2010 the leader 60 j a n u a r y / f e b r u a r y

right in the Middle: SignS of econoMic thaw acroSS the MidweSt

northeaSt ohio: tranSforMation fueled by innovation by bailey webb

Northeast Ohio’s history of innovation

and manufacturing expertise combine

with a set of forward-looking incentives

to create a perpetual transformation of

the area’s economy.

The region, which includes Cleveland,

Akron, Youngtown and Canton, is at the

crossroads of the steel and auto indus-

tries, as well as the Midwest and East

Coast, and boasts corporate and cultural

titans and touchstones such as Goodyear,

the Cleveland Clinic, Sherwin Williams,

Diebold, the Cleveland Orchestra and the

National Football League’s Pro Football

Hall of Fame in Canton. In fact, the

region claims the fourth largest concen-

tration of headquarters’ jobs in the U.S.

The region’s existing base, formed over

the past century-plus, plays a big role

in shaping its future. Northeast Ohio’s

63 hospitals and 230,000 bio/medical

employees have created bio startups

worth nearly $1 billion, while the

region’s history as a lighting-industry

hub evolved to include medical imaging

manufacturing and R&D by companies

like GE, Philips, Hitachi, M2M Imaging

Corp. and Quality Electrodynamics

(QED).

Hiroyuki Fujita, who earned a PhD

in physics at Case Western Reserve

University in Cleveland, founded QED

in suburban Cleveland in 2005, and the

company, which makes patent-protected

detectors used in the OEM’s magnetic

resonance imaging machines, has grown

to 50 employees and $4.7 million in 2008

revenue. QED has been awarded grants

by the National Institute of Health, the

State of Ohio and the Cleveland Clinic’s

Global Cardiovascular Innovation Center

(GCIC), and Forbes magazine recently

named QED one of the top 20 most prom-

ising companies in the U.S.

“Cleveland is a center of excellence for

the healthcare industry because you have

the major OEMs such as GE, Hitachi and

Siemens and then institutions like Case

Western Reserve, University Hospitals

and the Cleveland Clinic and its founda-

tion,” Fujita said. “You have the com-

mercial infrastructure as well as all these

other resources.”

The Cleveland Clinic, recognized as one

of the best cardiovascular hospitals in

the world, leads the GCIC, a $250 mil-

lion endeavor dedicated to cardiovascu-

lar R&D that also includes Cleveland’s

Case Western Reserve University and

University Hospitals of Cleveland. Ohio’s

Third Frontier initiative, which is dedi-

cated to providing funding and assistance

for medical and bio projects with com-

mercial promise, provided a $60 million

grant for the GCIC.

Third Frontier isn’t solely limited to

startups, though. Along with a fuel-

cell research at Stark State College of

Technology and Case Western Reserve,

Third Frontier also played an integral

role in bringing Rolls Royce’s U.S.

fuel cell business to Canton. Similarly,

BioEnterprise, which includes Akron’s

BioInnovation Institute, is a business

formation, recruitment and acceleration

program designed to grow healthcare

companies and commercialize biosci-

ence technologies in Northeast Ohio,

while the region’s Jump Start Inc. is

a nonprofit partnership that boosts

entrepreneurship and assists startups

with business plans and funding. So

far, Jump Start has provided expertise

and assistance to more than 200 com-

panies and loans to 40 entrepreneurial

endeavors, including electric car startup

Myers Motors and medical device firm

Checkpoint Surgical.

Northeast Ohio’s burgeoning bio and

medical community played a role in land-

ing MMPI’s Medical Mart & Convention

Center (MMCC) in Cleveland’s CBD. A

comprehensive marketplace for the medi-

cal and healthcare industries, the $536

million MMCC will include a 100,000-sq.-

2010 the leader 61 j a n u a r y / f e b r u a r y

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America comfort knowing that we’re going to be here next year and five and 10 years from now.”

For its part, Alter Group carries no CMBS debt, recently completed two CBD office developments and has one suburban office building at its Corridors office park in Downers Grove, Ill., in predevelopment. Alter’s Dearborn Plaza is 92 percent leased, with Google serving as its largest ten-ant. At 111 West Illinois St., Alter completed a Class-A building at the end of 2008 and is marketing 150,000 sq. ft. (13,935 sq. m.) as a single block, with rooftop signage options.

