Business Outlook 2014

By Dennis Read
Photos by Ryan M.L. Young
Illustration by Yogesh Chaudhary

Growth was a common talking point when Columbus CEO discussed the coming year with local experts in a variety of fields. Central Ohio hospital systems are adding facilities and services. Developers are planning numerous new sites for retail shopping. The Downtown housing market is continuing to expand. Employment numbers are expected to make slow but steady growth. Area colleges are increasing opportunities for students to pursue degrees.

For our annual business feature, we interviewed a variety of Central Ohio professionals to get their thoughts on what 2014 holds for five key topics: employment, real estate, healthcare, retail shopping and education.

Outlook: Employment

Employment growth will continue in 2014, but likely not as fast as anyone would like.

“We’re going to putter along at pretty much the same rate as 2013,” says Bill LaFayette, owner of Regionomics. He notes, however, that Columbus has fared “much, much better than the average. We have made back all the jobs lost during the (Great) Recession, plus 20 percent. And we’ll continue to grow better than the average.”

Jung Kim, director of research at the Columbus Chamber of Commerce, notes that in mid-2013 the city passed the 50,000 milestone for net new jobs since January 2010. “We’re striving to be on pace for 150,000 new jobs by 2020,” he says. “But it will be tougher to reach that goal.”

LaFayette says that the slower economy of the state and nation “puts a ceiling on our growth.”

Kim agrees, saying, “The national pattern has been two steps forward, one step back. We’re always fighting the headwinds.”

Chris DeCapua, owner of Dawson Careers, sees a definite upturn in job opportunities in the coming year. “We’re hearing from employers that we haven’t heard from in a long time,” he says. “We are short of people on all levels—from IT to forklift operators.”

His major problem is finding qualified candidates. “There are an awful lot of people who are not hirable,” he says.

Kim anticipates local job growth in manufacturing (especially at Honda), logistics, science and technology, business services, and financial services. He sees a significant jump in venture capital investment in Central Ohio, citing the opening of Drive Capital, headed by Mark Kwamme and Chris Olson, as a big boost.

“What Drive Capital is doing is a big deal,” Kim says. “Compared to Silicon Valley, this is an undercapped market. The activity from Drive Capital can have a multiplier effect.”

Jose Rodriguez, director of communications for the Columbus Public Health Department, says that the Affordable Care Act should generate increased employment. “As Medicaid and health insurance policies cover more and more people,” he says, “the demand for medical services will grow along with the need to supply it to residents.”

According to the Health Policy Institute of Ohio, this demand will create over 27,000 new jobs in the state, ranging from administrative services to workers at assisted living facilities.

Kim says that the key to growth for local companies is “serving a national and global market.” He cites Jeni’s Ice Cream as an example, noting also the expansion of Nationwide and Huntington Banks into new markets.

What could upset this outlook?

“A reprisal of the federal fiscal battles,” says Kim. “The recent agreement to end the shutdown provides funding to keep the government running through January 15 and allows borrowing to continue through February 7. It wasn’t a long-term agreement as much as an extension for further negotiations.”

Beyond that, LaFayette says, “an unknown unknown. It could be something geopolitical. Or a major supply disruption. Or something positive—like improved consumer confidence.”

Columbus MSA employment compared to state & national employment in the past 12 months:
Columbus MSA employment increase= 0.4% (June-Aug. 2013)
Ohio employment fell 0.1 percent (June-Aug. 2013)
U.S. employment increase= 0.2 percent (June-Aug. 2013)
Columbus MSA employment increase= 16,800 or 1.8% (past 12 months)
Ohio employment increase= 0.6 percent (past 12 months)
U.S. employment increase= 1.6% (past 12 months)

Source: Current Employment Statistics, U.S. Bureau of Labor Statistics. Seasonal adjustment of MSA employment by Regionomics LLC via Columbus 2020 Quarterly Economic Update, 2013 Q3

Outlook: Real Estate

Columbus developers predict Downtown residential construction will continue steadily throughout 2014. The Downtown apartment and condo market continues to be extremely strong.

“Rents are at an historic high,” says Ed Joseph, vice president of CB Richard Ellis. This indicates that demand is outstripping supply.

