R&D Labs and Flex Office for The Victory Center
The Victory Center was an underperforming office building in Midtown Cleveland before undergoing a rehabilitation for adaptive reuse as 165,965 square feet of flex office and research and development space targeted to biomed and high-tech firms. Development Strategies completed a market study for a prospective investor in the historic tax credits that were necessary for the project’s feasibility. Upon completion, the Victory Center would be the best of this type of facility in Ohio.
The property is located in the Cleveland Health-Tech Corridor, which has attracted over 100 biomedical, healthcare, and high-tech firms since its formation in 2010. The corridor is also anchored by the city’s wealth of healthcare and academic institutions including the Cleveland Clinic, Cleveland State University, and Case Western Reserve University—in addition to a burgeoning entrepreneurial infrastructure consisting of numerous incubator spaces and accelerator programs geared to launch new business in these industry sectors. Our market study found the Victory Center to be well-positioned to capture the growing need for research and development and other flex spaces necessary to accommodate these firms, especially those looking to “graduate” from smaller incubator and start-up spaces into a larger and more permanent space.
Our research found that comparable flex office and R&D properties near the subject were well-received and most occupied at or above 86 percent. However, there was inherent risk because prospective tenants would either be spawned from local incubator spaces or are attracted from other parts of the country—a concern since Cleveland has yet to officially establish itself as a major industry hub. We suggested more conservative rent (lower) and expense (higher) projections would be necessary to ensure the project’s market acceptance.