Watching the recession shrink from sight in the rearview mirror, Hugo again is steering toward a new downtown to capture the business that streaks north and south on Hwy. 61.

An updated marketing study, recently presented to the City Council, concluded that the city's central business district lacks a "significant draw or anchor tenant" and would benefit from new restaurants and possibly a hotel.

"We want to make it the commercial center that the community always had the desire to see," said Rachel Juba, the city's planner. "The city is eager to get the properties in downtown Hugo redeveloped."

The city's downtown district — separate from the burgeoning suburban business area near Interstate 35 — has undergone a transformation in recent years. The stretch of Hwy. 61 from 150th Street south to 140th Street has more vacant land available because of a major fire a few years ago and the razing of several unused and outdated buildings.

Eager to move forward, the city has hired real estate brokers to market about 5 acres of city-owned land near Egg Lake, located at the heart of the downtown revival. That's prime land for a boutique hotel, events center or restaurant with an outdoor patio, Juba said, and she's confident one big new business will attract others.

"They're not just looking for anyone who would buy there," she said of the brokers. "They want somebody who would create a spark downtown."

The study by Maxfield Research, a fresh version of one completed in 2007, concluded that the downtown district could support two or three new restaurants by 2020 and a 50-room hotel as well. Businesses that would thrive there include stores that sell groceries, auto parts, and health and personal care products. Specialty stores that sell flowers, gifts, pet supplies and art materials also would find customers, the study said.

"Successful downtown areas are typically compact with buildings set side-by-side, allowing customers to walk from one shop to another," Maxfield wrote. That's what the city wants, Juba said — a compact centerpiece of businesses that visitors would recognize as a traditional downtown, but off the busy highway.

"It's going to be something that's a little bit different," Juba said. "Obviously we're not going to be able to create a Main Street on Hwy. 61 but we could do it somewhere else."

Architecture should show French influences, the study said, to reflect Hugo's beginnings as a French trading post.

However it evolves, the central business district will receive strong competition from Victor Marketplace, the housing and retail district on Hugo's west side. But the city already is losing business dollars to nearby cities such as Forest Lake and White Bear Lake, the study said, and new businesses downtown will help keep money in town.

The Maxfield study also noted Hugo's profile as a commuter city. More than 6,500 residents leave Hugo to work while about 1,600 nonresidents go to Hugo to work. Only 269 people both live and work in the city.

Another distinctive demographic trend in Hugo shows new households outpacing the city's population.

"This trend is an indication of an aging household base and also reflects a general shift in demographic factors that favor smaller households, such as a declining proportion of married couple households with children," the study said.

Other conclusions:

• Employment in Hugo will jump nearly 30 percent — or by about 580 jobs — by 2020. That compares with a forecast of 12 percent job growth in the wider metro area.

• Manufacturing is the largest employment sector in Hugo, with 26 percent of total jobs.

• Downtown Hugo could support about 175 units of multifamily housing by 2020.

• The strongest demand for rental housing downtown will come from young professionals who work in St. Paul and surrounding suburbs and older residents without children looking to downsize from a traditional single-family home.

The study was funded with a $15,000 grant from the Metropolitan Council.