As Downtown revitalization continues, residents are returning to the central city. “Columbus has a decent boom going,” says Jung Kim, director of research at the Columbus Chamber of Commerce.

Increasing the number of people who live downtown has always been a top priority for the Columbus Downtown Development Corp., says Guy Worley, CEO and president of the CDDC and Capitol South Community Urban Redevelopment Corp.

“The public and private sectors joined together to build the two great amenities in the neighborhood—Columbus Commons and Scioto Mile. Since these parks were built, we’ve seen a private sector residential investment estimated at $200 million,” he says.

The investment continues to grow. Established apartment complexes are expanding. Lifestyle Communities is building Lifestyle Community Annex 2 on the site of the Trautman and Hub buildings, adding another hundred apartments to the Annex neighborhood. Neighborhood Launch will continue growing west and north, adding another 24 condo units, and Bishop’s Walk II will double its rental apartment units to reach a total of 258. Both are Edwards Company projects.

Highpoint on Columbus Commons, the six-story apartment complex comprising 301 units built by Carter of Atlanta, will be ready for full occupancy by mid-March. Connor McNally, Carter’s chief development officer, says that a restaurant will move in on the ground floor sometime in 2014. Other restaurants and shops, yet to be named, will fill the rest of the 21,000 square feet. While Carter has nothing else currently planned for downtown Columbus, McNally says the developer is “looking for other opportunities.”

Construction will begin this year for 250 High, a 12-story, mixed-use, high-rise by Kaufman Development, with completion anticipated in April 2015. The building, located between Rich and Main streets, will have 120 apartments on its upper six floors and office and retail space on its lower six floors.

The building is already attracting tenants. The digital marketing agency, Resource, will occupy 60,000 square feet in 250 High. Brett Kaufman, founder and CEO of Kaufman Development, says that preleasing of apartments will start in late spring /early summer.

Kaufman credits public-private partnerships for a renewed downtown. Mayor Michael Coleman says those partnerships will move forward in the coming year. “We are breaking ground on the Scioto Greenways and moving forward on the Scioto Peninsula project that includes the new zoo location and Veterans Memorial,” says Mayor Coleman.

Kim says that these actions provide “a foundation for future activity and for downtown to grow.”

Coleman is “incredibly supportive,” Kaufman says. “I give him a tremendous amount of credit.”

The continuing construction of downtown residences reflects the growing vitality of the area. “Downtown,” Edwards says, “is on the verge of getting really better.”

Taylor says that the steady growth of the metropolitan area, coupled with job growth, is creating a momentum for Downtown. More people, especially young professionals and empty nesters, are choosing to live there, adding greater numbers each month to its current population of 6,200.

“We think Downtown Columbus housing is still underserved,” Kaufman says.

Joseph adds, “There’s not so much construction that it’s going to overbuild.”

Edwards, who has developed Neighborhood Launch at a measured steady rate, notes, however, that gradually increasing mortgage interest rates “will temper the growth.”

Outlook: Health Care

The number one item in healthcare for 2014 is the Affordable Care Act.

Jose Rodriguez, director of communication for the Columbus Public Health Department, says it “will change the healthcare landscape in our region, state and nation. For the first time in history, thousands of individuals, families and small businesses will now be able to have health insurance that fits their budgets and meets their needs.”

Rodriguez adds that the expansion of Medicaid will provide health benefits to 275,000 low-income residents.

A major effort to promote good health and preventable medicine is the New Albany Center for Healthy Living, popularly known as the Core, now under construction and due to open in November. The brainchild of local resident Phil Heit, the facility, costing $13 million and containing 55,000 square feet, will be staffed by medical providers from the Ohio State University Wexner Medical Center and Nationwide Children’s Hospital, as well as personal trainers and dieticians.

“This won’t be a fitness center,” Heit says. He explains that members will be given a full medical workup and genetic testing to determine any health risks and to establish a basis for an exercise and dietary regimen. Members will be issued a thumb drive that fits into the exercise equipment and that will program the workout tailored to them.

“We’re really personalizing everything,” Heit says.

Although local residents and employees, numbering nearly 20,000, will dominate the membership in the Core, Heit stresses that anyone can join. Different membership options will be available. Fees have yet to be set.

