Cleveland has drawn a fair amount of attention since the Great Recession. The city rose with many other former Rust Belt staples, with the help of a cheap dollar that benefitted what manufacturing was left in the region. Cuyahoga County had a record 17.6 million visitors in 2015, up 3.7% from 2014. Further, overnight stays in area hotels were up 10.4%. Those travelers brought their cash; Tourism is estimated to have pumped $8.1 billion into Cleveland’s economy during 2015. Measuring the prosperity, Cleveland’s Department of Economic Development recently employed the headline “Boomtown Cleveland.” The identifier leads their overview of current development in the city, which includes six projects, in either the planning or construction stages, totaling over $100 million.
Despite its slumping population, the greater Cleveland area still hosts seven Fortune 500 headquarters, across diverse industries. CNBC even took note several weeks ago, boasting of the entrepreneurial, main street spirit of the city. The downtown area has changed drastically, and a study from Cleveland State University characterizes the difference a few years can make. The study, titled “The Fifth Migration,” revealed Cleveland to have the eighth fastest-growing population of college-educated 25- to 34-year-olds. The ranking ties Miami and Seattle. In Downtown Cleveland, which hosts a population 76% larger than 2000’s tally, nearly 64% of the aforementioned cohort has a bachelor’s degree or higher. The Downtown Cleveland Alliance also found that, despite only 7% of Cuyahoga County’s jobs being located downtown, downtown jobs are accounting for more than 17% of the county’s income. More than 20% of those jobs are in the healthcare industry. Cleveland remains appealingly walkable, as its transit infrastructure was developed for a population more than twice today’s size. This amenity was key in attracting the Republican National Convention to the city.
However, the narrative changes when you consider the bigger picture.
While Cleveland came close to positive net migration in 1st quarter 2013, the city has yet to see positive net migration on a quarterly basis since the first three quarters of 1991 (when Cleveland was alleviated from decades of population loss).
The employment picture isn’t nearly as negative but, in terms of base growth, settles among the weaker performances in the country.
The most recent economic summary from the BLS also shows the area unemployment rate has begun to drift higher, hitting 5.3% in August. That figure sits slightly higher than the U.S. average, and significantly greater than the area’s 4.3% year-ago rate. Mining/logging/construction and manufacturing job losses are principally driving the increase. August marked a weak month for professional and business services jobs in the area.
The mix of jobs has changed markedly in the area, over the past 15 years. The decline in the concentration of manufacturing jobs has outpaced other Rust Belt metros, and the meteoric rise of the healthcare sector has helped transform the demographics of Downtown Cleveland.
Cleveland has also lagged national economic growth. However, you wouldn’t know this by looking to regional bankruptcy levels.
The credit health of consumers and business is not showcasing the weakening evident elsewhere in the Rust Belt.
Multifamily development, however, is an area that does present an apparent waning. Permitting activity and starts in the multifamily space have cooled to a manageable pace.
It is hard to imagine that a metro should have any additional new units in the vacuum of a diminishing population, but then, the metro has not seen any net move-outs in nine quarters. Historical occupancy has shown strength across all product classes, with occupancy exceeding 95% across Classes A, B and C since 3rd quarter 2014. Annual rent growth, however, has been principally driven by Class A product, which has seen annual rent growth of better than 5% in the past four quarters. That product faces limited competition in such a developed market.
While Cleveland is not necessarily poised to become a growth leader by any metric, it appears the city’s low cost of living and diverse corporate presence have been enough to lure a young and educated population, a prime renter pool, to the city proper. Cleveland remains affordable, as indicated by mild housing price index growth. The city remains on a quest to reinvent itself, as evidenced by the rampant hotel development targeted at making Cleveland the perfect city for conferences. Although the population of the metro continues to decline, the city remains appealing for those who see it for its cost-of-living advantage over larger cities.