Three Ohio Cities & Downtown Development

Cincinnati, Cleveland and Columbus are often referred to collectively as the 3Cs and are major Ohio cities but they truly are separate entities—sometimes called city-states with not much else in common.  From a macroeconomic standpoint, Columbus, compared to Cleveland and Cincinnati, is an economic mecca.

3Cs Demographic Comparison

Fact Cincinnati Columbus Cleveland
Population 298,800 860,090 385,809
Population Growth 2010-16 0.60% 9.00% -2.70%
Homeownership Rate 37.70% 58.10% 41.90%
Median Home Value $120,300 $131,800 $67,500
Bachelor Degree or Higher 33.80% 34.80% 16.10%
Labor Participation Rate 65.40% 70.00% 58.40%
Median Household Income $34,629 $47,156 $26,583
Poverty Rate 29.90% 21.20% 36.00%

As the table above from the U.S. Census Bureau indicates, Columbus not only is growing at a substantially faster rate than their Ohio counterparts of Cleveland and Cincinnati but they have higher home ownership, median home value, bachelor degree, labor participation rate, and income rates and a lower poverty rate.  Columbus is one of the few large regions whose population has grown at a faster rate than the nations in the past three decades. Since 1980, Columbus’s population has increased by 53 %, compared to the nation’s gain of 39 %. In that same period, Cincinnati’s population grew at slightly more than half of the national rate, while Cleveland’s declined by 5%.

As the above table illustrates, the Columbus regional economy has grown dramatically compared to Cleveland and Cincinnati moving from a distant third to a close second behind in the Cincinnati region.

Columbus has benefited from an annexation policy adopted in the 1960s that developed growth corridors and mandated annexation into the city if development was planned in a neighboring township and the pool of 100,000 college students ready to fill the growing financial services and other advanced services jobs in high-demand the last fifty years.  Also, as a relatively younger city, Columbus did not have a large pool of manufacturing jobs to lose like their more mature counterparts of Cincinnati and Cleveland who benefited much more from the Industrial Revolution.  The result is Columbus is over 200 square miles in size while Cleveland and Cincinnati are not 80 square miles in size.

The 3Cs are also the corporate headquarters home to dozens of major corporations that drive much economic activity.

Columbus Corporate Fortune 1000 Corporate Headquarters Locations

Company Fortune Rank Suburb or Downtown
Cardinal HealthNationwideAmerican Electric PowerBig LotsHuntington BancsharesHexionAbercrombie & FitchGreifScotts Miracle-GroWorthington IndustriesDSWExpress 1568167495610659675676740757772893 SuburbDowntownDowntownSuburbDowntownDowntownSuburbSuburbSuburbSuburbSuburbSuburb

The good news for Columbus is they are home to a dozen Fortune 1000 companies.  The bad news for the Columbus Central Business District is that the majority of these companies are located outside of Downtown.  This job impact on Downtown Columbus is dramatically increased when you consider the nearly 20,000 jobs of JP Morgan Chase, and the thousands of other jobs the Limited Brands, Huntington Bank and many others have in suburban office parks around the I-270 outer belt.  Downtown Columbus does benefit from being home to much of state government and several higher education institutions but the largest employer in the region, the Ohio State University, while in Columbus, is really a city unto itself north of Downtown by three miles.

Columbus’ geographic expansion created a development pattern spreading jobs and residential development all over the 200 square miles leaving a Central Business District that does not compare nearly as well to Cincinnati and Cleveland. The development and growth of Central Business Districts is essential for the economic success of a region hoping to attract high-wage technology and advanced services jobs and the millennial workforce that should follow those jobs.  Central Business Districts are planned and designed for mixed use development with walkable communities appealing to Millennials.  Many of Columbus’ large employers do not have their corporate headquarters Downtown but instead are located on the outer belt in highly successful suburban style developments at Easton and Polaris.

