This may not be the last time we see a building under construction from this angle, looking east from the Rockefeller Building at West 6th Street, north of Superior Avenue. Between the new Sherwin-Williams headquarters tower and West 6th, another building may rise to accommodate additional Sherwin-Williams employees, suppliers and corporate partners (KJP). CLICK IMAGES TO ENLARGE THEM.
HQ2 reveal may coincide with Tower 1 move-in
ARTICLE UPDATED WITH NEW EMPLOYMENT DATA
One year from now, as Sherwin-Williams employees are scheduled to begin moving into their new, 616-foot headquarters tower in Downtown Cleveland, there are renewed rumblings that the global coatings giant will pursue the development of the west half of its HQ site. The HQ site is west of Public Square and the west half of the HQ site is along West 6th Street, between Superior and St. Clair avenues. That’s where Sherwin-Williams has proposed a second office tower and a row of low-rise, mixed use buildings extending around the corner of St. Clair to partially wrap its five-level, 920-space parking garage. And based on the company’s employment growth, it’s already outgrown its new headquarters.
Three sources familiar with the project said the second tower, dubbed HQ2, continues to be planned for development at the conclusion of the first phase, as it has been since the headquarters project officially became public in 2019. NEOtrans began reporting on the HQ project one year before despite company denials that there was an HQ project. After the 1-million-square-foot project was announced, NEOtrans’ reporting filled an information void and assured many grateful Sherwin-Williams employees, worried that they might have to relocate to a new city, that the HQ wasn’t leaving Greater Cleveland.
The sources spoke on the condition of anonymity that we may hear about some initial planning and design concepts for the west half of the Sherwin-Williams HQ site by the end of 2024. The conceptual planning and design will at least be about the HQ2 tower in the block south of Frankfort Avenue and could possibly include the mixed-use component around the parking deck north of Frankfort. Specifically, the HQ2 tower is planned at the northeast corner of Superior and West 6th while the mixed-use project at the southeast corner of St. Clair and West 6th is officially referred to as Sherwin-Williams’ “strategic development site.”
If Sherwin-Williams’ Building Our Future development team, which is simultaneously constructing the coatings’ company’s new research center in suburban Brecksville, is comfortable with the design and construction costs, it could move forward with constructing phase two in 2025. That’s also when interest rates are expected to come down below 6 percent and make big projects more affordable again. The real estate development community has adopted the phrase “Survive to 2025” in reference to the interest rates.
It should also be noted that many of the same companies Sherwin-Williams hired for the first phase of its new headquarters will likely be tasked to help it pursue the second phase. The only way they wouldn’t is if the Building Our Future team somehow manages to fumble getting the first phase across the goal line in a safe, timely and cost-conscious manner in the next 12 months, the sources said. Developing the second phase while the design-construction team is already mobilized and on site would save time and money.
Conceptual plan for the Sherwin-Williams headquarters site from August 2021 showing the second tower at lower left and the strategic development site at upper left, both along West 6th Street. Since then, the plan has changed to, among other things, increase the height of the parking garage by one level and reduce its footprint (Sherwin-Williams).
The team includes design firms Pickard Chilton Architects, Inc. HGA Architects and Engineers, LLC and Vocon Partners, LLC, plus construction manager Welty Gilbane, project manager formerly Mark G. Anderson Consultants Inc., real estate advisor CBRE Inc. and legal advisors Vorys, Sater, Seymour and Pease LLP plus Hanson Bridgett LLP. But it also includes many smaller firms, including local disadvantaged business enterprises.
Some development team members were hired for a term longer than the construction period of the first phase. Among them was Cleveland-based architectural firm Vocon Partners. It was hired by SHW to do programming and spatial/massing work on a five-year contract which started in 2020, sources said. Vocon representatives have declined to discuss with NEOtrans their involvement in any aspect of the SHW project.
An e-mail sent by NEOtrans to Sherwin-Williams Corporate Media staff this week seeking more information on the second phase of the HQ project was opened but otherwise not responded to prior to publication of this article. But, during City Planning Commission hearings in July 2021, Sherwin-Williams’ Director of Corporate Real Estate Timothy Muckley said they already have tenants in mind for the HQ2 building which was shown in conceptual massings to be about 15-20 stories tall and measure roughly 250,000 to 300,000 square feet.
“We work with a lot businesses and we’ll urge them to locate next door,” Muckley said. He added that it could also accommodate more Sherwin-Williams offices. “We’ve made this mistake with manufacturing plants of not planning for the future. We want this to be our headquarters site for a long time. It’s important to be able to have that for growth.”
