Cleveland, which has been losing manufacturing jobs for decades, has spent almost $1 billion on everything from new downtown sports stadiums to the Rock and Roll Hall of Fame in an attempt to rev up its economy, so far with mixed success. Next up: health care. In January construction will start on a $465 million Medical Mart & Convention Center targeted at manufacturers of health-care equipment and supplies.
Besides offering space to showcase and market high-tech medical equipment, project backers hope visitors will also want to see new gear in action at the nearby Cleveland Clinic, one of the country's top medical centers. The broader aim: to rebrand Cleveland as a health-care hub that will attract well-paying industry jobs to the region. "High-tech medical, biotech, that's going to be the new face of the community," says Timothy F. Hagan, a Cuyahoga County commissioner who championed the project.
To get there, the county is teaming with a unit of Vornado Realty Trust to redevelop the space underneath the 14-acre Cleveland Mall, a public square overlooking Lake Erie. Under the terms of the deal, the public would pay the entire $465 million construction budget and subsidize Vornado's operating expenses. The planned 422,000-square-foot exhibition center will be funded mainly with a quarter-cent sales tax increase.
All told, taxpayers may put as much as $840 million into the development, including debt costs over 20 years, says Tim Offtermatt, senior vice-president at Stifel Nicolaus (SF), the investment bank managing a county bond offering for the project. Vornado is contributing $28.5 million, Offtermatt says. It also is responsible for cost, repair, and operating overruns, he says.
Whether the new concept will pay off in jobs and revenue is uncertain, says Tom Murphy, a senior resident fellow at the Urban Land Institute. The Medical Mart has yet to sign any permanent tenants. "It's a shot in the dark in some ways, in their ability to create a new diversity for their economy," says Murphy, who was mayor of Pittsburgh from 1994 through 2005. "I would want to see some commitments before I would spend that kind of money."
Backers of the mart say it suits the area's changing job mix. Since 2000, Cuyahoga County has lost 41 percent of its manufacturing jobs, a total now down to 68,500 in 2009. Meanwhile, employment in health care and social assistance increased 19 percent, to 118,000.
The Medical Mart is the brainchild of Delos M. "Toby" Cosgrove, chief executive officer of Cleveland Clinic, a sprawling health-care complex east of downtown that ranked fourth this year on U.S. News & World Report's list of top U.S. hospitals. The medical center is the largest nongovernment employer in northern Ohio and the second-biggest in the state, with about 40,000 workers. "In order to build a hospital, I wound up traveling all over the country and the world to see various pieces of equipment," says Cosgrove. "It would be nice to have all those things in one place."
These aren't rich times for the exhibition and trade show industry, which slumped along with the economy in 2008 and 2009, according to the Center for Exhibition Industry Research. Revenue dropped 16 percent last year. Medical and health-care shows fared better: Revenue increased 1 percent.
Cleveland's Medical Mart also faces competition. Market Center Management, the trade show arm of Crow Holdings, is building its own health-care showcase in Nashville, which is scheduled to break ground in 2011. That project will have about 10 times the 100,000 square feet of permanent showroom space for medical products planned for Cleveland, says Market Center Management CEO Bill Winsor. And unlike the Cleveland project, the Nashville Medical Trade Center has an announced tenant, Healthcare Information and Management Systems, a nonprofit that promotes information technology for medical providers.
Although mart backers say they've received 40 letters of intent from potential lessees of exhibit space, they haven't disclosed the names of prospects. Cleveland Clinic's Cosgrove downplays the project's risks. "What's the worst thing that could happen if this fails?" he asks. "You have a brand-new building and a new convention center. So the downside isn't too bad."
The bottom line: Cleveland hopes to draw visitors and tech jobs by building a medical exposition center. The cost and competition make the plan risky.