Cleveland’s retail scene is rocking again, as supermarkets and discount department stores fuel construction and consumers regain jobs lost during the pandemic. The city’s retail sector demonstrated its first signs of recovery in the first half of the year, absorbing a net 140,000 square feet, according to CBRE. That’s an impressive turnaround for a metro whose vacant retail space had skyrocketed by 1.7 million square feet the prior year.

Demand for freestanding stores helped drive the recovery. Highlights include grocery and drugstore operator Marc’s commitment to a 54,000-square-foot former Kmart in Brunswick and discount department store Ross Dress for Less taking 31,000 square feet in Beachwood. Additionally, Lowe’s inked a long-term renewal for 122,000 square feet in Mentor.

The supply

Midway through 2021, the Cleveland area had 77.9 million square feet of retail. Another 380,000 is under construction, and 2.7 million more planned. The average retail asking rent is $13.69 per square foot, according to CBRE. Completions of new retail space were down slightly compared to the previous six months, totaling 156,000 square feet. For the 380,000 square feet of retail space under construction, significant submarkets are Belden Village/The Strip with 181,644 square feet, Middleburgh Heights with 99,892 and Cleveland West/Lakewood with 58,000. The largest share of square feet planned is in the Brunswick/Medina submarket, where more than 900,000 square feet is on the boards, including a new Menards store. Other significant retail construction planned includes 315,000 square feet in Richmond Town Square, 300,000 in Alliance, 262,709 in Broadview Heights/Brecksville, 230,000 in Aurora-Streetsboro and 200,000 in downtown Cleveland.

5 retail developments making headlines

1. In the underserved Hough neighborhood, Structures Unlimited is building a shopping center named after Black entrepreneur Madam CJ Walker. The 16,000-square-foot center will include a supermarket and federal credit union, and the developer plans to lease space to Black-owned retailers.

2. TLM Realty plans to transform a former Kmart site in West Park into a retail complex with Aldi, Big Lots, Burlington, Ross Dress for Less and Starbucks.

3. City officials and local developers are revitalizing downtown Cleveland’s Cuyahoga River waterfront with interconnected projects like a Cleveland Whiskey distillery, Scottish brewery BrewDog, a 23-acre park called Irishtown Bend and a makeover of the Tower City Center office, housing and retail complex. The center also just added three tenants: Peach Fuzz Wax Bar, boys apparel brand Jaxon’s Closet and women's apparel, footwear and shapewear retailer MiAmour.

4. Developers plan to redevelop an empty strip center into the 37,000-square-foot Uptown Mentor, featuring two levels of office above 11,300 square feet of ground-floor retail. A restaurant with an 8,000-square-foot patio would top the four-story structure. The developer plans to break ground this year and open in 2022.

5. DealPoint Merrill is redeveloping the former Richmond Town Square mall in Richmond Heights into the $200 million Belle Oaks, a 1.5 million-square-foot mixed-use center with 800 luxury apartments, retail, a resort-style pool, a dog park and a large pond. The pandemic has held up the project, but groundbreaking is scheduled for this fall with demolition of the mall. The second of two phases will open in 2023.

The demand

CBRE reports that Cleveland’s retail vacancy rate held steady at 12.6% during the second half of 2021, after having risen the previous two halves. The average lease rate rose slightly to $13.69. The submarkets with vacancy rates at 2% or tighter are Broadview Heights/Brecksville, at 0.9%; Lake County East, at 0.7%; and Tallmadge/Brimfield, at 2%. The submarkets with the highest vacancies are Bedford, at 37.8%, and Severance/South Euclid, at 28.5%. The most-expensive submarket in which to lease retail space is SouthPark Mall/Strongsville, at $28.68 per square foot. The most affordable is the city of Canton, at $6.70 per square foot, according to CBRE.

4 retailers making headlines

1. Wonder Cleveland, a museum of immersive environments and selfie-friendly backdrops that has set up shop in the former H&M in Mentor, Ohio’s Great Lakes Mall, hopes to expand to other malls. It’s picture at top.

2. Cleveland-based Yellow Banana took over 15 local Save a Lots near food deserts to serve more affordable, nutritious food and to provide local jobs. Each store now is stocked with fresh produce and meats in new freezer cases. At the beginning of 2022, the company will install new decor and facades and will upgrade flooring and lighting.

3. Marco’s Pizza plans to open five new franchised stores in Cleveland by 2025 and grow its 1,000-plus-unit footprint by more than 10% this year.

4. Meijer continues to grow its Northern Ohio footprint, opening seven supercenters in the state since 2019. That includes a 155,000-square-foot store in each Brimfield and Lorain in July.

Decline in investment flow

The recovery hasn’t extended to investment yet. Despite the market’s improving health, retail property sales volume declined 6% during the 12 months that ended in June, as fewer multitenant retail properties traded, according to Marcus & Millichap. The number of single-tenant transactions, though, was practically unchanged over the past year, as out-of-state investors continued to acquire suburban drugstores, fast food restaurants and supermarkets that have triple-net leases. Competition within this buyer pool pushed single-tenant pricing up 7 percent to an average of $345 per square foot, the mean cap rate holding in the high-6%, the firm reports.

6 notable retail deals of the first half

1. First National Realty Partners acquired the 138,881-square-foot, Whole Foods-anchored Cedar Center South in University Heights for $38.3 million.

2. First National Realty also acquired the 111,152-square-foot Shore Center Plaza in Euclid for $13.25 million. A 47,348-square-foot Dave’s Markets anchors the property.

3. Pine Tree sold Streetsboro Crossing, an 89,436-square-foot neighborhood shopping center anchored by Giant Eagle, for $10.5 million. A Delaware statutory trust purchased the asset in an all-cash transaction.

4. The R.H. Johnson Co. purchased the 474,000-square-foot Westgate Shopping Center in Fairview Park from RC Retail Centers/DRA Advisors. Additional tenants include Earth Fare, Kohl’s, Marshalls and Target.

5. Hedge fund Kize Capital bought the 1.4 million-square-foot SouthPark Mall in Strongsville from Starwood Capital Group. Anchors include Dick’s Sporting Goods, Cinemark, Kohl’s, Macy’s, Dillard’s and JCPenney.

6. DealPoint Merrill purchased The Shops at Pearl & 130th, a 155,805-square-foot shopping center in Parma Heights. The California company plans to kick off a $10 million renovation in the first quarter, the fourth major construction project it has launched in Greater Cleveland.

What the future holds

According to Marcus & Millichap, the recapturing of 8,200 jobs during July indicates Cleveland’s employment growth is improving. If sustained, this job creation will improve consumer spending and draw more retailers. Available space in top-performing submarkets — including downtown Cleveland, Stark County and the metropolitan area’s eastern region — stand to benefit, according to the firm. Retail inventory will increase by 0.1% this year, the expansion of Beachwood Place mall accounting for roughly half of the new space. By the end of 2021, vacancy will rest at 5.5%, Marcus & Millichap predicts.