The collapsed housing market put a big dent in the city's plan to build 10,000 units by 2012. But the news isn't all bad.
Almost a century ago, downtown Columbus was teeming with residents. In 1921, the area had a population of 23,000-nearly four times the number who live there today. City blocks were populated with smaller buildings, and industrial and warehouse properties filled the riverfront.
By 1951, Downtown had reached its peak population of 30,000 residents. Parks, government and civic buildings started popping up along the riverfront, and block sizes began to increase. The area was a retail hub for those who lived Downtown as well as the 55,000 people who worked there. Parking lots began to appear, and skyscrapers arrived. And more change was on the way.
An aggressive annexation policy adopted by Columbus dramatically altered both the city and its Downtown. In 1951, Columbus was the 28th-largest city in the United States, took up 39.9 square miles and had a population density of 9,400 people per square mile; today, it is the 15th-largest city in the country, with 213 square miles in land area, but only 3,340 people per square mile.
Newly constructed highways made it easier for workers to get Downtown, but the parking lots commuters demanded came at the expense of housing stock. Between 1950 and 1970, Downtown's residential population plummeted by 20,000; by 2000, fewer than 3,500 people lived there. That's when the city decided to take action.
10 Years, 10,000 Units
In 1995, the Pizzuti Companies announced a bold plan to build a 109-unit upscale condominium development whose units would sell for $300,000 to $1 million. Miranova set a new standard when it opened in 2001, but for a time it and another luxury development-the Waterford Tower, which opened in 1988-stood virtually alone in the Downtown residential landscape.
In 2002, after years of public conversations about the need for more Downtown housing, the Downtown Strategic Plan put it in writing. Mayor Michael Coleman announced an ambitious goal: build 10,000 condominium and rental units in downtown Columbus by 2012, the city's bicentennial.
To help galvanize growth, the city created a district-bounded by Interstate 670, I-71, I-70 and the railroad tracks just west of Franklin County Veterans Memorial-that offered 10-year, 75 percent property tax abatements for creating Downtown housing. Property owners could score a 100 percent abatement by creating affordable housing, converting vacant commercial space, or building in one of several target areas. Other incentives included utility tap fee credits, street and sidewalk improvement funding and housing loan funds.
Those incentives kicked Coleman's plan into action.
"Without the mayor's dedication to Downtown housing, we would not have this project today, nor would we have any other project," says Kyle Katz, developer of the Buggyworks condominium lofts just west of the Arena District. "The tax incentives and the housing incentive fund were the two tools created by Mayor Coleman that made projects like Buggyworks possible."
Other projects came in quick succession. ConneXtions, a loft project at 104 N. Third St., was one of the first office-to-residential conversions. Developer Spectrum Properties needed less than a year to sell all 60 units at the property, which was later renamed 110 North Third. Spectrum went on to convert offices at 221 N. Front St. into the 55-unit EcleXtions Lofts.
Burnham Square, a $28 million condominium complex developed by Nationwide Realty Investors (NRI), featured 98 one- and two-bedroom units. NRI started the project in 2004; condos were priced up to $500,000 and "sold out fairly quickly," says NRI President and Chief Operating Officer Brian Ellis.
‘What Could Harm Us?'
The possibilities seemed endless until developers found the rug pulled out from under them. The nationwide foreclosure crisis in late 2006 led to tighter loan requirements, which made it harder for some buyers to purchase a condo Downtown-or anywhere.
The ensuing housing and financial market meltdowns made an already bad situation worse. Lenders became impatient to earn back their investments. Housing stock outpaced demand. Sale prices dropped. And properties lingered on the market far longer than they had in the past, though federal homebuyer tax credits helped with sales in 2009 and early 2010. As of June, more than 160 condos were for sale Downtown, selling at a pace of roughly four a month, the Columbus Dispatch reported.
During those four boom years, no one imagined anything could go wrong. Andy Schiffman, president of the Midtown Area Real Estate Association, says developers "went after the right design, they went after the right prices. There was loan money. Mayor Coleman kept talking about the comprehensive downtown plan. City Center was still here. Downtown was exciting, the Blue Jackets were still relatively new. There was a lot of hype for downtown Columbus at that time."
