COMMUNITY INVESTOR
SPOTLIGHT: CINCINNATI
OVER THE RHINE: MIXED-USE, MIXED-INCOME, ALL ‘COOL’
and remain in the area. While many professionals in today’s job market are forced to “job hop” in order to continue to advance in their industry, Cincinnati’s growing economy is supported by industries and businesses that allow for and historically support upward mobility without the necessity of changing employers or careers. In 2014, the regional economy experienced 2.5 percent growth (compared to 2.3 percent nation- ally) and sharply accelerated over the year prior. Since that time, the local economy has surpassed its pre-recession level by a full 2 percent, while nearby areas and the nation as a whole still struggle to reach and exceed those benchmarks. More than half of this growth may be attributed to jobs in the legal, accounting, architectural, engineering and advertising sectors of the market. This diversity indicates that the region is essentially free from a true “kill switch” that could flip the economy overnight, as is the case in areas more dependent on sectors like hospitality or tourism, which rely heavily on consumer sentiment. The Cincinnati region also boasts a strong commercial real estate market that has, so far, resisted oversupply, thanks to an extremely cautious municipal approach to what Collier’s International refers to simply as “speculative construc- tion.” The resulting balance between strong commercial development projects and just enough demand to keep retail and office rents rising delivered a solid 2015 to the commercial sector. In 2016, however, Real Capital Analytics reported that the $1 billion in commercial sales that occurred over the course of the first three quarters of the year represented a substantial drop-off in activity – around 30 percent. Perhaps not surprisingly, giv-
O ver-the-Rhine (OTR) has come a long way since the 1960s, when the struggling community received tens of millions of dollars from the newly estab- lished federal Department of Housing and Urban Development (HUD). The influx of funding was made in an effort to rehabilitate the 2,000-odd housing units and assist residents, who, at the time, were mostly African-American or Appalachian and nearly all living at or below the poverty line. The millions went unspent and misspent, however, while the neighborhood deteriorated along with its morale and patience. Over time, racial tensions in the area spiraled out of control as residents accused the city gov- ernment of attempting to “gentrify” them out of their homes via upscale housing and redevelopment projects. Tensions erupted in the form of the Cincinnati Ri- ots of 2001 in April of that year, sparked by the shooting of an unarmed Afri- can-American man, Timothy Thomas. en Cincinnati’s status one of Zillow’s pro- jected “Hottest Rental Markets for 2017,” the only sector in which this drop-off did not occur was the multifamily sector, in which sales volumes nearly doubled to $296 million. It seems quite likely that the city’s careful planning, which is also evident in the meticulous development and tracking of building projects through- out the region, is paying off with a steady, upward trend even as some sectors level off for the time being. RELYING ON RENTALS So if rents are the hot ticket in this somewhat contradictory market right now, what is to prevent this trend from turning on its head by the end of this year? After all, a lot of hot predictions for 2016 ended the year “frozen out.” Bryan
Blankenship, CEO of Venture Real Estate Group LLC, a local real estate investment firm specializing in turnkey rental prop- erties, says that this concern is one that investors can largely rule out, in his opin- ion, because the rental market in the area has simply not been one to boom or bust. “Ohio has been a consistent performer [for rentals] because we don’t have the big booms. We’re not going up 12 percent a year, nor will we ever,” he said. For reference, Zillow is predicting rental rates in 2017 will rise a respectable 5.2 percent, which is likely to be competitive with a lot of those “double-digit markets” out west. Even with the rising rates, Cincinnati will remain one of the most affordable major cities in the country. Blankenship believes that in the long term, the same principles will apply for the area’s homeowners and property The riots had an estimated adverse impact of $10 million on the area, and violent crime rose in OTR and elsewhere in the city for several years afterward. At that time, about a third of the housing units in OTR were vacant and 96 percent of those occupied were occupied by renters. In the wake of the 2001 riots, OTR remained largely in limbo as community-restoration efforts languished and various segments of the Cincinnati community fought bitterly over how federal support funds should be spent and whether or not OTR and other similar housing developments should be razed to make way for up- scale or mixed-income developments. Tensions did not ease when it came to light that many OTR properties that were eventually subjected to “emergen- cy demolition” were owned by local nonprofits and absentee landlords. Only in recent years has capitalism been allowed to run its course, to a
62 | think realty magazine march :: april 2017
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