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Cleveland's downtown transforms through redevelopment, tax credit program

The lobby of the Kimpton Hotel in downtown Cleveland.

The very first electronic traffic light flickered on in 1914 on Cleveland's busy Euclid Avenue. It signaled a bustling, leading city—but somewhere in the following decades the buildings on that street fell into disrepair, leaving vacant, largely obsolete, product. But in 2006, that started to change.

That's when the Ohio Historic Preservation Tax Program began investing in the underdeveloped downtown and helped to reshape the area. In 2015, the program reached a milestone with the completion of its 100th project. The most recent report from 2015 states that more than 9.59 million square feet has been rehabilitated, a total of 141 buildings and nearly $125 million in tax credits issued.

"What's happened is a sea change in both perception and reality, especially in the last 12 years," said Michael Deemer, executive vice president of business development at the Downtown Cleveland Alliance.

Downtown Cleveland wasn't always a place people thought of as clean, walkable and safe—but now that's all Deemer hears from visitors. Residents are happy with the changes, too. During the last six years, the downtown Cleveland market has added more than 2,000 apartments and maintained a 95 percent occupancy rate, according to a DCA report.

"The CBD isn't a 9-to-5 office crowd anymore. It has turned into a 24/7 downtown," Deemer said.

Another 1,100 apartments are expected to come onto the market this year and a total of 3,000 added by 2019, the DCA reported. Those projections include 1,361 apartments in six different buildings that were awarded state historic tax credits.

"There has been a huge amount of residential growth largely fueled by the redevelopment of historic buildings," Deemer said. "Without the historic tax credit, the redevelopment would not have been possible."

In the latest round of tax credits, a total of $22.8 million was awarded to 18 applicants planning to restore 33 buildings across Ohio. One of the projects is the Halle Building at 1228 Euclid Ave. in downtown Cleveland.

The building opened in 1910 as a high-end department store with gold leaf ceilings, marble columns and a terra cotta exterior. The iconic structure will be revived with retail space and a 122-unit residential space on the six highest floors.

The decorative features, elevator lobbies and stairways from the days of the Halle Brothers Co. will be cleaned and repaired. The total cost of the project is $53.5 million. The project was awarded a $5 million tax credit.

The trend of converting out-of-date product downtown is timed perfectly to take advantage of the live-work-play trend. However, it isn't the only contributing factor to the downtown transformation. The regional transit service has worked to better connect areas such as the 6.5-acre Public Square park and University Circle. There's even a free downtown trolley seven days a week.

In the past decade, the Downtown Cleveland Alliance has taken a bold, proactive role in attracting developers, investors and companies. Conor Coakley, a vice president at CBRE with clients like Cleveland Clinic and Drury Hotels, depends on DCA as a valuable resource.

"They've been amazing in expanding downtown Cleveland. I lean on them a lot and they lean on us. They're good partners for us," he said. "It is an organization unique to Cleveland that helps the private sector. There is a certain level of trust we have in them."

There doesn't appear to be any obstacles in the way of development—the government is supportive, capital is readily available, resources are abundant and demand is set to grow. Coakley says the next step involves building up the condo market. Today, Cleveland doesn't have the for-sale market that it should.

"I do think people want to buy. You’re spending X amount on rent when you could be spending that on a mortgage. There is demand to live and own downtown, definitely," Coakley said.

With Cleveland's population expected to increase, the problem won't be demand. Multifamily and office are set to do well, and so is the hospitality sector. Last year, a spotlight was put on Cleveland with the Republican National Convention, NBA Championship series and the World Series drawing herds of tourists to the city. About 1,000 hotel rooms were added, bringing the total up to 5,000.

Most of the significant projects in 2016 were hotels—the Hilton, the Kimpton Schofield Hotel and Residences and Drury Plaza Hotel. The Kimpton, a late-Victorian style building, and Drury, formerly the Cleveland Board of Education Building, were both historic redevelopment projects.

One upcoming project that Deemer is excited to see is the 1.4 million-square-foot Huntington Building, the former location of Huntington Bank, and site of the largest bank lobby in the world. Construction began at the end of 2016 to build out a Hilton Curio hotel, a bar, a rooftop club, athletic club, 600 apartments, about 400,000 square feet of office space and retail.

Even though many large projects have been snatched up by developers, Deemer says a lot more are on the horizon.

"There is still a large supply of historic properties that need redevelopment and investments," said Deemer.

The city's downtown area is on its way up with a lot of runway left. Surface parking lots and getting projects through the pipeline on time will be the next challenges but all the advantages are on Cleveland's side.