Outlined in red at the center of this model is a simplified massing of Sherwin-Williams’ proposed second headquarters office tower, located to the left of its larger first-phase. Although the second tower is shown here as a largely featureless massing to demonstrate scale, preliminary designs for this tower may be developed by this time next year (TV20).
Sherwin-Williams could immediately move its own employees from other locations to an HQ2 building upon its completion. But which employees and how many? According to company employment data obtained by NEOtrans, Sherwin-Williams may already have at least 1,500 workers it can no longer fit into its new headquarters tower. That tower was designed to accommodate about 3,100 employees.
But in Cleveland’s Old Brooklyn neighborhood south of downtown, Sherwin-Williams has kept a 128,000-square-foot flex-office space on Hinckley Industrial Parkway. For now, there are no plans to move or close it. Sherwin-Williams leased that property in 2017 for an unknown term after it acquired coatings rival Valspar for $11 billion. About 325 employees work there, up from 250 just a few years ago, according to another source. They include a small number of former Valspar employees who moved from Minneapolis.
There are also 485 people working at the Higbee Building, as only the lower floors of the former downtown department store at Tower City Center house the Jack Casino. Sherwin-Williams signed a sublease last year for the entire sixth floor from Key Corp. which had previously occupied the 79,000-square-foot space. The reason why they’re not working at Sherwin-Williams existing headquarters in Tower City’s Landmark Building, 101 W. Prospect Ave., is because it’s packed to the doors with 3,800 workers, according to internal data provided by a source.
Most of Valspar’s corporate headquarters and research staff remain in Minneapolis and total as many as 700 employees including about 400 people working at the Valspar Applied Science and Technology Center near downtown, according to Finance & Commerce magazine. Sherwin-Williams has reassured the Minneapolis community that it considers that city’s Valspar offices as its “second headquarters.” Valspar also has sales and customer service offices in Chicago, Atlanta and Los Angeles.
What is less clear to Sherwin-Williams at this stage is which corporate suppliers and partners will move their offices to the HQ2 building. None will likely be accommodated in the first phase which needs the northeast corner of Superior and West 6th for construction staging for the massive project. Real estate sources said Sherwin-Williams would have difficulty getting office tenants to commit until the first phase’s opening is one year away or less.
In June 2021, geotechnical work and exploratory excavations were being done for design work for the Sherwin-Williams headquarters. But that data gathering wasn’t limited to areas of the site where the first phase of the headquarters would rise. It was also being done for the second headquarters tower as seen here in this view from the sidewalk along West 6th Street, just north of Superior Avenue, suggesting near-term interest in developing the tower (KJP).
That lack of clarity could soon change. We’re approaching the one-year-out time frame when those sources and one Sherwin-Williams supplier NEOtrans spoke with said they would start considering an office here. An employee of a potential tenant based on the East Coast reached out to NEOtrans in 2021 saying their company would open an office in Cleveland once Sherwin-Williams opened its new HQ.
Sources said Sherwin-Williams had been soliciting interest since early 2022 in the HQ2 site, the strategic development site at St. Clair and West 6th, along with a sale of the HQ’s adjacent parking garage. But the conversations soon turned to selling and leasing back the parking garage plus the rest of the headquarters’ structures. SHW’s original interest in selling the parking garage was, in part, because it would allow the paint company to justify charging its employees to park there.
The strategic development site along with the 1.3-acre HQ2 parcel were platted Nov. 9, 2022, just prior to Sherwin-Williams selling a 90-percent, $210 million stake in its HQ site to Florida-based Benderson Realty Development Co. The sale included the 36-story, 1,070,144-square-foot HQ tower; a two-story, 51,747-square-foot pavilion on Public Square; and its five-level parking garage, Cuyahoga County records show. Sherwin-Williams is leasing back its HQ for 30 years starting March 31, 2025 with options to extend the lease for 10 additional periods of five years each.
SHW couldn’t sell a 100-percent stake in the property to Benderson because SHW has a 20-year ground lease with the Cleveland-Cuyahoga County Port Authority so that it could offer sales tax exemption on construction materials purchased for the new HQ. The port authority also provided $50 million in taxable lease revenue bonds to SHW for its HQ project.
Sources said Sherwin-Williams pursued the sale-leaseback arrangement with Benderson because of the need for increasing financial liquidity for additional projects. The $210 million influx could help SHW develop new projects, including the HQ2 and/or the strategic development site. The latter has a footprint of roughly 70,000 square feet. If a building or a series of buildings were only five stories tall and filled out this parcel, they could amount to 350,000 square feet to accommodate housing, extended-stay hotels, offices and training facilities over ground-level retail and restaurants.
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