ERIE, Pa.—To local leaders, a row of abandoned redbrick buildings in the heart of this Rust Belt city’s ailing downtown presents the best hope to spark a citywide revival.

The buildings—stripped down to their plaster walls, tin ceilings and worn wood floors—are part of a $150 million plan to draw more people to live and work downtown. One building, most recently a biker bar, will house a food hall with seating for nearly 200 people. An old bus terminal will be demolished to make space for an indoor courtyard that will connect...