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Larkin Article 3.19.11

Larkin Article 3.19.11

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Published by: jmrj76 on Feb 02, 2012
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Gus Chan /The PlainDealer
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Not much going on atthe Galleria these days.
A bumper crop of empty offices in downtown Cleveland: BrentLarkin
Published: Saturday, March 19, 2011, 8:15 PM Updated: Monday, March 21, 2011, 3:48 PM
Brent Larkin
When Werner Minshall bought the Galleria and adjacent Tower at Erieview justeight years ago, the $30 million price tag was widely viewed as a steal.After all, as recently as 1991 the 40-story tower was on the tax rolls as a $93million property. And when it opened in 1986, with a cast of first-rate retailersand restaurants, the glassy, glitzy Galleria next door had cost Dick Jacobs $43million -- not including the value of the land.Sure, by 2003 the Galleria and the Tower were struggling, but so low was the$30 million sale price that conventional wisdom agreed with a Plain Dealerassessment that Minshall got himself a "bargain."Some bargain.The Galleria has become, at times, a ghost town. When it rains, the roosometimes leaks. The food court is hurting. And at noontime one day recently, Iwalked past Glitz, a female fashion store with a large sign that screamed,"Going out of Business Sale." Inside, the store was empty.In the adjacent office tower, it's a struggle to keep the occupancy rate near 60 percent -- which is belowwhat's usually needed to break even."It's Armageddon," said Minshall, describing the status of commercial and retail property along the EastNinth Street corridor. "There's almost no hope. My equity in this investment is wiped out. It's disastrous. Ilove Cleveland, but there's sort of a poisonous, weird attitude there. People spend all this time muddling onthings that never get done."Indeed, the entire East Ninth Street corridor, once the heart of downtown's business district, is indesperate shape. As a
story by Plain Dealer reporter Michelle Jarboe detailed
in November, the corridor -- an area encompassing East Ninth and East 12th streets, from Euclid Avenue to Lake Erie -- contains about2 million square feet of empty office space.
3/21/2011A bumper crop of empty offices in dowblog.cleveland.com//print.html?entry1/3
Jarboe's story said that's enough empty space to fill the 52-story Terminal Tower more than 31/2 times. Andwith more tenants expected to flee the corridor within the next 18 months, that empty space could swell tothe equivalent of more than five Terminal Towers."It's in the worst shape I've seen, and I've been doing this 40 years," developer John Ferchill, who ownsproperty on East Ninth, said of the corridor.David Browning, managing director of CB Richard Ellis Inc.'s Cleveland office, has a plan designed to savethat important part of downtown. Browning is a realist about the area's problems, though he's not nearlyas pessimistic as Minshall."Some naysayers are predicting the death of East Ninth Street, and that message concerns me a little bit,"said Browning. "The street will never be what it was, in terms of all those office buildings being occupied.There's going to be some that just aren't going to make it as office space. What we need to do is create anidentity for the place and focus on mixed use going forward -- an environment where people are living,working and there's entertainment and green space."Mayor Frank Jackson doesn't sugarcoat East Ninth Street's problems."It's a mess," said the mayor. "It's bad."But Jackson thinks good things happening elsewhere downtown -- the casino on Public Square, theWolstein family's development on the Flats' east bank and the medical mart-convention center project --eventually can spread to the East Ninth Street corridor. He insists he sees "light at the end of the tunnel."Councilman Joe Cimperman, who represents downtown, also takes a subtle shot at Minshall's negative viewof Cleveland, saying, "The view from 30,000 feet is much different from when you have boots on theground. When you're downtown on the streets every single day, talking to people who actually live andwork here, it may be imperfect but the trajectory is up."Because of the office-space glut, some have been short sightedly critical of the Wolstein project for buildingnew office space and taking tenants out of the corridor. Browning said some companies need the new,built-to-suit space the Wolstein project offers. Without it, those companies probably would relocate to thesuburbs.Nevertheless, despite all of the potential signs of life downtown, the number of "for rent" signs is anythingbut encouraging. In 1996, the downtown vacancy rate was 11 percent for Class A space and 19 percent forClass B. Today it's 18.7 percent for Class A space and 26.6 percent for Class B.It may be an overstatement to label that "Armageddon." But the numbers don't lie -- and they're prettybleak.
3/21/2011A bumper crop of empty offices in dowblog.cleveland.com//print.html?entry2/3

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