"Life was good. We were all sitting pretty during that time," says Donna Carstens, an agent with Coldwell Banker King Thompson and a member of the Midtown association. " ‘What could harm us?' is what we would say. ‘What could possibly harm us?' Well, what could harm us was the financial collapse of the housing market three years ago," she says.
Carlyles Watch, located at 100 E. Gay St., and CityView at 3rd, at 78 E. Chestnut St., were among the higher-profile projects to face serious trouble. In 2007, Carlyles Watch developer Urban Loft Ventures attempted to auction off 36 units to generate cash and provide a pricing benchmark. Only seven sold-for well under the original asking prices of $200,000 to $450,000. Unable to find enough buyers, Urban Loft Ventures ultimately rented out half the building's 54 units.
CityView at 3rd saw high demand early on. In April 2006, Spectrum Principal Bill Shelby told the Dispatch, "we've bumped [up] the price several times, just because the market demand's there. I don't know anybody who's struggling at this time to sell." Three years later, Spectrum turned over a third of CityView's 48 condos to Huntington National Bank to avoid foreclosure. Shelby, who declined to comment for this story, left Spectrum in 2009 for a position with a commercial brokerage and development firm.
"People tend not to be sympathetic to developers, but there are a lot of developers who are part artist, part businesspeople, and they put a lot of their soul in their developments, and it's crushing to not have their developments work out," says attorney Jim Maniace, a partner with Chester Willcox & Saxbe and co-chair of its real estate and land use practice group.
"The downtown market is really tough," Schiffman says. "There are a glut of condos on the market Downtown at every price point, so there is tremendous competition everywhere, and I think people are really scared about what they read in the media. There's no guarantee that things are going to turn around at the end of this year, next year, any time. We just simply don't know."
"I would obviously rather see things be where we were three or four years ago," says Kevin Wood, a board member of the Downtown Residents Association of Columbus and co-chair of the 2010 Columbus Landmarks City Hop. This year's showcase of Downtown housing included only eight developments, down from a record 22 in 2007. "Yes, I'm disappointed that the economy has slowed things down. But as I look at all of Central Ohio and the country for that matter, Downtown sales have not slowed down any more and, in most cases, not as much as other areas."
One of the criticisms of the building boom of the early 2000s was that too few entry-level homes were built in favor of $500,000 units. "Even in successful times, we were probably overbuilding the market at that price point," says Rob Vogt, a partner with real estate market research firm Vogt Santer Insights.
A joint press release issued in February by the city and the Columbus Downtown Development Corp. tried to shine a positive light on the situation: "Through city incentives, 2,542 units were built since 2002, another 2,468 units are under construction or in development, and the downtown population has reversed its 50-year decline, increasing by more than 2,000 since 2003."
Still, Downtown-now home to about 6,000 people-is off-pace to meet Coleman's 10-year, 10,000-unit aspiration. Asked whether the mayor has abandoned that vision, spokesman Dan Williamson e-mailed: "We set aggressive goals, and we continue to look for ways to spur the housing market by putting amenities/infrastructure in place that will spur the housing market and bring people downtown."
Mike Stevens, the city's deputy development director, says tax incentives will continue to play a role. The package "has been an effective tool, and we want to continue to utilize it to continue residential growth in the Downtown."
One recent bright spot has been the Edwards Companies' Neighborhood Launch, a Gay Street condo development. The project, started in 2007, is still developing and selling units. To date, 60 of 300 planned units have been constructed, 14 units are under way and another 28-unit building is ready to go, says Kim Ulle, president of Eclipse Real Estate Group, the development company for Edwards. The project features a variety of floorplans and price ranges ($160,000 to $600,000-plus), green space and on-site parking. "We tried to make this project something special and something different in Columbus," Ulle says.
NRI-no doubt helped by its ability to self-finance projects-continues to see success with its 109-unit Condominiums at North Bank Park, at 330 W. Spring St. The project, which offers views of the riverfront and Huntington Park, includes a new 20-story tower and a renovated warehouse. About 60 percent of the development, priced from the mid-$300,000s to nearly $1.5 million, is occupied.
