By: Andrew Batson, Director of Research, JLL
While cities spread throughout the Heartland are still making their comeback, the economic and investment outlook is promising according to our new research, Full Circle. The report takes a deep dive into the growth and development occurring in each of our markets, including Ann Arbor, Cincinnati, Cleveland, Columbus, Detroit, Grand Rapids, Louisville and Pittsburgh.
So, what did our research find?
Cities across the region are in the middle of a major renaissance as reurbanization continues to draw people, business and investments toward the downtown areas.
1. Young Professionals Gravitate Toward the Urban Core, Creating Need for More Multifamily Development
The face of the urban cores is changing, with the majority of each market’s downtown population made up of the millennial generation (20- to 36-year-olds), followed by generation Z (0- to 19-year-olds).
As these younger generations flock downtown, the need for more multifamily development is increasing. Each market has experienced positive population growth since 2000. What’s more is residential population has also posted impressive numbers in each market, most notably in Detroit with a downtown population of 37,700 followed by downtown Pittsburgh with 33,000.
Downtown Detroit, specifically, is seeing a boom in multifamily development. Nearly 8,000 multifamily units are either planned or currently under construction. The city’s downtown population has jumped by nearly 5,000 people since 2010.
Similarly, both metro and downtown Cincinnati follow closely behind Detroit, with a residential population of 22,900 people. Because the city has a large corporate community of 10 Fortune 500 companies, millennials have gravitated toward its urban core for the live-work-play lifestyle.
2. Downtown Economies Are Expanding and Diversifying
So, what’s driving these young professionals toward the urban cores? The opportunity for a live-work-play environment. In response, many companies are putting focus back into downtown areas, making them economic hubs once again.
For example, downtown Ann Arbor is proving it’s much more than just a college town. Having the University of Michigan nearby not only serves as the city’s largest employer, but has also attracted big-name companies to cash in on the excess of talent available.
Google developed its new corporate campus near the university’s North Campus just last year. Between its Ann Arbor and Birmingham offices, the company has nearly 400 employees. Other major companies in the area include DTE Energy and Barracuda Networks.
Also booming with business development is Grand Rapids, which takes the spot as the fastest growing metropolitan area in Michigan. The city recently retained many tenants, notably Spectrum Health—the city’s largest employer. Grand Rapids has quickly become a prominent hub for healthcare, higher education and the brewing industry, which attracts both young professionals and investors to the region.
Each market in the region has also retained and attracted a number of office tenants. Downtown Cleveland and Pittsburgh take the lead with 70 tenants each.
3. Private and Public Investment Allows Cities to Reinvest in Themselves
More than half of all downtown investment in each market consists of private investment. But what does this mean for the cities themselves?
Because much of private investment is focused mainly on residential and mixed-use developments, many developers are incentivized by state and federal tax credits. Instead of new development, many are converting obsolete properties into multifamily and hotel sites to accommodate growth.
Louisville, for instance, is expected to continue in a major growth phase with more than 80% of development planned or under construction. Public investment is focused on the 21 education, infrastructure and public space projects, while private investors seek out alternative property types.
Columbus, too, is in a period of rapid growth when it comes to downtown development. Between 2012 and 2016 there were 77 project completions; however, the majority of development is still either under construction or in the planning stages. Private investment makes up the majority of projects, focused heavily on multifamily and mixed-use developments.
This private investment has increased local taxes, which allows these markets to then reinvest in themselves for infrastructure, transit and public space improvements.
While these population, business and investment trends are occurring across the region, there are still many unique factors driving energy back into downtown in each city. To learn more about these trends and see how your city stacks up against others, download the full report.
About the Author
Andrew Batson is a Director of Research in the Great Lakes region of JLL. Andrew is responsible for building and continuing to elevate a best-in-class research program that differentiates JLL and drives a competitive advantage in the marketplace through market expertise, analysis and insight. Connect with Andrew on LinkedIn.