CITY HIGHLIGHT, AUGUST 2006

CINCINNATI CITY HIGHLIGHTS
Melissa Williams, Andrew Sellet, Thomas Banta and Debra Vicchiarelli

Cincinnati Retail Market

In Cincinnati, a $42 million renovation of Fountain Square (above) is being counted on to improve the retail market in the city’s central business district.

Fortunately for retailers, consumers are still spending, so there’s cautious optimism as the market heads toward the all-important year-end finale.

Development in greater Cincinnati continues against this backdrop but at a more restrained pace than just a few years ago. Big box stores continue to drive activity, as major discounters, in particular Wal-Mart, expand their presence and the competition responds.

Additionally, the regional malls are adapting to new shopping competition, namely lifestyle centers, and changing consumer preferences. Adopting the “if you can’t beat them, join them” philosophy, updates include streetscape appearances and more retail and entertainment offerings, the latter of which includes successful restaurant chains.

The central business district (CBD) is also undergoing a retail rally, with the $42 million Fountain Square renovation well underway. To date, restaurants have been drawn to the project with local restaurant Nicola’s rumored to be taking the Pavilion space on the square along Vine Street. McCormick & Schmick’s is building at the corner of Fifth and Vine, and rumor has it that Morton’s may relocate to this area.

While these restaurants are bringing new life to the area, Jos. A. Bank was the only retailer to open a store downtown during the year’s first quarter. But city leaders are optimistic that Fountain Square, the Great American Ballpark and new residential development will further establish a beachhead and need for retail in the CBD.

Wal-Mart is forging ahead with its aggressive expansion throughout greater Cincinnati. Three new Wal-Mart Supercenters have already opened this year in Fairfield Township, Forest Park and across the Ohio River in Florence, Kentucky. The world’s biggest retailer also has six more of its larger format stores under construction or planned in the next year, which would run its Supercenter store count to 17 in Cincinnati. And it may not be finished, as additional proposed sites are rumored.

While Target continues to expand in the area, albeit at a slower rate, Wal-Mart’s aggressive expansion is causing ripples more amongst the area’s leading grocery store chains. Hometown-based Kroger is fighting back with the first of its area’s massive stores in Anderson Township. The 104,000-square-foot store opened with a bang last year, offering expanded grocery selections as well as jewelry and a Starbuck’s Coffee. A second super Kroger will follow in the fast-growing suburb of Liberty Township. Expected to open in the third quarter, Kroger will relocate from a 50,000-square-foot store into a 112,000-square-foot supercenter.

While these stores fight for consumer spending on groceries and more, three home improvement chains are battling. Lowe’s Home Improvement Warehouse and The Home Depot continue to add to their store counts. Menard’s will be the third retailer looking to sell its share of hammers and nails when it opens its first home improvement store in the Cincinnati area. The store will be in northern Cincinnati, in Vandercar’s proposed development in Fairfield Township at Bypass 4 and Bypass 129, which will be anchored by Meijer.

As lifestyle centers gain favor, regional mall owners have taken notice. General Growth Properties showed that its streetscape changes at Kenwood Towne Centre do make a difference. The modifications attracted big names — Maggiano’s Little Italy, the Cheesecake Factory, Pottery Barn, Restoration Hardware and Ann Taylor Loft — to one of Cincinnati’s top regional malls.

CBL & Associates Properties followed suit on a lesser scale with Eastgate Mall in Union Township. Other malls with plans to redevelop with streetscape improvements and an enhanced entertainment environment include Northgate Mall in Colerain Township, Tri-County Mall along the Interstate 75 north central beltway and Florence Mall in northern Kentucky.

Plans for more lifestyle centers are moving forward as well. Jeffrey R. Anderson Real Estate, a local developer and the area’s pioneer for this concept, has three more projects in the works. In Mason, a 150,000-square-foot, mixed-use component will be added as the second phase in the Deerfield Towne Center; the redeveloped Crestview Hills Town Center opened last October, turning the former regional mall into a lifestyle center; and the long-anticipated third phase of the Rookwood projects, Rookwood Exchange, is still battling through the Supreme Court to resolve issues with eminent domain. The multi-use project will include 400,000 square feet of retail, 400,000 square feet of office, a hotel and a large residential component when it comes online.

