Why The Cincinnati Renaissance Is In High Gear
People who have lived in Cincinnati more than a few years remember it as a declining market, hit hard by industrial contraction and competition from Sun Belt upstarts. That Cincinnati is gone, said the speakers at Bisnow's first Cincinnati State of the Market event recently.
The Cincinnati renaissance is building on the area's central location, its solid CRE fundamentals, and its educated workforce. Of the 1.3 million or so workers in the region, about one-third hold bachelor's degrees.
Hamilton County Commission President Todd Portune, elected to his current position in 2000 after eight years on the Cincinnati City Council, said larger companies are looking for incentives, but what they really want is a place in which to grow their workforce. Cincinnati offers that.
"They want to be part of a city that looks like it's headed into the future, and that's the kind of urban area that we're becoming. We're in the midst of a positive upswing. We've had enough sustained growth that we can be bold in our thinking when it comes to the future of Hamilton County."
There are challenges, the commissioner said.
"Lack of an integrated, multimodal regional transportation system is a key challenge for the Cincinnati area. Public entities in the region need to come together behind a plan, one that needs private support as well. We need a three-state, eight-county system."
Another challenge, especially in attracting new companies to the Cincinnati area, is the relative lack of shovel-ready sites, Portune said.
"In 2015, there were 64 businesses who wanted to set up shop in Cincinnati, but who were left wanting because of a lack of sites. Either they weren't shovel-ready or access was too difficult. It's something the region needs to address."
Neyer Properties President and CEO Dan Neyer, who has developed more than 3,000 acres and 500 buildings totaling $1.5B, said there have been improvements in Over the Rhine, on both sides of the river, in the opening of breweries and more.
"We rank as an up-and-coming city," he said.
For attracting more businesses, incentives are important, but intangibles are often more important.
"People are working harder and longer than before, so it's important for a city to have recreation and arts and culture. It's important for a city to be fun."
Previously, not many would have called Cincinnati fun, Neyer said. But now it is.
"Cincinnati is fun. That's an important factor in attracting millennials and the businesses who employ them."
What Cincinnati needs and does not have are international flights, Neyer said.
"The situation is better than five years ago, but it still needs to improve. It's very difficult to attract foreign investors and companies to locate in a place that doesn't have strong air connections overseas."
City of Cincinnati City Manager Harry Black, who came to that position in 2014, said one of the main strengths of Cincinnati is its affordability to companies and their workers who are considering moving here.
"That's something that's on the minds of companies who might consider moving here from high-cost housing markets on either coast," Black said. "Cincinnati has high-quality housing at much lower prices. It's a definite advantage."
In that way and others, Cincinnati could accommodate Amazon HQ2 or any other large corporation that wanted to relocate to the area, Black said.
"Cincinnati is [an] up-and-coming city for recent grads, and it's a cost-friendly city for business and a city for finding a job and raising a family. Smart people want to come here."
Black also said people are not the only smart aspects to the region. A lot of investment is being made in smart technology for the city. The City of Cincinnati, for example, is planning a fiber optic ring around the entire central business district, he said.
The second panel discussed the outlook for commercial real estate in the Cincinnati market. Most property types are hot now, but continued success depends on attracting and retaining cutting-edge companies.
Northern Kentucky Tri-County Economic Development Corp. President and CEO Dan Tobergte said retention is as critical as attracting new companies.
"Toyota moving to Plano was a loss, and that happened for various reasons involving the consolidation of three sites as much as anything about the Cincinnati market. But at least Toyota left behind the Erlanger facility, which will be a campus that helps attract another user."
Putting together the bid for Amazon HQ2 took up a lot of the third quarter for Tri-ED, which teamed up with Ready Cincinnati, Jobs Ohio and the Kentucky Cabinet for Economic Development to fashion the proposal.
"That's something that had never been done before. It was a tremendous, cooperative learning experience. We're a lot stronger as a region for it," Tobergte said.
The Catalytic Fund President and CEO Jeanne Schroer said there is a lot of demand in northern Kentucky for single-family and multifamily housing, as well as smaller officer space in renovated buildings, and new office space in urban settings. Getting sites ready for development is a long, complicated process.
"Attracting jobs is about much more than incentives — office users ask about housing and amenities. Recently, one potential large-space user in northern Kentucky wanted to know about what was being done in placemaking."
Schroer said the Amazon HQ2 effort improved the region as a competitor.
"The region will be more successful as different entities work together. Cincinnati can't stand on its own, and northern Kentucky can't either. Many entities worked together on the submission to Amazon. It's a good model. That multi-entity, multistate approach can be used again."
Terrex Development & Construction principal and co-founder Tom Rowe said Mark Twain was wrong.
"He said that when the end of the world came, he wanted to be in Cincinnati, because it's 20 years behind everywhere else. That might have been true once, but now we're closing in on zero years behind everyone else."
Growing companies now want to be in urban areas, and that is good for established urban areas like Cincinnati, Rowe said. Now it is up to Cincinnati to show the world that it is an up-and-coming place.
"Another thing we think about is the cycle — where are we in the real estate cycle? Everyone's waiting for the next shoe to drop, or are we in a period of sustained growth? We can't say for sure, but the fundamentals are stronger than in 2008, and debt is still harder to get," he said. "Projects and underwriting are more solid."
CBRE Managing Director Kevin Schutte said that, in commercial real estate, keeping talent is getting more challenging, because of competition for the best people. Even so, he said it is an exciting time to be in real estate in Cincinnati.
"It's an active time. In the industrial side, the market's on fire — this year there will be 5M SF of absorption, a record high, and record rents, approaching $4/SF, despite all of the development going on."
One question for the industrial market is how far development can be from the city center and still attract employees.
"That dynamic is driving demand for infill sites," Schutte said. "Regional and national developers are looking for those sites, and the struggle for them is fierce."
In the multifamily market, Schutte said, more than 2,400 new units are hitting the market this year.
"Over the last 30 years, 1,600 was the average per year, and we're still not keeping up with demand. Cap rates are going down a little, and that's without institutional players looking to buy here — yet."