CLEVELAND, OH — The six-story Metropolitan Plaza in Highland Hills and three-story Landerbrook Corporate Center I in Mayfield Heights come to mind as newer buildings in the east suburbs, but the calendar shows that's not so.
The first is from 2000, the second 1997. However, Shelbourne Global Solutions of Brooklyn, N.Y., is about to undertake major improvements to both structures and upgrades to six other buildings it bought in the East Side suburbs in 2015. The New York company also installed a new, four-person leasing team from CBRE's Cleveland office to lead the charge for filling them up.
Shelbourne, which bought the properties for a total of more than $60 million, hopes to seize on a two- or three-year window before more new multitenant office buildings could be constructed in the market — if the post-COVID-19 era permits them — to boost the occupancy of the portfolio.
The window opens after new office buildings at Van Aken District and Pinecrest, in Shaker Heights and Orange Village, respectively, had largely leased up since opening their doors more than three years ago.
Sandy Monaghan, Shelbourne executive vice president, said the performance of the new buildings shows tenants have an appetite for newer space and are willing to pay more for it.
We're also hoping that suburban offices may gain after COVID-19 because properties such as these are near prime residential areas where people may want to work from home a few days and in the office a few days, Monaghan said, or companies want to have a large central office and a network of smaller ones in different areas.
Updates at Metropolitan, originally constructed as a bank headquarters that also offered rental offices, include adding a technology screen or bank of TVs to enliven its three-story atrium; addition of softer, contemporary floor coverings; and furniture for staffers to work outside the office.
At Landerbrook I, an empty office suite on the first floor has been gutted, according to Andrew Coleman, a CBRE first vice president who is part of the brokerage team that recently snagged the Shelbourne assignment. Such a demolition is expensive. It also limits prospective tenants to those who want to invest in totally new offices rather than seek a discounted lease on existing office space. The lobby at Landerbrook I will also be updated with contemporary finishes.
We've taken out the old private offices, Coleman said. Now you can see the window lines and get a better idea what the space can provide. Hallways are also getting updates to carpeting and wall coverings to give the structure a fresher feel, and similar steps including new lighting systems are afoot in the properties.
Metropolitan and Landerbrook I are in line for the bigger investments because they stand to have, or already have, large vacancies. At Metropolitan, a full-floor suite leased by Nationwide Mutual Insurance Co. of Columbus will go back to the landlord because the insurer's lease will expire and it has already vacated it. That is more than 30,000 square feet, and Landerbrook I has more than 18,000 square feet of empty space.
The two spaces also account for more than half of the available spec in Shelbourne's portfolio here, which is 83% leased.
That 17% vacancy rate is higher than the 13% vacancy rate in the east suburbs, according to Newmark Knight Frank's most recent office survey.
CBRE recently launched its campaign to lease the space by emailing flyers about the buildings that said, Let us reintroduce you.
Coleman said the marketing effort will include photos of the properties taken by drones and CBRE will use its own proprietary design software to help prospective tenants envision their space.