"We've actually been pretty happy with the way North Bank has performed," says Ellis. NRI expects to sell about 10 units in 2010, "which is a pretty good performance in this market," he says. "We came into this with a patient, long-term view, so we haven't sold out as quickly as we thought. But we continue to sell, and we haven't changed our price-point because we think there's real value there."
Growth in Rentals
Though buying has slowed, the rental market has remained strong. Katz, whose Buggyworks lofts sold out even before construction of the 69-unit development was complete in 2007, says he'll break ground next year to construct 250 rental units. Ultimately, he expects to build 500 or more rental units at Buggyworks. A soft lending market, however, has Katz teaming with a partner to be named later.
"The new market reality means we're too small to take on this development," Katz says. "All you have are a few little guys like me-and there aren't many of us left-and a few very big players. Only the biggest players are getting deals done right now. That's not based on demand, that's based on the ability to access capital."
Real estate agent Carstens says apartments will fulfill an unmet demand. "Certainly we haven't brought in as many homeowners as we wanted to, but that's OK, because what Downtown needed was rentals," she says. "We didn't have rentals and we didn't have entry-level priced housing-and those are the two things that we're sorely lacking Downtown."
"The establishment of a strong rental market is a precursor to what eventually will be a strong market for buying," Maniace says. "There's no denying where the economy is today, but there are people who are finding it desirable to pay rent in excess of $1,000 a month to live Downtown, and with that many people who are affluent and living Downtown, there is certainly a percentage of them who are going to become homebuyers."
In response to market realities, Lifestyle Communities' Annex at River South, at Front and Town streets, converted 76 condos into rentals in fall 2009-adding to the 137 apartments already planned for the project.
NRI also has apartments in its portfolio, including the popular Arena Crossing, a 252-unit building, and the 232-unit Flats on Vine under construction in the Arena District. Daimler Group, meanwhile, is working on a 68-unit apartment building near the Columbus College of Art & Design.
"The good news is there's still residential development occurring downtown during the Great Recession, and I think we've made the investment in the infrastructure and in the amenities to really capture a share of that market, once the economy comes back," says the city's Stevens.
Downtown events have a key role to play, says Vogt. Activities such as the Columbus Arts Festival and Red, White & Boom! bring vitality as well as visitors to the area. "The more you get people to come Downtown, they say, ‘You know, this isn't as bad as I perceived it to be.' It's going to be a way to get people to reconsider living Downtown," he says.
Katz expects many of the rental projects now under way will eventually be converted into condos. "I'd be surprised if any developer today that's building apartments hasn't already gone through the process of ‘condo-ing' them, and is just waiting for the appropriate time," he says.
Back to the Future
Coleman's goal was ambitious, but is nothing compared to what's envisioned by the 2010 Downtown Strategic Plan, which calls for an eventual return to the city's '50s-era population of 30,000. Planners say that figure is necessary to re-create a vibrant, 24-hour Downtown, and that roughly 15,666 additional units will be needed to meet the goal.
Both city officials and real estate agents are optimistic the benchmark can be met. It's been a tough market, Stevens acknowledges, "but the mayor hasn't lost track of his goal of continuing to attract residents Downtown."
"This is just a market correction. This is also a lending correction," says Carstens. "But we're moving forward Downtown, that's what no one seems to understand. We have Scioto Mile, we have Columbus Commons, so we've done some building. Now we're going to do some attraction to bring people back Downtown."
Joel Pizzuti, president and COO of the Pizzuti Companies, says his father, company founder Ron Pizzuti, has "always had the belief that great cities have a balance between their downtowns and their suburbs.
"While residential development in general and Downtown development in particular may be difficult today, long-term Columbus as a city has a very bright future and our Downtown market has the same," says Pizzuti. "The more people are exposed to the life Downtown, and the option of living here, working here, being entertained here, I think they like it. And I think a lot of the steps the city has taken, with the infrastructure improvements, with the Scioto Mile, with the addressing of parking issues, etc., I think those are going to lay a nice foundation for private development to be successful in the future."
Jennifer Wray is a staff writer for Columbus C.E.O.
Reprinted from theDecember 2010 issue of Columbus C.E.O. Copyright © Columbus C.E.O.