Heit says that while aspects of the Core can be found elsewhere, “this is something that’s never been done before on this scale. We intend to measure our results and establish benchmarks to determine a healthy community. We want to establish a national model by which other communities can build their own health campus.”

In Westerville, St. Ann’s Hospital, a member of the Mount Carmel Health System, is opening its new patient tower this month. The tower completes the hospital’s transformation into a regional medical center, offering a full range of cardiovascular services. Janet Meeks, president and COO of Mount Carmel St. Ann’s, says the $120 million investment in expansion “is meeting an unmet need and saving lives” for those living in northern Franklin and southern Delaware counties.

In Grove City, Mount Carmel West Hospital is opening this month a facility containing an emergency room, medical offices and ambulatory services for the second fastest growing community in Central Ohio. Sean McKibben, COO and president, says that the challenge of all providers of medical services is to make health care accessible and affordable. The Grove City facility is intended to serve those ends.

Another effort to achieve those goals is an affiliation between Mount Carmel and the OSU Wexner Medical Center promoting collaboration in clinical care, research and medical education. Collaborative activities between the systems, begun in mid-2013, include an integrated OB/GYN residency training program, clinical rotations at Mount Carmel for OSU medical students and shared physician coverage for maternal-fetal medicine.

Outlook: Retail

Central Ohio’s retail landscape could change dramatically if proposed development occurs.

Moving from 2013 to 2014, the pulse of retail business has slowed. Chris Boring, of Boulevard Strategies, says that “consumer confidence is currently way down,” a reflection of the continuing slow economic recovery and the recent federal government shutdown. “Consumers are not going to spend a lot of money if they don’t have to,” Boring says. Jung Kim, director of research at the Columbus Chamber of Commerce, says that during the past three or four years retail businesses “have been playing defense. But now they’re looking at new projects.”

Boring says that, looking ahead, signs are promising. He notes that the store vacancy rate is less than 10 percent, the lowest in a decade. Easton, rated as one of the 10 best shopping centers in the world by Shopping Centers World magazine, “is the most exciting thing in Central Ohio,” he says. Citing its current construction of Easton Gateway, a 54-acre addition at Stelzer and Morse roads, which will bring REI, Dick’s Field & Stream and other high-end retailers to the mix, Boring quips, “Easton reloads while other locations rebuild.”

Dublin will experience a huge boost in retail with the completion of Bridge Park, a $300 million mixed-use project near the city’s historic center. Construction will begin in 2014, to be completed in 2018. Boring calls the project transformational. “Dublin never had a downtown,” he says. “This will give it one.”

With the possibility of three outlet malls coming to the area—two at the Rts. 36/37 interchange off I-71 and one on Beech Road off Rt. 161 in New Albany—new shopping areas may well emerge before long. But not this year.

Kim says that “there is good reason to be concerned that so many projects in the pipeline might be too much.” Boring is dubious about the prospects of the New Albany outlet mall, which seems too far off the beaten path. But he doesn’t rule out its possibility. “Les Wexner might invent something that hasn’t happened before,” he notes.

The Short North will be another retail growth area in 2014. Boutiques and other smaller stores, anchored by restaurants, are increasingly dotting High Street. Apartment construction in the Short North will spur retail activity. Hubbard on High, a $25 million project by Wagenbrenner Development with 72 apartments, has just opened. Jeffrey Place that contains 276 attached single-family units is under construction and expected to be finished late in 2014 or early in 2015. Anthropologie will occupy two floors of The Joseph, a $65 million Pizzuti Construction project due to open early in 2015.

The retail development along Rt. 23 between Columbus and Delaware “never ceases to amaze me,” Boring says. “They’ve overbuilt. The market is saturated.” Kim notes that Tuttle Mall “has been losing some of its luster over the years. It’s not the destination that it has been.”

The recent proliferation of food trucks will continue. Boring points out that the cost of operating a food truck is only 15 percent of running a full-service restaurant. Food trucks are “enormously popular with millennials,” Boring says.

Boring predicts that in the future the most dominant retailer won’t be Walmart or Costco. It will be Amazon. Citing a yearly rate of 15 percent growth in e-commerce, he said that consumers will do more of their shopping on-line. That will diminish the need for new construction. “It won’t be long before we’ll have all the retail space we’ll ever need,” he says.

