The Shiny Rustbelt: Downtowns along 'Rustbelt' Evolve as Cities' Economies Diversify and a Generational Shift That Calls for Urban Living and Working Conditions

By Hunt, Kristin Gunderson | Journal of Property Management, November-December 2013 | Go to article overview

The Shiny Rustbelt: Downtowns along 'Rustbelt' Evolve as Cities' Economies Diversify and a Generational Shift That Calls for Urban Living and Working Conditions


Hunt, Kristin Gunderson, Journal of Property Management


Several major cities in the "Rustbelt" are looking a lot less rusty thanks to burgeoning development especially in downtown areas attractive to a younger workforce.

In fact, Detroit, Pittsburgh and Cleveland were all recognized by Forbes for having the nation's top "Emerging Downtowns" in March. While the markets aren't necessarily booming, they range from improving to solid, and investors are taking notice.

MOTOR CITY STALLS, HOPES TO RESTART ITS ECONOMIC ENGINE

It's no surprise that Detroit--built on the American automaker industry that failed during the Great Recession--is struggling. The city filed for bankruptcy in July, the largest municipal bankruptcy ever in the United States.

Marvin Perlin, CPM, member of the Signature Associates Advisory Services Division in Southfield, Mich., said he hopes the bankruptcy will move the city in the right direction, rather than set the city back yet again.

"I think the bankruptcy will be an opportunity for the city to clear itself of the debt that has been burying it for many years," Perlin said.

Overall, the Detroit Metropolitan area's retail vacancy rate was 10.4 percent in the second quarter of 2013, according to CBRE's second quarter report, Detroit Retail Market View.

Metro Detroit's office market occupancy rate was 80.9 percent during the second quarter, while Detroit's Downtown office occupancy rate was 82.8 percent, according to the Metropolitan Detroit 2013 Q2 Office Report, from Friedman Integrated Real Estate Solutions.

Bright spots in the Detroit economy and real estate market do exist, Perlin said, thanks to a surge in high tech jobs and startups; increasing professional services jobs related to the automotive industry; and--per-haps more than anything else--an infusion of capital from billionaire Dan Gilbert, founder of Quicken Loans Inc.

Gilbert's Rock Ventures, the real estate arm of Quicken Loans, owns or controls 30 buildings or about 8 million square feet of real estate in the city--most of which is being renovated or converted to mixed-use properties with ground-floor retail and multifamily housing or offices above.

"[Dan Gilbert] has been very successful," Perlin said. "Many of his properties are 100-percent leased. He is moving downtown forward almost singlehandedly."

Gibert's investment, along with increasing stakes from large national investors, has mostly been concentrated in a three-square-mile area including the waterfront, Downtown, Midtown and New Center. For instance, the Friedman report highlighted a plan for a $60-million-mixed-use project along Detroit's riverfront.

"Despite the focus on Detroit's chapter 9 bankruptcy, private investment in the core CBD continues to draw in new businesses and investors alike," according to the Friedman report.

CLEVELAND'S DOWNTOWN MARKET IS ROCKIN' AND ROLLIN'

Home to the Rock and Roll Hall of Fame, Downtown Cleveland is experiencing a resurgence of new development, too, said Kenny Coven, managing director of Asset Services at CBRE in Cleveland.

"There has been a renaissance in the downtown area," Coven said. "It's become a vibrant downtown. There is a lot of energy and nice things happening."

That energy stems from the new $465 million Cleveland Convention Center and Global Center for Health Innovation, according to Marcus and Millichap's Apartment Research Market Report for the third quarter of 2013 for the Cleveland area. …

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