CLEVELAND — From the lobby at Dogtopia, his luxe doggy daycare and spa on Euclid Avenue, Alex Mazzenga can see the challenges and opportunities Downtown is facing.
To the northeast, there’s the historic Union Trust Building, a hulking office complex that’s vacant, in receivership and going through foreclosure.
But across the street, at PNC Center, employees are preparing to return to the office five days a week – promising more feet on the street and more spending at nearby retailers and restaurants.
Mazzenga, who opened Dogtopia with his wife in late 2024, is optimistic about the center city. The couple also ended up moving Downtown from the suburbs, into an apartment tower just down the block.
“It seems like every other month a new apartment is coming online and growing their occupancy very fast,” said Mazzenga, who caters to the pampered pooches of many people who live and work nearby.
A new report from nonprofit group Downtown Cleveland Inc. paints a mixed picture of the landscape in the central business district.
The city’s seeing a wave of office-building foreclosures, as property owners deal with the fallout from interest-rate spikes. Apartment occupancy slipped to 86% last year, from 90% in 2024, as hundreds of new units opened.
But more employers are calling workers back to the office full-time, ending an era of flexibility ushered in by the pandemic. There’s new interest from prospective office tenants who aren’t Downtown already. And the residential population is still growing – just not fast enough to keep up with the surge of recent projects.
“We continue to see demand for Downtown living,” Michael Deemer, president and CEO of Downtown Cleveland Inc., said during an interview Friday.
“What we’re seeing now is … supply has caught up with demand temporarily, so we have a little bit of an oversupply situation,” said Doug Price, a major landlord and developer who serves as chairman of Downtown Cleveland Inc.’s board.
Deemer and Price gave News 5 an early look at the organization’s annual snapshot of the state of Downtown. The report is set to be released Monday.
“Right now, we may go through some flux,” Deemer said. “And there may be some turbulence. But long-term, we’ve got a strong downtown. We’ve got a strong partnership between the public sector and the private sector to get things done.”
The housing market
Nearly 900 apartments opened in the Downtown area last year, across a footprint stretching from the west bank of the Cuyahoga River to the Inner Belt. And there are still a few large office-to-residential conversion projects on the drawing board.
RELATED: A transformation is under way at one of Downtown Cleveland's tallest buildings
Price, the CEO of the K&D Group, believes there’s three to five years’ worth of supply Downtown, between brand-new buildings and historic-preservation projects. And the cost of debt and construction has only gone up over the last few years.
That means developers aren’t likely to move fast on the next wave of deals – and troubled older office buildings will sit longer before they’re reborn as living space.
“The cycle, especially these days for construction, is fairly long,” Price said. “Taking that into account, in a year or two, we’re going to need to start looking at new conversions.”
The first tenant just moved into K&D’s latest project, a 120-unit apartment revamp of the Electric Building at 700 Prospect Ave. Construction will be done in April.
RELATED: Electric Building in Downtown Cleveland wins state historic tax credits
But after years of rolling from one apartment project into the next, K&D doesn’t have another residential conversion lined up. “I think we’re good for right now,” Price said, citing the softer market and the company’s already-outsized presence Downtown.
Downtown Cleveland Inc. says 21,000 people live in the Downtown area. The vast majority of them are renters. Deemer said there’s still a gap to fill when it comes to for-sale homes.
“As we look to other downtowns, we don’t have as strong a mix of for-sale and rental housing,” he said. “We see great opportunity in-for sale.”
Bedrock, the real estate arm of Cleveland Cavaliers owner Dan Gilbert’s Rock family of companies, is eyeing townhouses and other for-sale housing as part of its redevelopment plans for the Downtown riverfront. Nic Barlage, CEO of sister company Rock Entertainment Group, talked about that possibility during a recent program at the City Club of Cleveland.
Price said K&D is weighing whether it makes sense to convert some of its apartments into condominiums. “It’s really a missing component Downtown,” he said.
The office shakeout
A handful of Downtown office buildings already are in foreclosure, owned by lenders or controlled by court-appointed receivers. More are in financial trouble – and headed that direction, between higher interest rates and lower values that make it tricky for landlords to refinance their debt.
That means more buildings are going to change hands – at low prices.
Deemer said the upside is that new owners will come in and, because of those low prices, be in a better position to remake the properties.
“That creates great opportunities for business growth and for investment-minded buyers that are looking for a return,” he said, noting that downtowns across the country are grappling with similar challenges – but don’t have Cleveland’s track record of successfully turning old office buildings into new things.
RELATED: It's one of Cleveland's hidden strengths. Other cities would love to emulate it.
“This is a typical real estate cycle,” Price said of the ongoing shakeout in the market. “We probably haven’t had one like this in 15 years.”
The best of the financially troubled office buildings will sell to new office investors. But heavily vacant, older buildings are likely to sit for a while before it makes sense to convert them into housing, hotels or mixed-use projects, he predicted.
“We went through this, you know, 15, 20 years ago when we started this building,” Price said while sitting in Downtown Cleveland Inc.’s offices in an old department store that K&D transformed into apartments, offices and retail space in 2010. “Euclid Avenue was virtually boarded up. Now look at it.”
Deemer’s encouraged to see more Downtown employers, including PNC and the Sherwin-Williams Co., summoning workers back to the office Monday through Friday. Late last year, Sherwin-Williams started moving employees into its new headquarters tower off Public Square. That move-in process is still underway.
Overall, Deemer said, “we’re definitely seeing more demand for office space, as we see more touring activity, more leasing activity – particularly directed at the higher-quality office buildings. I wouldn’t say we’re back to pre-pandemic levels, but we’re much healthier than we’ve been at any point in the last several years.”
Price echoed that.
“For the last three or four years, since the pandemic, it’s been people trading space. And there’s a lot of those again, coming out of hibernation,” he said. “But we’re also seeing the sprouts of people feeling out Downtown for the first time since the pandemic. So that’s really exciting.”
Foot traffic, safety and more
Deemer said Downtown Cleveland Inc. is focused on improving the basics – lighting, sidewalks, crosswalks, parks, along with more frequent, smaller events in public spaces.
About 150 people recently came down to Public Square to try curling, a sport where players slide stones across the ice. After a January snowstorm, Downtown Cleveland Inc. hosted a pop-up sledding and snow-tubing event on Mall B, a sloping, expansive lawn.
“The way to make ourselves stronger and more desirable for jobs and residents is to continue to make the place better,” Deemer said.
The nonprofit’s annual report says serious crimes fell by 26% last year in the police district that includes Downtown. Car thefts fell by 39%.
“That’s the result of a lot of investment, a lot of collaboration … behind the scenes between state, federal and local law enforcement agencies that doesn’t necessarily grab the headlines,” Deemer said.
Meanwhile, Downtown saw 39.5 million visitors last year, according to the annual report. Foot traffic is close to pre-pandemic levels, Deemer said.
At lunchtime Friday, there was steady pedestrian activity on Euclid Avenue despite the snow and ice. Customers popped into Dogtopia to drop off their dogs.
Mazzenga said the business cares for 50 dogs on a typical day. On special-event days – when there are costumed photo shoots, for example – there’s a bigger crowd.
“This is the ultimate doggy social club,” he said with a laugh.
So far, business is steady – and growing.
And though he’d love to see developers do something with that long-empty office building down the block, Mazzenga likes a lot of what he sees.
“We’re really bullish about Downtown Cleveland,” he said. “We love living here. We love having businesses here. So we’re excited about the future.”
Michelle Jarboe is the business growth and development reporter at News 5 Cleveland. Follow her on X @MJarboe or email her at Michelle.Jarboe@wews.com.