With one of the few big blocks of available space, Alter may be well positioned in the CBD market. In Chicago’s CBD, 155 N. Wacker deliv-ered in late 2009 73 percent leased, and 353 N. Clark and 300 E. Randolph were under construction, totaling 2 million sq. ft. (185,806 sq. m.) of office space that, collectively, is 72 percent pre-leased, according to Jones Lang LaSalle.

Even as the amount of CBD sublease space declines, as well as the average size of sublease blocks, small- and medium-sized tenants who can pull the trigger are finding unprecedented deals, said Keith Knox, managing director in JLL’s Chicago office. In Chicago’s suburbs, where corporate consolidations and concentrations of defunct residential lenders have the market at 20.8 percent vacant, one tenant recently subleased a block of essentially new, turn-key space for $14 gross, Knox said. Three years ago, ten-ants typically paid triple that amount.

“Chicago is a bit unique because we’re still delivering new construction, and we still have huge pressure in the marketplace from a vacancy perspec-tive” Knox said. “If you have the abil-ity, landlords are dying to commit.”

Alter Group’s industrial strategy for metro Chicago is similar to its office outlook, as the veteran Chicagoland developer prepares for economic resur-gence. Though O’Hare submarket availability, at 12.5 percent, essentially doubles its historical average, modern-ization and redevelopment at O’Hare

International Airport – as well as the market’s historical performance – sug-gest long-term health for the submar-ket. In anticipation, Alter has developed two buildings at Lake Center Corporate Park in Mt. Prospect, Ill., which is accessible to both Interstate 90 and O’Hare. The market may be the slow-est Alter Group Senior Vice President Pat Gallagher’s seen in his three-decade career, but, through his experience weathering past downturns, he is both optimistic and realistic.

“In the last big fallout, ’88 to ’90, while developers had some issues with overbuilding, Corporate America was pretty healthy,” Gallagher said. “The past 10 or 12 months, Corporate America has been on the sidelines, dealing with a double whammy. We are seeing an uptick in activity and some suggestion that Corporate America is coming back and re-engaging.”

Meanwhile, Chicago’s industrial market posted 4.9 million sq. ft. 455,224 sq. m.) of negative net absorp-tion through the third quarter of 2009, according to CB Richard Ellis, which has lead to an 86 percent decline in speculative construction over the past two years.

It’s still Chicago, though, crossroads of America’s railroads and commerce, and, as with its office market, a number of significant requirements are in the mar-ket, though they take longer to cross the finish line these days, said Tim Brauer, managing director in CB Richard Ellis’ Chicago office. Companies that survived the past two years are starting to look forward, he said.

“There’s an increase in the number of companies that a year or 24 months ago would make a short-term com-mitment,” Brauer said. “We’re seeing an improvement in activity, but how significant and sustainable, it’s hard to tell. There are a lot of obstacles, but we’re seeing some encouraging signs.

“It’s a tenants’ or buyers’ market, and this is the time to take advantage of that,” Brauer said.

ft. (9,290-sq.-m.) conference center,

scheduled to open this year, and 120,000

sq. ft. (11,148 sq. m.) of permanent show-

rooms plus 300,000 sq. ft. 27,871 sq. m.)

for trade show exhibitors scheduled to

open in 2013.

“That combination of having the clini-

cal capabilities, work force and state

willing to invest has really made a

difference,” said Carin Rockind, vice

president of Team Northeast Ohio, an

economic development organization

that markets the 16-county region. “It’s

really having the core infrastructure,

work force and supply chain that adds

to the businesses’ bottom line.”

As with bio, medicine and healthcare,

Northeast Ohio’s existing knowledge

base and history with high-tech met-

als, polymers and chemicals create new

opportunities. The region’s expertise

in metalwork and approximately 330

companies involved in alternative

energy also made it an attractive fit for

Rolls Royce in Canton and wind energy

component manufacturers and OEMs

across the area. NASA’s Glenn Research

Center in Cleveland as well as 2,300

Northeast Ohio firms in the aerospace

sector, including Parker Hannifin and

The Timkin Co., produces R&D and

high-paying jobs across the region.

For its part, Akron’s concentration of

polymers research at the University of

Akron’s College of Polymer Science and

Engineering and Bridgestone’s $100 mil-

lion R&D center, as well as Goodyear’s

commitment to keep its headquarters in

the city, will maintain Akron’s century-

long status as a global hub for the indus-

try and create new opportunities and

transformation, Rockind said.

“The way we’re diversifying our econ-

omy and the heritage of expertise here

have led to these new industries sprout-

ing up,” Rockind said. “It’s our job right

now to really leverage that expertise.”