From the WSJ Real Estate Archives

Real-Estate Boom Snubs
Cincinnati, a Midwestern Hub

by Maura Webber Sadovi
Special to The Wall Street Journal Online
November 17, 2005

Since 1837, when two brothers-in-law founded a soap and candle company in Cincinnati called Procter & Gamble, the region has carved a niche for itself as a town for big business. Yet while the metro area is home to more Fortune 500 companies per capita than even New York or Washington, D.C., the Queen City's real-estate performance continues to lag behind much of the country.

Cincinnati's office, retail and apartment vacancies were above the national averages in the third quarter and rents were below, though all but office rents are strengthening, according to Property & Portfolio Research Inc., a Boston-based real-estate consulting firm.

[Duke Realty Corp. recently broke ground on an approximately 178,000-square-foot office building in the Cincinnati suburb of Blue Ash.]
Duke Realty Corp. recently broke ground on an approximately 178,000-square-foot office building in the Cincinnati suburb of Blue Ash.
Office sales also were tepid. Cincinnati, the Kansas City area and Detroit were the only major Midwest cities to report average office-sales prices below $100 a square foot for the year ended in September, although one suburban Cincinnati property sold for $152 a square foot, according to Real Capital Analytics. In addition, one local property owner said the average price data were skewed because of an unusual sale as well as relatively few transactions. Housing, too, has largely missed out on the boom seen in many other areas of the country. Median home prices rose 3.9% to $148,700 in the third quarter from $143,100 in the year-earlier period, below the median of $173,300 for the Midwest, the nation's lowest-cost region, according to the National Association of Realtors.

Developers are betting on increased demand for new offices despite Cincinnati's lack of froth. About 600,000 square feet of office supply are expected to be completed in the region this year and 875,000 square feet next year, PPR said. "Cincinnati's a good place for people to live and raise families; it's just not going to be as exciting for some folks as the coasts," said Kevin Rogus, senior vice president of the Cincinnati operations of Duke Realty Corp., one of the region's largest office landlords.

Some of the development is occurring in the suburbs. Duke just completed a new 140,000 square-foot office building called Centre Pointe IV in West Chester and has broken ground on a speculative office building with about 178,000 square feet in Blue Ash. Downtown Cincinnati also is getting its first new high-end office building in about 14 years. The first phase of Queen City Square, designed by Hellmuth, Obata & Kassabaum and developed by Eagle Realty Group, a unit of Cincinnati-based Western & Southern Financial Group, is expected to be completed in January.

The region's economy, driven by manufacturing, financial services and such slower-growth industries as consumer products and retailing, is on the upswing. Being on the winning end of some recent mergers, including P&G's purchase of Gillette, is expected to help modestly. Unemployment fell to 5.2% in September, though still above the national rate of 4.8%, according to the Bureau of Labor Statistics.

Cincinnati has been working to overcome the stigma associated with several days of racial unrest that followed the police killing of a black man in 2001, said Norm Miller, director of the real-estate center at the University of Cincinnati. A $42 million project is under way to renovate Fountain Square, the city's central plaza, but Mr. Miller said it remains to be seen if an effort to redevelop the waterfront along the Ohio River between the Bengals' Paul Brown Stadium and the Reds' Great American Ball Park will be successful. "We lag behind the rest of the country on downtown amenities," Mr. Miller said, noting that the prime real estate between the recently built stadiums largely is used for parking. "We have to get our act together."

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