— Melissa Williams, senior associate, and Andrew Sellet, retail specialist, specialize in retail investment and leasing in Colliers Turley Martin Tucker’s regional office in Cincinnati.

Cincinnati Multifamily Market

During the past 12 months, multifamily sales, specifically riverfront condos, have accelerated greatly. A year ago, the market averaged 285 sales per quarter according to Michael Dinn, president of Dinn Focused Research. Today, the market averages 350 sales per quarter, up approximately 23 percent year-to-year. The key driver is a combination of pent-up demand and burgeoning product availability.

Cincinnati has lagged behind coastal and sophisticated interior markets, which saw multifamily activity increase as early as 5 years ago behind the migration of empty nesters back to the urban core and into luxury condominiums. Cincinnati saw this trend emerge only 18 months ago as the first rehabs became available. The first of these was Park Place at Lytle, developed by Miller-Valentine. Once a printing and corporate training facility, Park Place has been redeveloped into 111 luxury loft condominiums. Park Place at Lytle sold out quickly and has helped inspire additional multifamily developments. Other rehabs include the American Building, an 18-story high-rise that has been redeveloped into a condominium tower housing more than 40 homes and is almost completely sold out; and McAlpin On 4th, a 64-unit loft development on Fourth Street from Madison Marquette, that is also currently under construction in downtown Cincinnati.

The current wave of new condominium construction began in earnest in Cincinnati approximately a year ago with three properties on the southern shore of the Ohio River. The most luxurious of these, The Ascent at Roebling’s Bridge, was designed by architect Daniel Libeskind. The 22-story structure is located in the heart of the city, on the south shore in Covington. The Ascent offers 64 condominium units and eight one-of-a kind penthouses. The building is currently under construction and was more than 50 percent sold out within 4 months of opening sales. Further to the east, The Ackerman Group is building Harbor Greene, an $80 million, two-building mid-rise development, across the river in Bellevue, Kentucky.

Recently, the rate of new project announcements has begun to accelerate. In total, more than 10 projects have been announced representing more than 2,000 new multifamily units during the next 5 to 10 years. These projects range from loft-style apartments to more high-end condominiums. Further evidence of the robust multifamily market is the recent emergence of apartment conversions, which are just now taking hold in the greater Cincinnati area. 

Encouraged by the growing multifamily market, urban retail and office developments are following the multifamily growth. The increase in activity across all sectors signals a rebirth for Cincinnati’s urban center. While the project pipeline grows, the region still has an abundance of developable land and market demand for additional development.  Multifamily announcements are just beginning to happen outside the urban core with three new projects announced in surrounding suburbs. Clearly, multifamily development will be a driving force in the Cincinnati real estate market for the foreseeable future.

— Debra Vicchiarelli is chief marketing officer of Corporex, a Covington, Kentucky-based developer n the Cincinnati area, Kentucky and Colorado.

Cincinnati Office Market

In the last year, 41 companies have either moved to or significantly expanded in the greater Cincinnati market  — that number is almost twice the national average. The growth has created more than 2,909 new primary industry jobs, making 2005 a really good year by any standards. But the numbers also represent an ongoing trend. In the past 20 years, 428 companies have moved to greater Cincinnati/Northern Kentucky, creating more than 41,000 new jobs.

Why is this market such a hot spot for growth? For one, it is simply pro-business. State, county and city governments are proactive, doing everything they can to attract new companies and help the businesses that are already here to succeed. For example, The Kentucky Economic Development Cabinet offers 19 different assistance programs and has a regional office to help businesses apply.

Another reason for the area’s popularity is location and access. It offers several large master-planned communities with diverse office, warehouse and showroom availabilities within minutes of the Cincinnati/Northern Kentucky International Airport. The airport has almost 500 daily flights, and in 2005 it served more U.S. cities than all but two other airports in the country.  That distinction makes a big difference for area companies.  For example, Integrated Energy Technologies moved to The CirclePort Master Planned Community in Erlanger in 2005.  In 1 year, the company experienced a marked increase in the efficiency of its employee’s travel. In addition, many of the area’s business parks are also located near great residential neighborhoods that offer short, easy commutes.

— Thomas Banta is an executive vice president for Corporex Companies.



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