Harbor Group Markets Cleveland Skyscraper
Harbor Group International has teed up one of Cleveland’s tallest office towers.
The 1.3 million-square-foot skyscraper, at 200 Public Square, is expected to attract bids in the vicinity of $210 million, or $162/sf. JLL is marketing the Class-A building.
Harbor, of Norfolk, Va., acquired the 45-story building in 2005 for $141.3 million — which still stands as the city’s price record.
Cleveland’s office-sales market is typically quiet, but has been picking up. Last year, seven properties traded for a total of $483.9 million, more than doubling the $200 million tally in 2016.
The city is benefiting from the fact that buyers are turning to stabilized properties in secondary markets in search of higher yields. Capitalization rates for top Cleveland offices range from 7.75% to 8.25%, or 3-4 percentage points higher than in top markets, according to a CBRE survey.
The occupancy rate at 200 Public Square is 87%, in line with the Class-A average in downtown Cleveland, where only two buildings are taller. One major tenant, law firm Benesch Friedlander, recently renewed its lease until 2022. Harbor leased 110,000 sf to New York Life a few years ago. Other tenants include mining company Cleveland-Cliffs, Huntington National Bank and PricewaterhouseCoopers.
The property is adjacent to Public Square, a four-block central plaza. It was completed in 1985, initially serving as the headquarters of BP’s U.S. arm. But the oil giant moved out in 1998, leaving much of the space vacant. The occupancy rate was just 75% when Harbor made its purchase. The company then recruited Huntington National and signed Cleveland-Cliffs to a new lease that almost doubled its space.
Since then, downtown Cleveland has seen an influx of residents, as some 500,000 people migrated from suburbs. That has prompted redevelopers to convert some 3.6 million sf of offices into apartments over the last decade, in turn tightening office occupancy rates.