In Buffalo, New York, the office market is in the midst of a slow recovery from the lows experienced in the early 2000s. Even with the recent economic downturn, the statistics show that this market is still showing improvement. The inventory continues to grow at a slow, controlled pace and net absorption of space is positive.
There is a growing preference for regionally based companies to invest in Buffalo. Two recent corporate relocations, HealthNow and New Era Cap, had a significant impact on the market by moving their headquarters operations into Buffalo’s Central Business District. HealthNow took 469,000 square feet of space and New Era Cap signed on for 130,000 square feet.
The second trend has been the growth of governmental agencies and their policy of leasing privately owned facilities. Over the past 3 years, 600,000 square feet of government tenants have been moved to new, privately owned, Class A buildings. The best example of this is the relocation of 280,000 square feet of Federal GSA tenants from a government owned building to the new Federal Center at 150 S. Elmwood Avenue. The two largest tenants were the Veterans Administration, which leased 85,000 square feet, and the IRS, which took 60,000 square feet.
Other new leases include Damon & Morey, which signed on for 55,000 square feet, and Cellino & Barnes, which leased up 21,000 square feet. Both firms moved within the CBD but upgraded to newer Class-A quality space.
Aside from some new movement, many tenants, who have been in the downtown Buffalo market for years, remain committed and have renewed leases. Consulate General of Canada recently renewed for 35,000 square feet and Freed Maxick renewed a 25,000-square-foot lease.
The total inventory and vacancy of downtown office space during the last 12 months has remained stable and even shown slight improvement. Currently, downtown Buffalo has 9.4 million square feet of occupied office space. Of that number, 91,762 square feet was new space absorbed in 2008. Over the last 6-year period, the downtown inventory grew by 3 percent annually. As a reference point, since 2004 downtown Buffalo has absorbed a total of 1.3 million square feet; an average of 238,602 square feet of office space per year across all classes of space.
Although we are in the midst of a slow recovery, there is every indication that conditions will improve. There continues to be significant investment and great optimism surrounding the development of the Buffalo Niagara Medical Campus, in addition to several government related development projects.
The Buffalo Niagara Medical Campus, a 100+ acre development along the northern border of the CBD, has seen several hundred million dollars of investment in Bioinformatics and Life Sciences by the institutional partners. The University of Buffalo recently announced a commitment to the development of a major educational campus wit in the campus boundaries. Kaleida Health, with the University of Buffalo, just announced the development of a 300-bed Skilled Nursing Facility and a 300,000-square-foot Global Vascular Institute. A new 200,000-square-foot medical building is also planned by Ciminelli Development.
In addition, one year following the opening of the Federal Center, the same development partnership, Uniland Development Company and Acquest Holdings, Inc., purchased the vacant government building at 200 Delaware Avenue, stripped it down to its steel skeleton and invested $85 million into its rebirth as Avant. The building, which is opening this month, is now a 375,000-square-foot mixed-use project consisting of a 150-room Embassy Suites Hotel, 40 luxury condominiums and 120,000 square feet of Class A office space.
As further evidence of Buffalo’s position as a major center of government, the new U.S. Courthouse is nearing completion. The 265,000-square-foot, 10-story structure at the Northwest corner of Niagara Square is estimated to cost $130 million.
— Jim Militello is president of Militello & Company/CORFAC International