CLEARWATER ― The city’s downtown housing market is listless. Officials have known this for decades.
But now, a city-commissioned study by HR&A Advisers suggests the lack of a downtown market could complicate Imagine Clearwater, the city’s $64 million redevelopment of the downtown waterfront.
Developers would have to charge well above $2 per square foot for high-rise apartment complexes in order to be profitable, the study shows. Downtown Clearwater’s market currently includes a total of zero buildings charging rents that high.
Real estate investors also prefer to own the land, the study found, which would only be possible on two key city-owned parcels if voters ultimately approve a sale.
“As a developer, that would scare the bejesus out of me,” said Ken Stoltenberg in an interview. He’s one of the owners of Tampa’s Mercury Advisors, which HR&A consulted for its study.
Stoltenberg said if he were looking to invest downtown, the Church of Scientology’s growing real estate footprint would also “weigh into the equation, and not from a positive standpoint.”
The 73-page study, which was submitted to city staff last month, shows how downtown revitalization is something of a circular problem. Downtown Tampa and St. Petersburg have proven to be fertile markets because, in the last decade, residents have flocked to their commercial centers. That’s allowed developers to charge rents well north of $2 per square foot in lucrative apartment high-rises ― which has in turn led developers to build more high-rises for even more residents.
Clearwater has largely been left out of that positive feedback loop, the study showed. Multifamily rents in the city are just 60 to 70 percent of those of its neighbors. And average downtown Clearwater retail rents are half of Tampa’s and St. Petersburg’s at best.
With Imagine Clearwater, city officials hope hefty investments in a sparkling new park surrounded by mixed-use retail and housing developments will bring life back to the long-moribund downtown.
“It’s our biggest challenge,” said Michael Delk, the assistant city manager in charge of Imagine Clearwater planning. “I think we know that the downtown marketplace is anemic.”
Clearwater wanted to have the study done so it could solicit downtown developers with a clear-eyed view of the market. For months, the plan was to do the study, then put out a request for proposals for the city-owned former Harborview site on the corner of Cleveland Street and Osceola Avenue.
But the study showed that the city may not be ready to solicit developers.
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In an interview, Cary Hirschstein, an HR&A partner who worked on the economic analysis, said the city should solicit ideas from the development community for three city-owned sites before putting the sites out to bid.
Delk said he didn’t think further conversations with developers would cause a delay in Imagine Clearwater “per se.” Planning for the new park, with its 4,000-seat amphitheater, shaded bluff walk, gateway plaza and refurbished garden, continues apace.
Just what will surround that park remains the $64 million question. The study analyzed the development prospects for three city-owned parcels near Coachman Park: The former Harborview site; the old City Hall building on the north side of Pierce Street and Osceola, and a plot that was formerly owned by the Clearwater Marine Aquarium on the south side of Pierce Street and Osceola.
The consultant interviewed developers about downtown’s prospects, then proposed hypothetical scenarios for the three sites in order to give the city a better sense of the development market.
At the former Harborview site, HR&A found that a seven-story apartment building would cause the city to lose money or barely break even. A 22-story condominium development would be profitable.
For the City Hall site, the consultant ran multiple scenarios. In one, the city would transform the old building into a museum, then build an adjacent condo high-rise. In another, the city would tear down City Hall to erect housing developments. As with the Harborview site, the consultant found potential high-rise condominium developments would make the city significantly more money than an apartment complex.
At the 1.3-acre Clearwater Marine Aquarium lot, a six-story apartment complex would net Clearwater just a fraction of what a 24-story condominium complex would make, the study found. (Development on this parcel would not be subject to a voter referendum.)
The study’s conclusions are less than ideal for Clearwater.
Full time apartment-dwelling residents can revitalize a downtown, city officials say. Seasonal condominium owners? Not as much.
“If it’s going to have the impact on downtown revitalization that we want, there have to be residents living here 24/7,” said Community Redevelopment Agency Director Amanda Thompson.
Whether Clearwater acts on its consultant’s recommendation is up to the City Council, Thompson said. The council could choose to prioritize city profit and build condominiums, or it could spend more public money on affordable housing developments. Or anything in between.
But no matter the scenario, the city will need a developer.