Office Sector
The Cleveland office market is stable approaching the midway point of 2025. While net absorption moved into positive territory in 25Q1, demand over the past 12 months remains negative. Limited deliveries and office-to-multifamily conversions have helped to offset occupancy losses in the years following the pandemic. As of the second quarter, office vacancy in Cleveland is 9.3% compared to the national benchmark of 14.0%.
Leasing volume slowed gradually over the past year, reflecting the market’s weak job growth compared to the national average and peer markets. Renewals represented many of the top leases signed in the market, and new leasing volume slowed notably over the past 12 months. Individual lease transactions are down 13% compared to pre-pandemic levels, while the average size of new leases is down 24%.
Market participants report that smaller tenants drive activity in the market as they tend to be client-facing services that require offices to meet customers in person. This has benefited some key suburban submarkets, particularly in southern suburbs that offer a central location and easy access to parking. Market participants see leasing activity return faster to areas like Independence and Brecksville compared to the Downtown Submarket.
These suburban submarkets have also attracted new development, which supports leasing activity. Office tenants are targeting newer buildings and properties that entered the market since 2020 saw more than 200,000
SF of net absorption over the past 12 months, while those built in the five years preceding the pandemic saw less than 10,000 SF of net absorption. As new space becomes scarce amid a historically low development pipeline, landlords that invest in their properties and have built-out space available will likely be more competitive in attracting tenants.
Uncertainty surrounding the future of office demand and weak job growth projections in Cleveland have weighed on rent growth. Rent growth in Cleveland fell 300 basis points year over year to 0.2%, while nationwide rent growth has remained flat at 0.9%.
Despite ongoing occupancy challenges in the office sector, vacancy in Cleveland will likely see a modest increase over the next 12 to 18 months. The construction pipeline is at the lowest level in over a decade, and few new projects are breaking ground amid elevated interest rates and weak office demand. This will limit the number of new properties entering the market and will contribute to relatively stable conditions over the near term.
Industrial Sector
Industrial vacancy remains balanced in Cleveland at levels well below the national benchmark and peer markets in the region. Modest construction activity is a key factor in the market’s stability, and around 400,000 SF was added to the market last year, a 65% pullback from the prior year. As of the second quarter of 2025, vacancy sits at 3.8% compared to the national benchmark of 7.2%.
Weaker demand from third-party logistics providers and retailers selling home-related goods weighed on demand. Net absorption totaled 600,000 SF over the past year, a 25% increase from the prior year, but still 70% below pre-pandemic levels.
In addition to increased move-outs, modest leasing activity weighs on net absorption. The availability rate in Cleveland has hovered just below 5% for the past two years while the national rate has been increasing since mid-2022 and sits at 9.6%.
The record-low availability rate likely contributes to fewer new move-ins. Renewals were behind many of the top leases signed last year as tenants stayed put amid uncertainties surrounding the presidential election and potential tariffs. New lease volume totaled 3.3 million SF over the past year, down 23% year over year and still well below pre-pandemic norms.
Cleveland’s low vacancy rate tilts market conditions in landlords’ favor, and rent growth remains well above typical levels. Rents in Cleveland climbed 5.1% over the trailing 12-month period compared to the three-year pre-pandemic average of 2.6%. Cleveland far outperforms the national benchmark of 2.0% and ranks among the top 10 major industrial markets in the country for rent growth.
While deliveries are slated to increase in Cleveland through the second half of the year, the impact on the vacancy rate will be minimal as net absorption remains positive and aging industrial stock is removed from the market.
Retail Sector
Historically tight market conditions continue in Cleveland amid healthy consumer spending and limited new construction. These tailwinds have pushed retail availability to the lowest level on record. Macroeconomic headwinds are forming, however, which could weigh on retail demand heading into 2025.
While move-outs accelerated in recent months, spaces are getting backfilled quickly amid record-low availability. Around 40% of all available space on the market is rated Class C and is not typically a target for retailers that are actively expanding, further limiting the pool of available space on the market. This is particularly true among anchor or big-box spaces. Spaces larger than 20,000 SF that were recently vacated have been snapped up by retailers such as Grocery Outlet, Aldi, and Macy’s. Backfills have supported leasing volume, which totaled 276,000 SF, up 15% year over year. This kept the availability rate at 5.3%, well below the market’s 7.8% pre-pandemic average.
The sector’s performance varies among shopping center types and locations. Shopping centers in high-growth suburban areas with established retail clusters see particularly tight availability. Submarkets such as Southwest and Southeast have an availability rate of under 3%. Strip Freestanding locations, which benefit from strong leasing among service-oriented retailers, have less than 3.5% of inventory available, while availability among neighborhood centers and power centers is around 7%. Neighborhood centers see the highest availability rate, hovering around 8%, which have seen an outsize share of move-outs.
While tight market conditions would typically support strong rent growth, rent growth slowed significantly in Cleveland over the past 12 months. At -0.1%, year-over-year gains in underperforms the 10-year average of 2.3%. Rising operating costs weighs on retail tenants’ ability to keep pace with recent levels of rent growth.
While consumer spending remains healthy, the household savings rate is falling back to pre-pandemic levels and excess savings built up during the pandemic is shrinking, which could weigh on spending, and by extension retail demand. The retail sector is well-positioned to maintain balanced market conditions, however, as construction activity is at an all-time low and the market faces minimal supply-side pressure in the case of a pullback in demand.
Cleveland Economic Outlook
As the second quarter of 2025 unfolds, Cleveland’s economic outlook is marked by cautious optimism amid external challenges. Mayor Justin Bibb, in his recent State of the City address, acknowledged “choppy headwinds” due to anticipated reductions in federal and state funding, which could impact essential programs like SNAP benefits and violence prevention initiatives . Additionally, Cleveland Federal Reserve President Beth Hammack highlighted concerns over potential stagflation—a scenario combining economic slowdown with rising inflation—stemming from ongoing trade tariffs and policy uncertainties . Despite these challenges, significant investments, such as Sherwin-Williams’ $600 million headquarters and the Cleveland Innovation District, are poised to bolster job creation and stimulate economic activity .Axios+1Axios+1AxiosMMG Real Estate Advisors
In the commercial real estate sector, Cleveland’s industrial market continues to demonstrate resilience. The city leads the U.S. in industrial investment, attributed to its strategic infrastructure and a low vacancy rate of 2.6% . However, leasing activity has slowed, with the first quarter of 2025 recording the lowest demand in recent history at 922,644 square feet . Despite this, limited availability and constrained new construction are expected to maintain tight market conditions and support steady rent growth, projected at an average of 3.8% annually .Newmark
Conversely, the office market faces ongoing challenges. While there was a slight decrease in vacancy rates to 22.7% in the first quarter of 2025, leasing activity remains subdued, with only 240,121 square feet leased—the second-lowest quarterly total in 16 years . This has led to increased office conversions, as property owners repurpose underutilized spaces into residential or mixed-use developments to adapt to shifting demand . Overall, while Cleveland’s economy and industrial real estate sector exhibit signs of strength, the office market continues to navigate the complexities introduced by evolving work patterns and economic uncertainties.Newmark