As small cities go, Wheeling is something of a hidden architectural gem. Many of its buildings are listed on the National Register of Historic Places, and according to the American Planning Association, North Main Street has one of the greatest concentrations of mid- to late-19th Century Victorian-era residences for a city of its size. It is no surprise that so many local projects have been awarded a federal preservation tax credit or that Wheeling is considered one of the most historic small towns in America.
Repurposing – making new from old
Many cities, both large and small, have undergone challenging times since the end of the 2000s. The Great Recession cut a swathe across industries and the cities that served them with few escaping unscathed. In urban areas throughout the country, a combination of inertia, economic forces and changing industrial trends has left many cities bereft of purpose. The financial crisis hit businesses hard, but in truth they were also suffering from a customer shift to online retail. In some cases tenants went out of business, while in others big box stores relocated but kept the empty properties as a way to keep competitors out.
The result? Empty stores that added to the general environment of inactivity. Take a drive through many of these cities and even the casual observer can see buildings and even whole areas that have been left empty, stranded and seemingly at a loss as to what to do next. In 2012 commercial vacancy rates exceeded 30 percent in areas like Cuyahoga County, Cleveland (38.8 percent), Mahoning County, Youngstown (37.5 percent) and Allegheny County, Pittsburgh (31.7 percent).
But while a situation like this seems bleak it can also be temporary. It is possible to create a brighter future where people have the will and vision to see the possibilities. This is as true for Wheeling as it is for Cleveland, Pittsburgh and Youngstown – cities that have all successfully undergone transformative development.
These areas have witnessed a strategic urban regeneration that has seen large department stores repurposed as schools, libraries, medical centers, court houses, museums and recreation centers. Warehouses have reopened as business incubators, art galleries and event venues. Strip malls, traditionally seen as unattractive and transactional, have been refurbished to be more pedestrian friendly and have been set in more enticing surroundings.
Heritage Port – Wheeling, West Virginia Prior to development, the Wharf Garage was a stagnant economic area. The city saw the potential of its heritage and devised a long-term plan to redevelop the port, encouraging activity on the waterfront. The Wheeling National Heritage Area Corporation (WNHAC) spearheaded the demolition of the Wharf Garage and the creation of Heritage Port. This has transformed the waterfront area and now attracts between 250,000 – 300,000 visitors annually to the festivals and events held there.
Over-the-Rhine – Cincinnati, Ohio By the 2000s this historic area was suffering badly from a chronic lack of investment, leading to poverty rates of 58 percent and unemployment rates of 25 percent. In response, a public-private partnership between the City of Cincinnati and local private companies formed a non-profit city development committee to revitalize the area, focusing on a 110-square block area. They embarked on a strategy of identifying buildings with potential for redevelopment, particularly those that complemented both the history of the buildings and the neighboring community. Funding structures were put in place and the projects managed by development teams, who took the buildings from plan to market. By 2012, leases were in place for 90 percent of the completed commercial buildings and 98 percent of the 186 refurbished residential units.
Artisan Center – Wheeling, West Virginia The Wheeling Artisan Center is an adaptive mixed use industrial structure, consisting of three buildings with a three-storey atrium and skylight. Originally housing a grocery business and dating back to 1868, the building had several uses in the intervening years. WNHAC rehabilitated the building, which is now functioning as office space, a large restaurant incorporating Wheeling’s heritage, an arts and craft floor, an art space, and a 7,500 square foot special events hall used for conferences, wedding receptions and banquets.
Many older buildings have unique historic and architectural features that can add immeasurably to the character of a commercial area. Attractive in their own right, they can draw in customers and visitors to the district. Of course, older buildings may require some investment to refurbish them to the required standard but this may actually be less expensive than building new properties from the ground up. It is not uncommon for developers to report savings of 10 to 12 percent by renovating instead of building from scratch.
Investors are advised to avoid focusing too much on whether national brands are present in an area when deciding whether to develop a property. These include the department stores, pharmacies and other retail chains. While it is useful to congregate around the nationals there are other anchors outside of the large retail operators. Museums, libraries and theaters can all be effective in drawing consumers.
As a word of warning, think carefully before developing buildings in areas that have high vacancy rates and high crime areas, as the investment can be leached away by the surrounding environment. The exception to this is when there a development is aligned to the urban strategy of a city, planning organization or other group.
Market data will be able to offer historic perspectives on a proposition’s commercial viability. Analyses tend to look at three areas: customers, competitors, and industry/regulatory environments. The first tries to identify who the customers are in an area and what they want to buy. Conducting surveys and analyzing data on their preferences and spending habits can provide this information. Competitor analysis will look at what other businesses are currently offering, and evaluates products, business sizes, sales, services and staffing. Analyzing the industry and regulatory environment looks into the obligations and constraints that a business would have to operate under.
As well as looking at the numbers, it is worth getting in touch with people on the ground because it can yield plenty of valuable insights. Speaking to customers (or potential customers), business owners and employers in a commercial district can be very informative. Moreover, simply walking or driving around an area will give a feel for how a proposed development will fit in to the neighborhood.
Renovate, repurpose or mixed-use
Transformative projects such as those mentioned above show the huge potential that is out there and how vacant buildings can be brought to life in innovative and profitable ways. In most cases, a vacant building will be renovated, repurposed or converted to a mixed-use property.
