How's Main Street doing?
As a national recession deepens and the federal government bails out Wall Street, Americans are increasingly concerned about the economic health of Main Street. That phrase evokes images of family-owned businesses in small towns. Yet, every city has a Main Street — a major boulevard of commerce in its downtown business district. To find out how these communities are doing, USA TODAY visited five Main Streets in different-size cities around the country.
The first in our series: Central Avenue in Phoenix.
If you dine in the Compass Room, a rotating restaurant atop a skyscraper in downtown Phoenix, you'll get a 360-degree look at huge development projects going up.
Luxury hotels, university dorms, nightclubs, condo lofts and a commuter train are all under construction or just completed here. The new projects huddle on both flanks of Central Avenue, the main street of America's fifth-largest city.
The place seems to be booming.
But what you can't see is the stress on the faces of big investors and small shop owners who have poured money into a burgeoning metropolis at what just might be the worst possible time.
First, the housing market crashed, wiping out Arizona's main economic engine. Foreclosures set a record in September, although they've since fallen. But as the credit market dried up, developers were left without financing, and construction on some of the city's major projects is at a standstill. To make matters worse, tourism, the lifeblood of many downtown businesses, went into the tank. A million fewer passengers have passed through the city's airport so far this year.
Now, Arizona State University, which just expanded its downtown campus, is firing instructors to cut its spending. "We had a big bubble here, and it burst," said Anthony Sanders, professor of economics and finance at ASU. "We've taken Kevin Costner's Field of Dreams and now it's Field of Screams. If you build it, nobody comes."
In a speech just months ago, Mayor Phil Gordon described how downtown Phoenix was on the cusp of a new era: Central Avenue would no longer be empty after dark, but the main artery in a bustling metropolis.
Today, the mayor is trying to cut his office spending by 30% amid a budget crunch, and recession hovers over Central Avenue like a vulture.
Even boosters struggle to maintain enthusiasm. "Some cities might have a downtown in decline. Ours is on the move," said Lyle Plocher, an urban property specialist. "But no doubt about it, we've been hard hit. Our biggest problem in terms of 'Main Street' is the real estate slowdown." Last year, home building, sales and related industries accounted for $1 of every $3 generated in the metro area.
"The thing is, people aren't spending," added Ioanna Morfessis, an economic development consultant in Phoenix. "Consumers aren't spending. Businesses aren't spending. Unemployment is going to increase."
Slowdown hits hard
Developer Dale Jensen said his vision of a $500 million entertainment district just off Central Avenue is in limbo because there's no financing.
"It's not the end of the world," Jensen added. "It's just: Can you survive? And that's what everybody's doing, trying to tread water."
Much of the development in downtown Phoenix has been bankrolled or subsidized by taxpayers. The city alone has participated in 15 major projects with a tab of $1.5 billion, according to municipal records. Those incentives spurred another $2.1 billion in private investment on nine projects.
John Chan, downtown development director for Phoenix, said that while the credit crunch has prevented new projects from getting started, those already underway will pay off eventually. "We're still optimistic long-term," he added. "But everyone's working toward that critical mass."
For now, even developments that moved forward are threatened. Plocher said some residential loft prices have dropped 50% since 2007. CB Richard Ellis Inc., a market analyst, reports vacancy rates in Phoenix office space rose to 17.1% in the third quarter this year, up from 12.9% during the same period in 2007.
The recession's impact may be illustrated best by the story of Mortgages Ltd., the largest private lender in Arizona. As the nation's economy faltered in the spring, the company founded by Scott Coles began drowning in red ink. On June 2, Coles took his own life. Within days, Mortgages Ltd. filed for bankruptcy protection. Thousands of investors are expected to lose money. Dozens of major projects were suddenly without funding.
One of those is Hotel Monroe, the $100 million transformation of an old office building into a boutique jewel with 150 rooms. It was supposed to open in October, but stands empty and unfinished, a monument to recession in the city's heart.
Another casualty is the entertainment district along Jackson Street, Jensen's plan for an eight-block stretch of nightclubs, restaurants and other attractions.
"It's going to be one of the coolest — an authentic, vibrant, 24/7-type area," Jensen said with spirit. Then he added, "There's no credit to do anything. These are hopes until this thing (the economy) gets square."
Small businesses hit hard
Small businesses already have weathered more than a year of traffic disruptions in anticipation that the $1.5 billion Metro light rail will bring customers from the suburbs when it opens Dec. 26.
For now, though, Central Avenue is dead after dusk. A few bars remain open, but most eateries close after lunch, and other businesses shut down by 5 p.m.
Steffin Newman, a downtown ambassador employed by merchants to assist visitors, said he often sends tourists to Scottsdale and Tempe when they ask about night life. "Since I started here six months ago, it's looked like recession to me," he sighed. "It's a ghost town."
In Alice Cooperstown, bartender Jessica Lawrence rolled her eyes when asked how business is doing. "I can't make my rent," she said. "We have fewer customers, and those who do come in don't tip. It's in people's faces. Everybody's affected. Everybody's worried."
Three blocks away, Jukka Göös, 30, of Helsinki, snapped pictures of an empty Central Avenue at 5:45 p.m. on a weekday. In a thick Finnish accent, he explained that he was attending a convention and wanted to send a photograph of Phoenix to his wife. "I'm trying to find the city's heart," he said, "but I'm not able to. What is Phoenix? I don't see anything. No Phoenix people are here. I just see (homeless) people hanging around, not doing anything, asking me if I have a dollar.
"Am I speaking straight?"
Wagner reports for The Arizona Republic