The recent Cleveland Clinic groundbreaking for a $276 million Cancer Institute, scheduled for completion in early 2017, invites myriad real estate possibilities. The institute will be located at East 105th Street and Carnegie Avenue.
“Whether it is janitorial supply companies, pharmaceutical companies, construction jobs, property maintenance, parking and food service, there will be many trickle-down opportunities,” says Rico Pietro, SIOR, Principal, Cushman & Wakefield/ CRESCO Real Estate.
“The institute will be a meaningful catalyst. A recent study showed that for every highly skilled job created, another five jobs in the professional or service industry follows,” says Bill Saltzman, CCIM, SIOR, Executive Vice President.
The new institute will be a lightning rod for development and redevelopment likely within a three-mile radius. Investors should pay close attention to properties in the area, since demand will increase — as will prices — when the institute is completed.
Smart Business spoke with Pietro and Saltzman about how the project will affect the area real estate market and the city.
What should investors know about the impact of the new Cancer Institute?
Sometimes when these owner-occupied transactions or build-to-suits are done, they become invisible to the brokerage and real estate markets, but they are still compelling to investors for the ancillary benefits they bring. Media coverage may be minimal, which is unfortunate.
The ancillary demand for support services with this type of infrastructure will benefit the Midtown and University Circle marketplaces. This could create opportunities for construction suppliers, and it could lead to demand for offices. A rising tide floats all boats, as they say.
Where would an investor begin to explore such real estate opportunities?
As an investor thinks about hotels and retail sites in the University Circle area, as well as rental unit or condo housing starts, proposals have to further enhance the already significant amount of hospitality offerings there. It is sort of the question of the chicken or the egg — which came first? Do retail sites arrive first and draw customers who then choose to live nearby, or does an influx of residents spur retail development? Retail is driven by rooftops: the more population in an area, daytime or nighttime, the more the need for retail establishments.
There is likely to be an increased demand for multi-family unit construction. The number of outpatient rooms would create demand for new limited-service hospitality projects as well as supporting office and retail space. Almost all asset classes will benefit from such a massive investment by the Clinic.
Is there much opportunity for properties to be renovated or repurposed?
Existing conditions will probably direct what is there. Dilapidated buildings that don’t need to be razed may be renovated. Land sites may be repositioned for vertical development.
Whenever a contractor repurposes an existing building or clears a site and starts anew, environmental concerns have to be taken into account, such as asbestos removal. Challenges appear every day, and sophisticated studies about developing property can be done quickly to meet environmental deadlines. Removal and cleanup are not insurmountable procedures.
Would this area draw an interest in new ‘green’ buildings?
Economically there currently is not a value proposition behind green buildings. But when a company looks at fast-growing markets, the green factor is attractive to millennials. The idea is that being a better green citizen and being a little bit more earth-friendly creates a better impression of the market — that a company is being thoughtful of the environment with its new construction. It may not make sense on the balance sheet, but from a goodwill perspective, it goes a long way.
What role does a civic image play?
With the growth at the Clinic, it is the responsibility of the marketplace to offer the amenities necessary so visitors have a positive experience in Cleveland. ●
Insights Real Estate is brought to you by Cushman & Wakefield/CRESCO Real Estate