Renovation is when a building is refurbished but its original function remains the same. This can work well if the building sits within an existing commercial space where there is already a market demand for that type of business. Essentially, the developer is seeking to do what was done before but to do it better.
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Adaptive reuse means taking an existing property and repurposing it for an entirely different use. This can be popular for older buildings because of the tremendous character they can bestow on a business, which in turn can attract customers. Adaptive reuse works well when market analysis identifies a gap in the market or where the new use aligns with other businesses in the area. One example would be utilizing an old building as an event space in an area with lots of bars and clubs. In Columbus, Ohio, the old Smith Bros’ Hardware building was successfully converted into Dock580, a food and event venue. In Wheeling, the former Wheeling Stamping industrial building was transformed into the worldwide operations center for international law firm, Orrick, Herrington & Sutcliffe LLP. This development retained the character of the original building but repurposed it for an entirely new function. Further information on adaptive reuse can be found here.
Mixed use developments provide a platform for two separate activities in the same building. This can be a combination of retail, office, entertainment, residential or civic space. It is worth noting that mixed use projects can take more time because zoning changes might be required, including implementing Planned Unit Developments (PUD), overlay zones and “by right” zoning.
Whenever changes to an existing structure are made, a developer will require the assistance of professionals such as architects, landscape architects, suppliers, contractors and, for historic buildings, preservationists. If possible, professionals with prior experience of similar projects should be approached.
Fitting in with strategic plans
In some urban areas policy makers, regeneration groups, business organizations, and other stakeholders work strategically to implement a long-term plan. Developers should pay close attention to the bigger picture because aligning with an area’s long-term strategy and policy aims will significantly boost the chance of success.
In the Over-The-Rhone development previously mentioned, the successful regeneration of the urban area was led by the City Development Committee, a public-private partnership, which took a strategic and planned approach. In Wheeling, the city council created the Economic and Community Department to coordinate the various city functions e.g. planning, zoning, development, economic development, code enforcement, inspection, housing, and neighborhood development. This streamlines planning, regulatory, inspection and enforcement activities. Perhaps unsurprisingly, Wheeling has been ranked as one of the top 20 small Metropolitan Statistical Areas (MSAs) in the country by Expansion Management Magazine, for its business recruitment and attraction.
The city’s strategic vision is the brainchild of the Wheeling National Heritage Area Corporation (WNHAC), which was instrumental in the successful regeneration of Wheeling Heritage Area and Heritage Port. WNHAC has implemented a 10-year action plan to transform Wheeling by maximizing the potential offered by the city’s past. The organization encourages economic revitalization through public-private partnerships in coordination with citizens. In some ways its role is to act as a ‘spark plug for projects’, by offering expertise and guidance on areas like grant information, tax credits or advice on contractors (the latter are fully licensed in Wheeling). This type of local assistance can make a big difference to development projects, from the planning phase right through to completion.
The cost of repurposing vacant properties is not insignificant and may involve demolition of existing structures, area clean up, rebuilding or renovation. However, there are a range of funding alternatives from private, public and non-profit sectors.
If a large corporation has operations in the area they may be interested in funding the development of a property in return for having their name displayed prominently in the building. Alternatively, if a repurposed property is going to be used in a way that aligns with a commercial organization in some way, they may be willing to offer sponsorship.
Federal and State
In low-income areas, New Markets Tax Credits (NMTCs) offer private developers a federal tax credit. These are primarily for emerging areas, so to qualify, the individual poverty rate must be at least 20 percent or median family incomes must be 80 percent of the median for the area. Typically NMTC projects are between $2-$5 million. In Wheeling, the city shares in a federal grant known as the Home Investment Partnership (HOME) Program, which is worth $500,000 annually and focuses on housing for low and moderate-income people. In 1996 the city joined forces with six local governments to form the (West Virginia) Northern Panhandle HOME Consortium, with Wheeling designated as the lead administrative agency by HUD.
The Regional Economic Development (RED) Partnership Programs offer the Real Estate Advantage Loans (REAL) SBA 504 Loan, which can fund projects up to $5 million (or $5.5 million for certain manufacturing projects or those incorporating energy-saving technologies). Funding is possible for up to 40 percent of the total project.
Another option is Federal Small Business Administration (SBA) loans, which target small-scale projects aiming to commercially revitalize areas. Additional state funding is sometimes may available to businesses who are planning on creating create local jobs.
If a project involves a building that has historic value it may be worth applying for federal historic preservation tax credits. Increasingly, credits at the state level are becoming harder to come by. Further information on historic buildings can be found at the State Historic Preservation Offices (SHPO) – www.ncshpo.org/find/index.htm.
Tax Increment Financing (TIF) takes into account future property taxes to finance development projects, particularly in underdeveloped areas.
Revolving Loan Funds (RLFs) are utilized by some municipalities as a perpetual loan fund to finance small business development. In Ohio and Marshall counties loans of up to $350,000 are available – $35,000 per job created.
Local governments may also use tax abatement and financing from the General Fund to support property development.
Community Development Financial Institutions (CDFIs) support low and moderate income groups and can access federal funding to finance business development, including commercial real estate. Foundations may also be willing to support businesses whose projects help to develop a local area.
Cities like Wheeling have a rich cultural heritage that offers opportunities for investors who can see the potential in renovating and adapting the many fine buildings in the area. When projects are aligned to the broader strategic goals of the city these newly developed properties can fit seamlessly into their surroundings. The result can proudly showcase the regeneration of an area and serve as an example of what is possible.