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Published: Tuesday, 6/24/2008

DOWN BUT NOT OUT

City of Cleveland battles poverty, exodus

Like Toledo, city struggles to map revival

BY GARY PAKULSKI
BLADE BUSINESS WRITER
Joseph Marinucci talks with Josh Taylor about downtown Cleveland. Joseph Marinucci talks with Josh Taylor about downtown Cleveland.
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CLEVELAND -- Even as chain stores like Ann Taylor are abandoning downtown's Tower City Center mall, A.J. Ballard has no difficulty selling $35 T-shirts to young shoppers eager to mimic the urban look favored by professional athletes and pop music stars.

"If you have a good concept, you can do phenomenal business here," said the 28-year-old man from Willoughby, Ohio. He helped develop and now oversees Ideal and two other mall boutiques that have attracted a wide range of shoppers from visiting pro athletes to pop star Miley Cyrus.

Since the 1970s, downtown boosters have expended lots of energy determining what to do with failing retail sites.

Now, they say, their efforts are beginning to show results.

READ MORE: Down But Not Out series

Along famed Euclid Avenue in downtown Cleveland, its downtown portion clogged with the corpses of dead department stores and specialty shops, the transit authority is spending $200 million on beautification and improvements to persuade people to move into lofts and apartments being carved from old stores and offices.

In the depressed Flats District, a riverfront area long popular with young partiers, former hot spots like the House of Brews are being razed to make way for an office tower and specialty retail shops. Accounting firm Ernst & Young has signed on as the office building's main tenant.

On tightly packed East 4th Street at Euclid, venues including the House of Blues, Pickwick & Frolic Comedy Club, and Wonder Bar are helping draw crowds to the cozy entertainment zone.

And at the Tower City Center, whose fate has been debated since 2002 when anchor store Dillard's (formerly Higbee's) closed, local shops like Ideal have replaced some national chains including Abercrombie & Fitch.

Today, the center, a former rail station along downtown's Public Square, includes 80 specialty stores, an 11-screen theater, and six restaurants that draw brisk crowds on weekdays.

To address complaints about rowdy young people, the mall prohibits unaccompanied minors after 2:30 p.m. and stations security personnel at regular intervals.

On a recent spring day, a guard saw a youth wearing a sweatshirt with the hood up.

"Excuse me!" she exclaimed, pointing to the apparent rule violation. The youth uncovered his head without complaint.

A.J. Ballard, who oversees clothing boutiques in the Tower City Center mall, said a good concept will succeed. A.J. Ballard, who oversees clothing boutiques in the Tower City Center mall, said a good concept will succeed.
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'Turned the corner'

"We think we have turned the corner and are making good progress," said chief downtown booster Joseph Marinucci, who is president of the nonprofit Downtown Cleveland Alliance.

Bounded by highways, Lake Erie, and the Cuyahoga River, the sprawling downtown is the center of a 303,000-person municipality long derided as the "mistake on the lake."

When Ohio's second-largest city comes up in conversation, somebody invariably spouts off about the day an oil slick caught fire on the river. Never mind that the event lasted 30 minutes and happened nearly 40 years ago.

But like Toledo, Cleveland has struggled with population losses and poverty.

Since the beginning of the decade, the metro area lost 51,000 residents. With slightly fewer than 2.1 million people, it now ranks behind Cincinnati, which has become Ohio's largest metro area.

And, in the city of Cleveland, 27 percent of people live below the poverty line, making the municipality the fourth poorest in the nation, according to a report last year from the U.S. Census Bureau.

But while many people in the city are struggling, downtown is seeing something of a revival, boosters say.

The population there grew by nearly a third to 9,599 between 1990 and the 2000 Census.

Officials predict that downtown residents will more than double to 20,000 to 25,000 in the next few years.

Nearly 3,000 condos and apartments are under way or have been OK'd for historic-preservation tax credits, which will reduce development costs, said Mr. Marinucci of the Downtown Cleveland Alliance.

On the commercial side, there is demand for at least three new office towers, he added.

Just last month, a Cleveland developer announced he will spend $180 million to erect a 21-story skyscraper at downtown's Public Square.

"The office market is seeing a resurgence," agreed David Browning, a downtown expert at CB Richard Ellis in Cleveland.

