Celebrity chefs feed Cleveland real estate

CLEVELAND — You can't buy a great cheeseburger on the Internet, and that is the simple fact behind the new driver of downtown real estate development. Restaurants are the new retail, and celebrity chefs today are fast becoming just as powerful as names like Macy's and Neiman Marcus were a half century ago.

"I think these days you're finding our developers lead at the ground floor with the restaurant, and everything fills out around it. Retail these days as we all know because of the Internet, is a fairly precarious proposition," said Chris Ronayne, president of University Circle Inc., a development, service and advocacy organization in this Ohio city.

Cleveland has embraced the "foodie" culture, as young millennials move downtown. They are the force behind a 70 percent jump in the city's downtown population to over 13,000, according to the Downtown Cleveland Alliance. Apartment growth is already robust, with 4,000 units in the planning stages, and job growth in professional services and technology is helping to fill more and more housing. There is one common denominator in all the growth.

Owner-Chef Zack Bruell directs his staff at Cleveland's L'Albatros
Diana Olick | CNBC
Owner-Chef Zack Bruell directs his staff at Cleveland's L'Albatros

"We've got a dozen great-happening vibrant retail centers in Cleveland that are really part of the resurgence, and they seem to be over and over again led by the chefs," said Ronayne.

Cleveland housing is also the most affordable in the nation, with an average sale price of $74,502, according to Coldwell Banker's 2015 Home Listing Report. That is prompting more young residents to move back home after college. One of Cleveland's celebrity chefs, Zack Bruell, said these are the people filling his restaurant tables and his kitchens.

"The kids that left Cleveland to be educated somewhere else would stay in Chicago, they'd go to San Francisco, Los Angeles or New York. Now those people are coming back to Cleveland. That's the future," said Bruell. "Look at what the cost of living in Cleveland is. It's really affordable, and there is a sophistication here that exists in those markets, so you can practice your craft here and maybe buy a house, save some money and raise a family, which would be very difficult there."


Bruell, who owns and operates 10 Cleveland-area restaurants, from a French brasserie to an Asian fusion eatery, said restaurants are driving downtown development and employment, and names like his are at the heart of it. Bruell said he has expanded his staff from 250 to 470 in just the past two years.

"The developers or the landlords come to me, so I've got, sort of have, an upper hand in choosing where I go. I'm going to transform a neighborhood or help transform a neighborhood. I'm part of that," said Bruell, standing in L'Albatros, one of his restaurants that already had a good crowd seated around the bar on a cold Wednesday afternoon.

While brick-and-mortar retail is flailing across the nation, restaurant sales are growing. Stronger employment also means more people are eating out for lunch.

Chef Zack Bruell at the Alley Cat restaurant, one of ten he owns in Cleveland.
Source: Denise M. Kramer
Chef Zack Bruell at the Alley Cat restaurant, one of ten he owns in Cleveland.

"Americans are using their [gas] pump price savings to go out to eat," said Chris Christopher Jr., director of consumer economics at IHS Global Insight.

Cleveland has also benefited from a new government program that has awarded more than $160 million in tax credits to the city's development projects, leveraging almost $1.5 billion in redevelopment, according to CBRE, a commercial real estate services company. Abandoned office buildings are being converted to apartments and hotels.

"As this wave of new residential properties has swelled, it has been a catalyst for development activity downtown. As more young workers are moving downtown, businesses have taken note, choosing to remain in the CBD rather than expand to the suburbs," researchers wrote in a recent report by CBRE titled, "Resurgence in Midwest Secondary Markets."

Restaurant growth is fueling downtown commercial property prices as well. Office vacancies are down and rents are up. Occupancy in apartments is at 97 percent, according to CBRE, which estimates downtown Cleveland has seen $5.5 billion of new investment since 2010.

Chef Bruell's Alley Cat restaurant opened last summer in Cleveland
Source: Denise Kramer
Chef Bruell's Alley Cat restaurant opened last summer in Cleveland

"We look at neighborhoods these days as experience districts. Of course they're housing, they're also the return, 100 years later, to mixed use. They call it new urban, but it's really true urban of 100 years ago, on these old street car corridors in these Midwest cities, where the retail commercial ground floors were at the base, the residents lived right above, and you're finding that they're both live/work 24/7 districts, but they're also destination districts," said Ronayne.

Cleveland may not seem like a destination city, but as more millennials struggle to afford big-city life, they are heading to the next best thing. Vibrant downtowns are no longer exclusive, and affordability is beginning to trump location. In a fast-changing economy, food still works, and if you cook it, foodies will come.

"Cleveland is no different than anywhere in the United States," Bruell said as he put on his chef's jacket and headed into the kitchen to whip up a cassoulet.