Ira Korn, Genesee Commercial Realty/CORFAC International.
Rochester’s story is similar to those of other cities with once prominent downtowns. Starting in the 1970s, businesses and families largely fled to the suburbs as newer and nicer suburban offices were built. Larger companies, including many staple downtown dwellers such as large law and accounting firms, left the downtown in search of free parking, shorter commutes and a suburban lifestyle for their employees.
Yet Rochester was a small city with big businesses. Bausch & Lomb was founded in Rochester in 1853. Eastman Kodak started business there in 1888 and beginning in 1906, Xerox Corporation was formed.
Kodak is still based in Rochester, though it is a much smaller entity than it was before the digital era, and Xerox moved to Norwalk, Connecticut, years ago. However, the core technology culture never left Rochester. Over the past few years the University of Rochester — the area’s largest employer — received more than $1.9 billion in research money, most of it from the federal government.
Organizations like High Tech Rochester, Greater Rochester Enterprise and the Rochester Downtown Innovation Zone have played important roles in the region’s comeback. In 2015, the Rochester region won a nationwide competition and was named the site for the American Institute for Manufacturing Innovation, focusing on the increasingly important field of integrated photonics that is used in telecommunications and lasers. This public-private partnership — which has been renamed the American Institute for Manufacturing Photonics, or AIM Photonics — is projected to have far reaching implications for the region.
Vibrancy, and just as importantly, new construction, are returning to the downtown.
The once showcase Midtown Plaza, a downtown mall that has been mostly vacant in recent years, is being redeveloped into a Tower280, a mixed-use property with high-end residential lofts, as well as some office and retail space.
A new community college campus will be delivered soon downtown in a repurposed former Kodak facility, which will bring an additional 5,000 students into the city during the day.
The improvement in the CBD office market is due to a combination of stronger leasing activity as well as an increasing amount of office space being converted to residential units. Gallina Development Corp. is converting the former Chase Tower into a mixed-use building, with mostly residential space. WinnDevelopment is converting a portion of The Sibley Building into residential space under a new name, Sibley Square.
CBD Activity on the Rise
AIM Photonics recently selected Legacy Tower as its business headquarters, and some of the 400,000 square feet of offices at The Sibley Building will become home to a workforce development center. High Tech Rochester, an IT economic development incubator, has begun construction on the first floor at Sibley Square and plans to occupy 68,000 square feet when construction is completed. The incubator will house office space for high-tech startups, wet labs for biotech startups and related entrepreneurs.
Bergmann Associates has committed to becoming an anchor tenant at Tower280. Rochester developer Buckingham Properties is behind the 400,000-square-foot project, which will include ground-floor retail, nearly 80,000 square feet of office space, and 182 contemporary residential units.
Gannett Newspapers recently doubled down on its commitment to Rochester and constructed a new downtown Rochester headquarters. Centrally located between Midtown and Sibley Square, the Pike Company delivered this striking building which complements neighboring Windstream, Metropolitan and Midtown Tower areas.
Lu Engineers, which has been suburban-based since the 1980s, relocated its operation to downtown in April. The environmental and transportation civil engineering company leased approximately 5,700 square feet at the Fitch Building.
Class A CBD product leases from $28 to $32 per square foot and downtown Class B office options range from $12 to $18 NNN per foot, plus parking.
While there has been significant momentum to repopulate the downtown, challenges remain, including a shortage of parking and a reluctance by local businesses and consumers to pay for parking. Even as overall office absorption improves, tenants still have the upper hand in lease negotiations because there are many affordable suburban choices with free parking.
In addition, the Greater Rochester suburban office market has seen the delivery of new and attractively priced office buildings in recent years. Over the last decade, Buffalo-based developer North Forest Office Space has built product that rents from $13 a foot (gross) with lease terms of 36 months.
Compounding the challenge for CBD landlords to lure tenants to their office space, companies such as LeFrois Builders and Developers have been delivering suburban flex-office space for over 20 years. Second-generation options range from the $11 to $13 NNN per foot with lower operating costs and taxes than office buildings within city limits.
— Ira Korn, CCIM, Founder and Principal, Genesee Commercial Realty/CORFAC International. This article originally appeared in the October 2016 issue of Northeast Real Estate Business magazine. To subscribe, please visit www.francemediainc.com/publications.