The overall vacancy rate downtown slipped in late 2007 to just below 18 percent, the lowest in four years, CB Richard Ellis said in a report this year. Vacancies for top-quality space, known as "Class A," fell below 10 percent.

The improved market helped lead to the construction plans in the Flats District, where developers have announced the first privately financed office tower downtown in nearly two decades, real estate agents said.

Proposals are being considered for a new downtown convention center and a merchandise-mart-like facility for physicians and other medical professionals to purchase medical equipment.

Obstacles remain

Yet obstacles to downtown revitalization remain.

From the beginning of the decade to 2005, 353 businesses left the area around the downtown improvement district, a U.S. Census report last year shows.

The improvement district was established by downtown merchants under Ohio law. The area around the district had 4,069 firms, 8 percent fewer than in 2000.

They employed 115,941 people, or 5 percent fewer than the private-sector's downtown work force at the start of the decade. The figure doesn't include government workers.

It is unclear how many people government agencies employ downtown. But U.S. Labor Department reports show that they account for about 155,000 of the 1.1 million workers in metro Cleveland.

Downtown officials concede that the impact of lost businesses and jobs goes beyond those directly affected. For instance, fewer businesses mean fewer janitors and other support personnel.

As many as 10,000 jobs have been lost downtown since 2000, acknowledged Mr. Marinucci, of the Downtown Alliance.

Still, downtown retains four Fortune 500 companies: banks KeyCorp and National City Corp.; paint manufacturer Sherwin-Williams Co.; and Eaton Corp., a parts supplier to the aerospace and auto industries.

And neither job losses nor tougher times have stopped residential developments, said the Downtown Alliance president.

"The question is, 'Can future deals for future projects get tied up by the national foreclosure crisis?' " Mr. Marinucci asked.

So far, he claimed, there is no sign of that.

Avenue District plan

Projects include the Avenue District, a $300 million collection of townhouses, condos, and retail space planned by Cleveland's Zaremba Group developers for three city blocks at 12th and St. Clair streets. The project was announced nearly three years ago, but just 10 units of a planned 600 are completed and 72 are under way.

Spokesman Mandy Barney denies the plan is behind schedule.

"A couple years ago, this probably would have been at a faster pace," she said. "But this project is not affected like our suburban developments. There is still demand for housing to purchase in downtown."

Future construction, she explained, will depend on "when the market picks up and at what pace." Most units are priced at $240,000 to $373,000.

When the last Census was conducted in 2000, downtown Cleveland had 3,818 housing units, 3 percent of which were owned by their residents, according to a Brookings Institution study.

Apartments and lofts - either new construction or office and retail conversions - have been added downtown at the rate of about 500 a year, the Downtown Alliance president said.

Despite growth in the housing market, there is skepticism about other downtown projects.

The Euclid Corridor transportation project will include street and sidewalk improvements, new lighting, and a new style of bus service offering faster trips. The project will cover 10 miles from downtown to suburban East Cleveland.

Backers hope the work will attract developers and tenants for the abandoned buildings along Euclid in the downtown area.

People cutting back

But Sam Narine isn't so sure that will happen.

As he looks out the window of Men's Designer Outlet, which is one of the few remaining retailers on its section of Euclid, the shop assistant points down the street toward a sleek, glass-covered parking garage finished a year ago.

For-lease signs hang in the window of ground-floor retail shops.

"I don't see anyone taking that space," Mr. Narine said.

He fears that the area's sluggish economy will hurt redevelopment of the area.

"It's mainly jobs," he said. "It was worse in the '80s. But people are cutting back a lot."

At Town City Center mall, General Manager Lisa Kreiger has struggled with loss of tenants. About 20 percent of shops have left in recent years.

Merchants depend heavily on downtown workers and tourists visiting the nearby Rock & Roll Hall of Fame and other attractions.

Sales are strongest during the work week, especially over the lunch hour.

Ms. Kreiger is pleased that local entrepreneurs have taken space formerly occupied by chains that have been closing stores nationally and shifting to so-called lifestyle centers from indoor malls. Even so, sales aren't as strong as they once were.

"We are noticing that people are being very conservative," she said. "We are feeling economic pullback."



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