Millennial Influx Helps Cleveland Shake Rust Belt Reputation

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Cleveland once held a vital place in America's industrial landscape. John D. Rockefeller kicked off his oil empire there, and the city was an early center for car production and later diversified into other manufacturing sectors.

But when American cities began de-industrializing and the American dream became a picket fence in the suburbs, Cleveland struggled with growing blight, and people started leaving in big numbers.

"Cleveland is the poster child for white flight out to the suburbs," said Conor Coakley, a broker with CBRE in downtown Cleveland. The 5.4 percent fall off in residents in 2000 actually accelerated in the 2010 census, to 17.1 percent.

But Cleveland has begun to embody another trend: The nationwide phenomenon of Americans, especially millennials, wanting to live a hipper, less-car dependent lifestyle in the urban core.

"Cleveland is the poster child for white flight out to the suburbs."

Cleveland is among a group of mid-sized Midwest cities, including Cincinnati, Columbus, Kansas City, Milwaukee, St. Louis, Pittsburgh, Louisville, and Detroit, experiencing a downtown Renaissance.

Aided by historic preservation tax credits, Cleveland has been climbing back since the 1990s. The credits and low property costs have lured developers and other investors, including Dan Gilbert, the Detroit billionaire whose purchases of dozens of vacant buildings in that city are setting the stage for a downtown population boost there.

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Lately, Cleveland's downtown population growth has been accelerating. It increased 79 percent between 2000 and 2016, and is projected to top 18,000 by the end of 2018, based on housing developments currently planned or under construction, according to new numbers released last month by the Downtown Cleveland Alliance.

Cleveland's downtown residents are getting younger and more of them are making more money. Between 2000 and 2014, the number of millennials rose by 77 percent, and the number of baby boomers by 97 percent. Households with income of at least $100,000 jumped by 91 percent.

Of course, with progress comes rising home values. Some of the same millennial pioneers who chanced it and bought properties in the wake of the recession in places like Ohio City, a near-west neighborhood, now find themselves struggling to continue living there.

Anne Hartnett and her then-fiance bought a rundown 900-square-foot home out of foreclosure for $22,000 in 2010. They secured a $57,000 loan that covered the purchase price plus renovations, she said.

They gutted the two-bedroom home and converted it into a one-bedroom loft. The couple got married and started a family, converting a walk-in closet into a nursery. But with their second child on the way—and home prices beginning to soar—they sold their home last year for $130,000 and moved to Rocky River, a suburb about 10 miles away.

"Housing prices have gone up again but small business owners and artists are getting priced out," said Hartnett, 32. She said that Ohio City has begun to suffer from a lack of "mid-market" housing ranging from $175,000 to $250,000—the price point they were shopping in. "Five years ago Ohio City was more affordable than Rocky River, so this is pretty crazy."

Ohio City was once a fierce competitor to Cleveland. In 1836, violence broke out between the two during the "Battle of the Bridge," when Ohio City residents tried to prevent the use of Cleveland's new Columbus State Bridge, which was pulling traffic to Cleveland before it could reach Ohio City's mercantile district. In 1854, Cleveland annexed the town.

Today, Ohio City is rebounding quickly. The neighborhood is home to 9,000 residents, including 250 businesses, 60 of which were established there in the last three years.

One of those businesses is Hartnett's Harness Cycle, which Hartnett opened in Ohio City after spending time at Soul Cycle in New York. The demand has been overwhelming, she said, and she is in discussions to open a second location in the heart of downtown.

Though they would have liked the option to stay, Hartnett wasn't convinced that the urban core offered enough amenities. Downtown Cleveland's first grocery store, a Heinen's Fine Foods, opened in early 2015. On a recent visit, Coakley toured me through the store, which has a spectacular stained-glass rotunda.

The building, at the corner of Euclid Avenue and East 9th Street, adjoins the Metropolitan hotel and The 9 residences, a conversion of a 1971 skyscraper co-designed by modernist architect Marcel Breuer. Johnny Manziel, the quarterback recently cut from the Cleveland Browns, lived there until last year (leaving, reportedly, after a 10-week stint in rehab).

In all, 29 projects with more than $3.5 billion in investment are slated to open from 2016 to 2018. They will add 3,315 residential units and 1,500 hotel rooms, after converting 1 million square feet of commercial space into residential.

Workers are also racing to finish three new hotels that will service the Republican National Convention in July. They will add more than 900 rooms.

Via Stark Enterprises

Longer-term projects include the $395 million Flats East Bank project along the waterfront; the $400 million nuCLEus development that will add 500 housing units; and the Weston Citymark, a $400 million project that ultimately will add 1,200 apartments and 100,000 square feet of retail space.

Unlike Detroit, where two billionaires are essentially driving downtown construction, Cleveland has a variety of developers involved, including some national players. It's a sign that Cleveland is viewed as less risky and much further along in its rebound than Detroit, which has less than 6,000 downtown residents and declared bankruptcy in 2013.

Gilbert's Bedrock Real Estate Services is among the investors making noise in Cleveland. Last month, Bedrock said it had acquired The Avenue Shops at Tower City Center, a three-story retail center with more than 100 retail shops and restaurants, and a multiplex movie theater complex.

Gilbert has been well-known to Cleveland residents since 2005, when he bought the Cleveland Cavaliers, renaming their home court Quicken Loans Arena, or "The Q." One of his subsidiaries also owns The Ritz-Carlton and an attached five-story commercial office building, while another owns a downtown Cleveland casino.

Tower City Center and the hotel are connected to each other, and share indoor walkways to the basketball arena and Gilbert's Jack Cleveland Casino.

Gilbert's entertainment venues have added to the appeal of downtown as a walkable place to live. Neighborhoods like the Warehouse District, which was home to warehousing and distribution terminals for more than 100 years, today are filled with millennials enjoying the ample nightlife options. I walked through it on a sunny Saturday recently and was moved by how it is bordered by some of the city's most prominent skyscrapers, including iconic buildings like the 17-story Rockefeller Building, a lasting symbol of how the oilman helped build Cleveland into an industrial powerhouse.

·Property Lines archives [Curbed]
·Detroit's Billionaires Hope to Change Downtown with Development Spree [Curbed]