Report Outlines Opportunities, Challenges Facing Downtown TC

A new report that captures survey input from nearly 1,200 local residents and stakeholders – plus a market assessment of the opportunities and challenges facing downtown Traverse City – will be presented to TC Downtown Development Authority (DDA) board members Friday. While the report highlights positive trends like a strong varied mix of local independent storefronts, high marks for downtown’s cleanliness and accessibility, and a continued robust tourism draw, it warns that challenges including an aging population, skyrocketing housing and commercial leasing costs, and staffing and employment challenges will need to be addressed to preserve downtown’s vitality heading into the future.

President Brad Segal of national consulting firm Progressive Urban Management Associates (PUMA) will present the report virtually to DDA board members at their 8:30am meeting Friday. PUMA – with assistance from Traverse City firm Parallel Solutions – has been hired to lead the DDA through a process called Moving Downtown Forward. The goal is to analyze the DDA’s organizational structure and funding mechanisms, compare downtown Traverse City to other downtowns across the country, and look at national trends and best practices to make recommendations on how the DDA can position both itself and downtown in general to thrive in the coming years.

An online survey designed to gauge local opinions about downtown generated 1,172 responses, with PUMA also meeting with key stakeholders in one-on-one and group interviews to gather input. Survey respondents were commonly 35-64 years old (61 percent), white (96 percent), female (66 percent), and from a range of household incomes. 83 percent of respondents identified as local residents, with 58 percent living in Traverse City and 25 percent elsewhere in Grand Traverse County. Respondents identified restaurants and bars (73 percent), shopping and markets (55 percent), and recreational opportunities (36 percent) as the top three reasons why they come to downtown Traverse City.

Another survey question asked residents what characteristics of downtown have improved, stayed the same, or worsened in the past five years. Answers cited as improvements included downtown’s “general appearance, mix of restaurants and nightlife, and pedestrian and bicycle friendliness.” Respondents believed many characteristics have stayed the same in recent years, including downtown’s safety, cleanliness, parks and open space, mix of retail and shopping options, and businesses and jobs. However, respondents believed that housing options and affordability, the unhoused population, and parking had all worsened in the past five years.

When asked to provide three words that would best describe how respondents wanted to see downtown in 2030, the top answers were walkable (138 responses), easier/more/free parking (122 responses), affordable (104 responses), clean (86 responses), and safe (72 responses). Respondents chose improving stormwater and wastewater management as their top pick from a list of physical improvements they wanted to see downtown, and creating opportunities for affordable and local workforce housing downtown as the service they most wanted the DDA to provide. While downtown business owners and stakeholders praised the district’s storefront economy, character and charm, natural amenities, and multi-modal options, they cited challenges including a fear of change, residential and commercial affordability, small business retention, parking, and the seasonal nature of tourism as concerns heading into the future.

A separate PUMA market assessment compared Traverse City to a handful of peer cities across the U.S. with similar size metropolitan areas, market dynamics, outdoor draws, and seasonal tourism reliance, including Burlington (Vermont), Bend (Oregon), Bozeman (Montana), and Rapid City (South Dakota). Traverse City had the highest median age of that group, increasing from 44.2 in 2010 to 46.8 in 2022 (by comparison, Bozeman’s median age was just 35 this year). Traverse City also had the strongest real estate sector, with a median home value of $425,000 – a 48 percent increase since June 2020 (PUMA’s report called market prices “unprecedented”). Downtown housing especially carries a premium, with an average sale price in 2021-22 of $594,000. Lease rates on Front Street – increasing by $8-10 per square foot over former rates – were flagged as a factor that could start displacing local businesses and lead to more chains moving downtown, since those are the companies that can afford the higher prices.

Traverse City also had more than double the number of short-term rentals per 1,000 residents than every other city on the comparison list. There are more than 1,500 active rentals in the greater TC area, a 53 percent increase since 2019. PUMA warned that vacation rentals are “bringing visitors, but straining (the) housing market and service businesses.” Among its key conclusions from the market assessment, PUMA said that downtown TC boasts a strong mix of local, independent storefronts – at least 82 percent of businesses are locally owned – but that the “increase in lease rates, tourism, interest from chains, and staffing shortages will challenge this sector.”

PUMA predicted downtown’s business mix will continue to transition more towards food and beverage service, as well as expand into areas like West Front, East Eighth, and the Warehouse District. Converging trends – Traverse City’s aging population, housing costs, tourism growth, and boom in short-term rentals/second homes – will create continued “lack of affordability and housing for service industry and working families,” the report states. PUMA also noted that downtown remains heavily reliant on Hagerty – which went largely remote during the pandemic and has yet to bring many of its office workers back – and needs to prioritize “finding additional anchor employers in growth industries.”  

DDA CEO Jean Derenzy says she was encouraged by the report’s positive findings, but acknowledges there are challenges ahead, particularly for retailers and workers. Derenzy has emphasized in the past wanting to keep a balance of retail stores and restaurants downtown – with PUMA again predicting that mix could start skewing toward restaurants – but concurs that with rising lease rates, “we’re going to price ourselves out if we’re not careful.” The DDA is already taking steps to address that and other challenges, like the need to diversify the downtown office/employer base, by planning to open a retail incubator space next spring and hiring Traverse Connect to help with employer retention and recruitment. Housing projects are also on the horizon, such as a proposed mixed-use development at the corner of Cass and State streets.

PUMA will present additional findings to the DDA in the coming weeks, including recommendations on how to best divvy up maintenance services with the city (such as street sweeping, garbage collection, and sidewalk and riverwalk repairs) and proposed funding, operational, and governance options for the DDA as an organization. While some have questioned whether the DDA has “fulfilled its mission” and is no longer needed, PUMA’s report concludes otherwise, stating: “Downtown isn’t ‘done’ – the community has clear priorities for downtown moving forward. Downtown continues to need a champion to implement and finance these shared priorities.” The report notes that if the DDA – and its tax increment financing (TIF) programs – were eliminated, Traverse City taxpayers “will bear 100 percent of the financial burden of implementing the region’s priority improvements for downtown.”

According to a PUMA timeline, Friday’s presentation will be followed by more stakeholder and public input meetings in the coming weeks. A draft version of the Moving Downtown Forward plan will be presented to DDA board members November 1, then at two public open houses and a joint DDA/city commission meeting on November 2. Based on feedback received at all of those meetings, PUMA will finalize the plan and deliver it to DDA board members at their November 18 meeting.