Cleveland’s metro headline improved to 11.1% vacancy in Q3, but the CBD sat at 23.2% as recently as Q1. That split matters. Submarkets with sub-11% vacancy can still finance with local lenders; legacy downtown high-rises cannot without credit tenancy or public support. On balance, the data argue for micro-market underwriting, not metro averages—especially where safety, amenity gaps, and dated floorplates slow re-lease velocity.

CMBS stress remains elevated—special servicing at 10.65%—and office is the driver. That keeps spreads wide and leverage thin for anything short of best-in-class. As a result, capital stacks are being rebuilt outside the conduit, with rescue equity, bridge debt from private funds, or no debt at all. Ultimately, low-basis buyers can move; legacy owners are stuck in the bid-ask canyon.

“Cleveland’s CBD continues to evolve as a national model for adaptive reuse… This conversion trend, which now includes 1100 Superior Avenue, is reshaping the office market by removing less efficient assets,” said CBRE’s Steve Timmel, whose team brokered the sale. The line captures the new playbook: remove obsolete supply, add housing/hospitality, and restart the downtown flywheel.

For assets that resemble 1100 Superior, underwrite 50% effective occupancy until leases are signed; test break-even at today’s rents and expenses. Meanwhile, run a dual track: “as-office” with minimal TI/LC versus conversion with full entitlement and hard-cost contingencies. If neither clears a double-digit cash yield on a low-teens $/SF basis, price is still wrong. For now, government or medical tenancy remains the only conventional financing bridge.

Expect more comp-setting auctions across secondary Midwest CBDs as maturities hit and debt costs stay sticky. Where municipalities offer abatements, infrastructure grants, or zoning flexibility, conversion math can work—especially paired with low bases like $10–$25/SF. Elsewhere, lenders will triage: note sales where recovery exceeds REO costs; extensions only where credible tenancy is forming. Watch two leading indicators: (1) CBD vacancy deltas vs. suburbs—if that gap narrows, refinance optionality improves; (2) servicing/transfer rates—if they plateau, loss-given-default should start to stabilize. Until then, capital will pay for optionality (basis) over going concern