Hot Downtown Retail Submarkets

North High Street
Annual retail spending potential=$140 million /year
Retail demand generators:
--59,800 daytime workers within a quarter mile
--20,000 COTA riders/week average
--200,000 unique overnight visitors/year

Gay Street
Retail spending potential=$135 million/year
Retail demand generators:
--41,200 daytime workers within ¼ mile
--1,300 residents within walking distance
--550,000 theater patrons per year

Lynn & Pearl Alleys
Retail spending potential=$85 million/year
Retail demand generators:
--45,700 daytime workers within ¼ mile
--1,200 residents within ¼ mile
--1,125 hotel rooms within walking distance

Capitol Square
Retail spending potential=$85 million/year
Retail demand generators:
--44,700 daytime workers within ¼ mile
--1,360 residents within ¼ mile
--80,000 Statehouse visitors/year

RiverSouth District
Retail spending potential=$80 million/year
Retail demand generators:
--35,500 daytime workers within ¼ mile
--800 residents within ¼ mile
--Millions of visitors/year to Franklin County Courthouse complex

Third & Main
Retail spending potential=$65 million/year
Retail demand generators:
--14,000 daytime workers within ¼ mile
--1,530 residents within ¼ mile
--38,000 vehicles through intersection/day on average

Source: Downtown Columbus Retail Submarkets

Outlook: Education

Growing partnerships help students transition from community colleges to four-year universities.

In the aftermath of the November defeat of the Columbus City School levy and reform plan, Alex Fischer, president and CEO of the Columbus Partnership, still is determined to help improve the city’s public schools. “There is a continued commitment from those of us who have worked together during the last 18 months,” Fischer says. “One Tuesday in November is not going to define our community. We in the business community are totally committed. The mayor is totally committed. Everyone agrees that 2014 is going to continue to be a big year. Twenty-five thousand of our kids are attending failing schools. That’s not acceptable.”

Fischer outlines three steps community leaders should take in the coming year. First, continuing community engagement and outreach to secure an understanding of the issues confronting city schools. Second, establishing measures of accountability and defining the work that the school district has to do. Third, identifying issues of leadership and selecting new leaders.

“I would hope personally,” Fischer says, “that we would have a new school superintendent in 2014.” He adds quickly, “(interim superintendent) Dan Good is doing a fine job. He’s a strong contender for the position.”

There are no “quick and easy fixes” to remedy the city’s public school ills, Fischer says. “We need to be committed over the long haul.”

One encouraging development for Columbus and area public schools is the recent $5 million grant from the American Electric Power Foundation to enable students to earn up to 12 college credits from Columbus State Community College while they attend high school. Columbus State president David Harrison says the program, geared particularly to science, technology, engineering and math (STEM) courses, will start at West High School in 2014. “The program will create opportunities for high school students to take college courses as soon as they’re ready,” Harrison says.

For those students who aren’t ready, an intervention program in math and reading will be in place. In middle schools a program in career awareness will introduce students to careers in science and technology.

Columbus State also is establishing partnerships with Ohio Wesleyan, Otterbein, Capital, Ohio Dominican, Franklin, Ohio and Miami universities to mesh coursework and programs of students transferring to bachelor degree-granting institutions. This formalized action began in 2011 with the Preferred Pathway program Columbus State initiated with Ohio State University. Harrison says that these partnerships will enable students in good standing to have guaranteed admission to these institutions “with no loss of credit and no guesswork.” The savings in tuition costs are considerable, with Columbus State charging about a third of Miami’s in-state tuition.

A third development at Columbus State is intensive modular instruction in applied fields. Harrison says that this program started in 2009 with hands-on training in logistics for people who had lost jobs during the Great Recession. Of the more than 1,000 people who entered the program, more than 70 percent were successfully placed in the logistics industry. “We’re now taking that same approach in insurance, health care, information technologies, and other areas,” Harrison says. “We want to make sure that our students will succeed in the workplace, and the only way for that to happen is to have close contact with people in the business sector.”

Dennis Read is a freelance writer.