News

Hi-Tech Hotels:

The Great "Plug-In" to Vacant Downtown Office Space

Aired April 18, 2000

Some Cleveland buildings that have spent years, even decades gathering dust, are now finding new life. Many are becoming part of the high tech building boom. But the phenomenon could eventually drive up the cost of doing business for everyone who operates downtown. 90.3's Mike West checks into the accommodations at these high-tech hotels.

Mike West–It's dark, dusty are bare here on one of the upper floors of Dillard's department store at Tower City. This part of the building hasn't seen a customer in years. The store still operates on the lower floors, but has abandoned the top eight levels of the building. However, the half-million square feet of space won't be quiet for long. It's just what the doctor ordered for the internet and telecommunication companies that will soon move in.....

Mike Roard–We're looking at wide open space and the wide open space is eventually going to become sort of a hub in the super highway of information. And what's happening is that due to the deregulation of the phone industry , which coincided with the emergence of fiber optics and other technology.

MW– Mike Roark is with Telesource Companies. He's been hired by the building's owner to get the space designed specifically for its future tenants. It will be wired with plenty of outlets, have lots of room for huge equipment racks, and will come with several sources of power, that way if the lights ever go out, their electronic services will not be interrupted...

MR–It has exactly the features these particular types of companies need. It has high floor load capacity, high ceiling heights. We are right directly over the rail road tracks which harbor almost all of the fiber optics backbones that race through the city of Cleveland.

MW–Roark says in Cleveland, as with most cities, main optic lines run along rail road tracks. That means high-tech companies need to locate in the city in order to exist. You might think computer age high-tech companies can operate from anywhere, but anything that gets "plugged in" has to eventually join some kind of switchboard. It's all part of a spider web of cables and fiber optic lines that criss-cross the country like spaghetti. That's led to a real estate "gold rush." At least a million and a half square feet of space has been snapped up in the last 6 months and about 30 internet providers have already set up shop in the area.

Robert Redmond–I think that this a tremendous piece of luck, it's almost like winning the lottery to those who have owned these buildings. Those basically are class "c" buildings and have been the most like candidates for adaptive re-use and have not been generating revenue for the last several years. So in effect, to the owners of these buildings, it's found money and is not taking away space that would normally be used by office companies.

MW–Robert Redmond is in charge of corporate development at "C-B Richard Ellis", a real estate development company. He also credits deregulation for allowing competition in the local and long distance phone businesses. At the same time the internet has taken off and led to ordering more goods and services "on-line". He says the combination of these factors has led to high demand for growing high tech companies looking for space...

RR–This has been an explosive growth and when it comes right down to it, time is money and what were dealing with here is a realization here among the business public whether it's consumer or business to business. These businesses and the volume of transactions which will really replace some direct sales activity.

MW–Developers are gobbling up old buildings faster than you can dial 10-10-3-2-1. And why not? Demand for office or manufacturing space in downtown has not exactly been hot. As icing on the cake, computer and telecommunications companies have pockets deep enough to pay top dollar for the kind of room they need to operate. Gerry Meyer is with the Greater Cleveland Growth Association.....

Gerry Meyer–The prices being paid for vacant buildings are probably higher than we would have seen if it hadn't have been for the telecommunication and hotels development companies buying them. The only downside we can potentially see is that it may raise the market for the cost of buildings downtown above what some people can pay for other types of development, particularly housing which has been the emphasis on the Euclid corridor, and needs to happen.

MW–The new telecom and computer nerve centers are likely to have more equipment racks than cubicles. That means only about one employee per 1000 square feet. It means less people to do things like pay local taxes, buy lunches and shop downtown. But Meyers says there's a trade off...

GM–That would seem rather sparse, but they are very high technical capability jobs, they're probably very high salary jobs that go into this space in terms of the types of people that are trained to work in that area. And they also have great spin off in terms of what they provide to other businesses.

MW–While most folks here are giddy about the new demand for downtown real estate, there's trouble in other areas. In New York, real estate developers love the boom, but not the business owners who have suddenly seen commercial space go from eight dollars to forty dollars a square foot. Older companies complain they are being run out of the neighborhood by the "new high-tech kids on the block." In Cleveland, I'm Mike West, 90.3 WCPN® 90.3 in Cleveland.