Based upon the geographic spread of Columbus’ large employers, it should not be a surprise that Columbus is behind Cincinnati and Cleveland in the redevelopment of their Downtown as a variety of measures illustrate.  As the graph above indicates, Columbus is also below Cleveland and Cincinnati when it comes to the number of jobs in their Downtown. As the graph below illustrates, Columbus is far behind their smaller urban counterparts of Cleveland and Cincinnati in the critical measure of how many residents call Downtown home.

In fact, a recent market study found that Central Ohio needs 33,048 new apartments to satisfy projected demand through 2030 and the success of Downtown Columbus and the region’s efforts to continue to attract Millennials dictates the need for this residential development to occur in Downtown Columbus.  To meet that demand, recent news reports indicate that more than two dozen apartment projects have been announced as planned for Downtown Columbus.  This should drive Downtown Columbus residents total over 10,000 but still far short of Cleveland and Cincinnati.

3Cs Downtown Real Estate Office and Retail Comparison

Cleveland Downtown SF Vacancy Absorption  Rental Rate
Office 19,483,278 SF 17.60% -55,229 SF (YTD 2017) $18.34 PSF Gross
Retail 2,130,566 SF 9.60% 15,488 SF $14.67 PSF NNN
Columbus Downtown SF Vacancy Absorption  Rental Rate
Office 19,763,167 SF 8.78% -66,137 (YTD 2017) $18.77 PSF Gross
Retail 1,129,426 SF 3.11% -5,088 (YTD Q3 17) $13.02 PSF NNN
Cincinnati Downtown SF Vacancy Absorption  Rental Rate
Office 18,113,763 Sf 12.80% -20,743 SF (YTD 2017) $20.01 PSF Gross
Retail 2,379,300 SF 6.30% -13,591 SF $18.53 PSF NNN

Source: Colliers

As the table above indicates, Columbus is behind Cleveland and Cincinnati with Downtown retail centers but on par with total office space, office rents and has a lower office vacancy rate than its smaller urban counterparts.  However, Downtown Columbus has no critical mass of retailers, a lack of parking, a high 12 % vacancy rate for Classes A and B office space, a 17% vacancy rate on the Capitol Square driven by a lack of parking and an aging office product, and the Fifth Third tower in receivership.

Finally, Columbus has struggled against its urban counterparts to redevelop historic properties. As the graph above illustrates Columbus has 152 sites on the Register of Historic Properties. While this total is smaller than Cleveland and Cincinnati, Columbus has a large volume of sites primed for historic preservation redevelopment.  The use of the Ohio Historic Preservation Tax Credit Program by the three regions illustrates how Columbus is far behind Cleveland and Cincinnati in the redevelopment of historic structures.  The table above illustrates has Cleveland and Cincinnati have more than doubled Columbus’ total of gaining Ohio Historic Preservation Tax Credits as registered by the counties in which they sit.

Even more troubling for Columbus, the table above illustrates the staggering dollar amount they are behind Cleveland and Cincinnati in the total dollars gained from Ohio’s Historic Preservation Tax Credit.  The opportunity cost for Columbus is substantial in its poor performance with Ohio’s Historic Preservation Tax Credit Program and it clearly is part of the reason the growing city’s Central Business District has suffered compared to Cleveland and Cincinnati.

Columbus is also behind when it comes to the use of the Federal New Market Tax Credit program.  The Federal New Markets Tax Credit provides a 39 % Federal Tax Credit Over seven years for real estate investments in poor communities through complex transactions involving retail, office and manufacturing projects. The Ohio New Markets Tax Credit program provides an incentive for investors to fund businesses in low-income communities. The Ohio Development Services Agency provides $10 million annually in a tax credit allocation to Community Development Entities who invest in New Market Tax Credits. Again, as the chart above indicates, Columbus is far behind counterparts Cleveland and Cincinnati when it comes to utilizing the New Markets Tax Credit which is focused on low income urban areas that traditionally have been Downtown.

Economic conclusions from comparing Ohio’s three cities is clear: from a macroeconomic standpoint, Columbus is the clear winner with substantial recent population, job and wage growth tied to the advanced services industry; and Downtown Columbus is behind Cleveland and Cincinnati focused on critical economic measures such as the number of jobs, residents, and retail space.