Two weeks ago, I posted a speculative but data-driven article suggesting Cleveland-Cliffs Inc. will probably start looking for a new headquarters facility given its recent corporate shopping spree. This week, several sources at and close to Cliffs confirmed that the company is in fact considering a new HQ.
And that’s not all. They are talking with others about identifying additional firms to co-locate with them in a building. Based on who they’re reportedly talking with, it’s apparent that Cliffs will stay in Greater Cleveland and probably in downtown Cleveland.
But wait — there’s more. The fact that Cliffs is talking with firms about co-locating their offices with them strongly suggests that Cliffs is looking to fill a large, empty building. There is only one large, empty, existing office building in downtown. So they’re either trying to fill that building or build a new one. It’s one of many office plays underway in Cleveland.
After its recent acquisitions of AK Steel and ArcelorMittal USA, Cliffs is now Greater Cleveland’s second-largest Fortune 500 firm by revenue, barely edging out Sherwin-Williams. Only Progressive is larger locally.
|In West Chester, a northern suburb of Cincinnati, AK Steel’s
headquarters waits to be emptied once Cleveland-Cliffs can
find or build a larger headquarters in Cleveland (Google).
But Cliffs has a relatively small HQ staff of about 600 compared to Sherwin-Williams’ 3,000 or Progressive’s 12,000. Cliffs’ current home of 200 Public Square has only about 207,000 square feet of available space scattered among multiple floors of the 46-story tower. Cliffs occupies just under 110,000 square feet in the tower.
Once AK Steel and ArcelorMittal USA are assimilated into Cliffs, its HQ staffing may increase to 1,200 employees and its space needs may increase to 204,000 to 272,000 square feet. If those acquisitions result in growth as Cliffs’ executives hope, the company’s HQ staffing could rise by hundreds more workers and its office space needs could rise to about 255,000 to 340,000 square feet or more in the coming decade.
Considering that Cliffs is shopping for new HQ space, its probable that the HQ staffs from AK Steel near Cincinnati and ArcelorMittal USA in Chicago will be consolidated within Cliffs’ HQ. If it wasn’t for the pandemic, Cliffs would have already started moving AK Steel office jobs up to Cleveland. For the time being, Cliffs is only replacing departing managers at AK Steel near Cincinnati with new managers in Cleveland, sources at Cliffs say.
And it’s a pretty safe bet that Cliffs’ HQ will stay in Greater Cleveland if not in downtown Cleveland. The reason is that Cliffs is talking with firms that are already based in downtown Cleveland about co-locating with them.
|ArcelorMittal USA’s regional headquarters is located in Richfield
at 4020 Kinross Lakes Parkway. Cleveland-Cliffs could expand this
8-acre campus between Cleveland and Akron (Commercial Exchange).
What’s more intriguing is what this could mean about Cliffs’ new address. With the square-footage needs that Cliffs has by itself, there are only two existing buildings in downtown Cleveland with enough contiguous vacant space to accommodate Cliffs’ HQ. One is 55 Public Square whose owner is the target of a federal investigation.
The other is the totally vacant, 493,000-square-foot Ellipse at 45 Erieview Plaza. The Ellipse is the 1983-built, 16-story former Ameritech HQ at the southeast corner of Lakeside Avenue and East 9th Street. It’s not only big enough to accommodate Cliffs’ after it assimilates AK Steel and ArcelorMittal USA, but it can also hold the offices of the firms with whom Cliffs is willing to co-locate.
Those firms reportedly have space needs in the 20,000- to 50,000-square-foot range. They approached Cliffs in the normal course of doing business with them. They informed Cliffs they were looking for new digs. Cliffs responded that they were also looking for a new home. That’s when the conversations began but which are still very preliminary. Many other options for each firm are still on the table.
Because they do business with these firms, Cliffs’ sources were unwilling to reveal them.
Buying and updating The Ellipse would be far cheaper than constructing a new building, but it’s not a structure meant for everyone. If it was, it would already have office tenants. It has large floorplates averaging 34,000 square feet. It’s certainly an attractive building inside and out, including a glassy, elliptical facade offering unobstructed views of Lake Erie. Plus it has a 348-space parking garage nearby and another 32 executive parking spaces under The Ellipse.
|The Ellipse, a 16-story office building in downtown Cleveland,
is completely empty. It could accommodate Cleveland-Cliffs’
new HQ plus another small-medium office tenant or two,
depending on their size (Google).
An unidentified buyer won an August auction to acquire The Ellipse for a bargain $14.9 million. For an unknown reason, the buyer walked away during the due-diligence period prior to taking title. New York City-based private equity firm Somera Road bought the property in 2016 for $36 million. To build an office building of similar scale in downtown Cleveland today could cost about $150 million.
And perhaps that’s what Cliffs and another firm or two might be willing to do to get a trophy-class office building of about 20 stories or so with high-end finishes, the latest technologies and an energy-efficient design that reduces operating costs. One has to wonder if this is what Cliffs and a co-locating firm or two have in mind.
The only reason why Cliffs might consider co-locating with another firm in a building is if it was to either occupy a completely empty building like The Ellipse or to construct a new building. The smaller firm or firms would be a tenant and help offset construction financing and maintenance costs.
Otherwise, Cliffs could go to The Ellipse by itself or build its own building without partnering with a tenant. The fact that they are considering co-locating with other Cleveland-based office users is a telling piece of information — and a hopeful one for those of who like to see more downtown investment and more jobs coming to Cleveland.