial real estate in Cleveland and Columbus?

Michael Glass: I’d say that we’re pretty steady in both markets. Since the beginning of the recession in the fourth quarter of 2007, Ohio has lost about 275,000 jobs. In the first half of 2010, though, the state has added 36,000 jobs, which is leading the national average slightly. A big concentration of these jobs has come in the Cleveland MSA, about 19,000 jobs. We are expecting that to level out. It’s good news, though, that we are finally getting into positive job growth. That’s a great indicator that things are stabilizing here.

MWREN: Is Ohio, despite the many vastly different markets it boasts, generally a pretty stable commercial real estate market?
Glass: Ohio in general doesn’t seethe tremendous amount of appreciation as some of the other markets. But it didn’t see the tremendous amount of depreciation that other markets did, either. It’s stability. This stability is one of the major appeals of Ohio. You are buying for appreciation, yes, but what you are really buying here is cash flow and good operations. That is what Ohio is all about.

MWREN: What positive signs have you seen in Cleveland and Columbus?

Glass: We are starting to see a tremendous amount of buyer activity. The big hurdle was lending. It’s all about quality assets. Buyers are getting more comfortable with what it’s going to take to get a deal done. If you took a snapshot from a year ago today and compared it with that same day this year, you’ll see that our transaction velocity is up around 65 percent from the same period last year. Our transactional volume is up more than 70 percent. We are just getting deals done. Buyers are re-engaging in the marketplace. Some quality assets and quality sponsors are out there. Money is starting to come off the sidelines and re-engage the market. We are starting to come out of this.

MWREN: What has to happen for this momentum to continue or pick up?
Glass: We have to maintain the job growth. We have to be able to fill some of the supply that is coming on the market. In the three major metros of the state, there are about 820 apartment units to be delivered, 1.2 million square feet of retail and 2.2 million of office. Our ability to absorb the old product and to start letting operations catch up before new construction comes back into the marketplace is the key. That all starts with job growth. As jobs grow, households form and all the fundamentals trickle through the real estate market.

MWREN: What about financing? Is that starting to get any easier?
Glass: The lending environment is getting better. Banks are starting to loosen their belts a bit. There are more opportunities for people to transact and move capital around. With financing, last year it was the year of the local banks and the regional banks. In 2010 the national banks are coming hard back into the marketplace. Last year there was so much uncertainty from a lending standpoint and from a buyers’ and sellers’ standpoint. It was shock and awe. In 2010 there is more clarity on where we have been and where we are going. Sellers are coming to terms with where the market is. They have more realistic pricing expectations. I don’t expect it to go back to where it was in the golden years, maybe ever. But as banks start to clean up their balance sheets, the opportunity for them to redeploy their dollars back into the street into some solid loans is there. For the right sponsor they are willing to put that paper back on the street.

MWREN: How about Columbus specifically? How is that market performing?
Glass: Columbus is a solid market. The infrastructure of the state is based in Columbus. We  have Ohio State. Columbus added 7,500 jobs year to date. The bright spot in the state, though, has been Cleveland. When reviewing some of these numbers, I saw that Cleveland added 19,000 jobs in its MSA in the first half of the year. The fundamentals in Columbus held up very well, too, of course. From my perspective, doing what I do, this year we have already done more business out of the Cleveland office this year than in all of 2009. There are still challenges. There are still vacancies putting pressure on rent. But we are seeing a slow burn-off in concessions on the multi-family side. The retail business is starting to firm up a bit.

Tags | Cleveland, Columbus, Marcus & Millichap, Michael Glass, Ohio