The Cleveland Clinic plans to empty out much of its office space in Independence, in a move that could be a harbinger for the market.
Real estate brokers say that the region’s largest employer aims to shed roughly 200,000 square feet at the Independence Technology Center, at 6801 Brecksville Road. Those offices are the subject of chatter about a sublease opportunity widely expected to hit the market soon.
“My understanding is that that space is available, even though it’s not publicly listed yet,” said Damon Taseff, a principal with Allegro Real Estate Brokers and Advisors. “And that’s the case with a lot of shadow space in Cleveland right now.”
In an email early Tuesday, May 25, a Clinic spokeswoman confirmed that the hospital system plans to sublease about two-thirds of its space at the property. The Clinic occupies more than 90% of the 306,000-square-foot building under a lease that runs through 2026.
About 2,000 Clinic employees, in home care and finance, are associated with the facility. Some of those employees will remain on-site, while others will work on hybrid schedules — in an office only part of the time — or will be fully remote, said Angie Kiska, the spokeswoman.
“To ensure a safe environment for our caregivers throughout the pandemic, many of our administrative caregivers across the organization were successfully transitioned to working remotely or a hybrid function,” she wrote in an emailed statement. “As we move forward, we will maintain this model for a small portion of our administrative workforce.
“This shift is a reflection of both today and tomorrow’s workforce strategy to intentionally recruit, develop and retain the best talent from the communities we serve to support our mission.”
As COVID-19 case numbers fall and public-health restrictions lift, employers across the region are weighing how, when — and whether — to bring workers back to the office.
For the Clinic, the Independence sublease appears to be part of a broader, and still evolving, administrative reorganization. The health care provider is winnowing is office footprint even as its clinical presence grows, with planned projects including a new hospital in Mentor and a pathogen-research center on its main campus on Cleveland’s East Side.
Real estate professionals expect the Clinic to put additional space up for rent, at locations including the health care giant’s five-building administrative campus in Beachwood.
“I heard the primary casualties are at least one building at the (Beachwood) campus … and then a few administrative spots that are struggling,” said Rico Pietro, a principal with Cushman & Wakefield-Cresco Real Estate.
Kiska said the Clinic is in the “early stages” of a transition process and doesn’t have final details on the real estate that’s in play or the share of the workforce that won’t be tethered to an office. The Clinic employs 68,700 people, more than 45,000 of them in Northeast Ohio.
The CBRE Group Inc. brokerage, which has been marketing the Clinic’s 98-acre Lyndhurst campus for sale since 2019, will be pitching the Independence sublease as well.
The Clinic has been a tenant in the building, a former steel-research center, since 2002. A major addition a decade ago allowed the Clinic to move hundreds of additional workers to the property, which often is referred to as the Cleveland Clinic Business Operations Center.
“As a landlord, we’re happy to work with them,” said building owner Dick Pace, CEO of Cleveland-based Cumberland Development. “They’re going to look at doing a sublet because they’ve changed their work pattern. … If they can reduce some of their costs, that’s good for the organization.”
He believes that the space will appeal to local tenants and more far-flung office users, from outside of the region and the state. The property includes a fitness center, cafeteria and abundant parking. The recently opened Hemlock Creek Trail traverses the grounds, linking users to the Towpath Trail and the Cuyahoga Valley National Park.
“We think that we will be in a good spot in the market to be able to find tenants,” Pace said, adding “I think that we can be very competitive on pricing.”
In an email, Independence Mayor Gregory Kurtz characterized the city’s relationship with the Clinic as “solid and productive.” He’s confident that relationship will continue.
“The pandemic disrupted life and business-as-usual last year,” Kurtz wrote. “Employers scrambled to set up remote work options for their staff and operations. Because of the experience, many organizations and employees have embraced the work-smarter-not-harder mindset as part of the new normal.”
When the Clinic’s space officially becomes available, he wrote, the city’s “prime location, business-friendly attitude and 360-degree access to a deep regional pool of talent, clients and customers will be critical for attracting and retaining companies to occupy this location.”
Taseff predicted that other large employers in the region will take a similar tack in the coming months, since they’ve recognized that many administrative and support jobs can be done almost anywhere.
“People have realized that they can do it off-site and save on the real estate costs,” he said. “I think where they can, they will.”