Knox Econ 2010: The Downtown Exception

Despite stalled projects, a bright spot in the gloom

For decades, through booms and busts, downtown Knoxville contracted and withered while the surrounding city and county expanded. But the current recession has seen something of a reversal: Knox County has lost jobs and businesses from east to west and north to south, but the downtown revival that began about 10 years ago has seemingly endured.

"Market Square has held up well, Mast apparently is doing well, the movie theater is doing well," says Bill Lyons, the city's senior policy director, referring to the Gay Street outposts of Mast General Store and Regal Riviera cinema.

John Craig, a downtown property owner and president of the Market Square District Association, says, "It's obvious that a lot of people are in pain in the area and the county. And yet downtown, I think we have had in the last 12 months more residential and commercial space occupied than in any 12 months in our recent history."

Craig and Lyons say that downtown is still absorbing a pent-up demand that had grown over the years for urban living and commerce, part of a nationwide trend that has a much longer arc than any short-term downturn. Which is not to say the recession has left the center city unscathed. Some larger projects that had been bandied about in the midst of the last decade's boom—such as Sentinel Tower, a proposed 21-story upscale residential building on the old News Sentinel site on State Street—have stalled. (See Citybeat, page 10.) And Lyons says buildings that are still being finished are tending more toward apartment rentals than condos, because apartments are easier to fill these days.

But Craig sees even that as a plus. "That's worked out well, because it's sort of balanced out the inventory," he says, creating more affordable downtown options.

On Market Square itself, two new businesses are set to open this summer (a restaurant/bar called Latitude 35 and a clothing boutique called Black Market), both of them the kind of one-off efforts that have characterized the Square so far. "I think that the healthiest thing that has happened downtown is you have had so many different people doing projects," Craig says, which has provided some protection against the impact of any individual failure.

But looking out from the sixth floor of the City County Building, where Lyons has his office, you can also see how contained the downtown boom has been so far. It has not jumped the Tennessee River, despite a decade's worth of plans for development along the south bank. That, Lyons says, will probably have to wait for a healthier national economy. "That has been a pay-as-you-go project," he says, with the city providing infrastructure improvement only as private investment actually surfaces. At the moment, there is not much by way of paying or going.