Advancing Growth and Development in Buffalo

The most dangerous point in a recovery can be shortly after economic activity starts looking better. It can be tempting to think the hard work is done and that maybe the outlook will just keep improving, even without a continued focus on revitalization. This is exactly the point the Buffalo region is at right now.

After generations of languishing in the economic doldrums, the last several years have seen a noticeable uptick in economic activity in Buffalo and Western New York. Positive economic indicators and high-profile projects have put construction cranes on the skyline and people to work on the ground. Members of the NAIOP Upstate New York chapter have invested several billion dollars updating the city and region alongside the “Buffalo Billion” investment from the state of New York.

But the improvements have not been enough. Since the last census, 15,000 people have moved out of Western New York. Even though the unemployment percentage has improved, there are 4,000 fewer people employed in Erie and Niagara Counties. Income growth isn’t keeping up either, falling 4.5 percent below the inflation rate. In spite of the gains, the region risks losing the battle to generate growth and attract and retain millennials.

However, it doesn’t have to be this way. The Western New York region has a number of organic assets that can attract new residents. They include the Buffalo Niagara Medical Campus, SUNY at Buffalo, Niagara Falls, and our proximity to the Canadian market. Now we just need to implement the right policies so these assets can pay off.

To help set a better course, the Upstate New York chapter of NAIOP has published a white paper that uses hard data to explain the region’s current economic status and how it can best be positioned for future growth. Since it’s better to be forsomething than against everything, our recommendations include positive actions that state and local governments can take, and invite local leaders to cooperate with private sector developers to create a new vision for our community.

A key step would be to change local zoning regulations. Buffalo has made great strides and is now recognized as an attractive place for millennials to call home. But when it comes to designing new housing strategies, our area seems to be out of step with the new market forces. Too much property is zoned as single purpose, preventing a more complex use by residents. Single-use zoning should be switched to “mixed-use” that includes housing styles attractive to millennials.

While the region makes progress revitalizing our housing stock, the City of Buffalo cannot take a step backward with a proposed “Inclusionary Zoning” policy that would set aside almost a third of new housing units for “affordable housing.” In our region, housing is, if anything, too affordable. In Erie County, housing costs have grown only $179 in the last seven years. This is an extremely low rate of rent increases, especially relative to other healthy communities during the same period. Property in the city has had even less rent growth.

The low rents and slow growth has discouraged even “value-added” redevelopment of rental units to improve quality (unless there is substantial government assistance) and virtually prohibited all new construction. Governments should encourage growth by enforcing policies that remove empty houses, expand thriving neighborhoods and encourage investment in single-family homes.

It’s also important to change our approach to industrial development.

Buffalo currently has one of the lowest vacancy rates in the nation for industrial buildings, less than half the vacancy rate of many American cities, even when you include obsolete properties. However, in contrast to cities such as Phoenix, Atlanta and Chicago, which have hundreds of thousands of square feet of industrial space in construction, Buffalo has virtually no industrial space in development.

“Shovel-ready” sites and “build-to-suit” don’t work in the 21st century. In today’s economic climate, companies are not looking for a shovel-ready site that would easily take 18 months to fully build out infrastructure, complete entitlements and take possession. Rather, tenants are looking for “finish-to-suit” space that can be ready to occupy within 90 to 120 days. Builders must provide that space as a way to attract new businesses and government needs to lead in this area.

Now is the time for the region – including both government and private sector leaders – to begin mapping out a “Post-Buffalo Billion” strategy. Area leaders need to assess the economic and demographic trends that offer the best opportunities for economic and job growth, design public policies that recognize those trends, and implement the right policies to continue the momentum our region is enjoying.

Bob Richardson is the Founder and the Managing Partner of Blue Cardinal Capital. Bob is a real estate industry leader in Upstate New York and has been directly involved in the financing of many of the signature real estate projects in the region. He is a NAIOP board member and president of the NAIOP Upstate New York chapter.

Commercial real estate developers release white paper

Recommend a series of economic development policies that will continue Western New York’s economic resurgence after the Buffalo Billion

The Commercial Real Estate Development Association (NAIOP Upstate New York) presented a white paper to elected officials and representatives of Industrial Development Agencies, mapping out a series of recommendations designed to continue economic development momentum in the region.

Entitled, “The Commercial Real Estate Climate in Western New York is Undergoing Dramatic Change,” the 15-page paper examines emerging trends, places them in the context of our regional needs and goals, and recommends a series of economic development policies for public officials and economic development agencies that will continue the economic resurgence of recent years to increase wealth and job-producing activities for all Western New York communities.

“It is the belief of the Commercial Real Estate Development Association, supported by hard data, that our region is at that juncture where it needs to advance beyond the traditional approach to economic development, proactively recognize emerging economic trends and development, and implement a series of new policies to position our economy to maximize the benefits of those new trends,” said Bob Richardson, president of NAIOP Upstate New York.

The white paper is divided into five parts:

  1. The Western New York Commercial Real Estate Economy Today – Where we are versus where we think we are
  2. Three new realities of economic development policy
  3. Benchmarking the multi-family housing market – Fact versus Fiction
  4. The Buffalo Billion: What happens when it’s gone?
  5. Existing approaches to a swiftly evolving marketplace

The white paper notes current Industrial Development Agency policies regarding incentivizing housing and spec buildings are not in line with market forces for ready-to-go industrial space, the relationship of business following millennials, and the need to have an proactive housing policy.

It concludes with six recommendations:

  1. Develop and execute a single regional comprehensive plan for retention, attraction and support for millennial residents.
  1. Allow PILOT agreements and tax abatements for multifamily housing developments within high density zoning.
  1. End single-use zoning and allow buildings which formerly had single use to be adapted to mixed use that includes housing styles attractive to millennials.

  2. Industrial Development Agencies and other government entities should immediately complete the infrastructure and entitlements for industrial properties which they own and commence RFPs to encourage the private sector to begin construction on industrial property.

  3. Immediately allow PILOT and other tax incentives for speculative industrial developments without tenants.

  4. Take steps to correct the inverted housing market including removing housing stock, expanding the boundaries of thriving neighborhoods and encouraging investment in single family houses.

Regarding the business climate after the Buffalo Billion, the white paper states, “Governor Andrew M. Cuomo’s commitment to revitalizing the Western New York economy is indisputable.  The governor has backed up words with a solid list of actions and accomplishments since taking office.  Getting state government to recognize the seriousness of the economic weakness, the history of government neglect, the positive impacts a recovery would produce for the region and the entire state and then backing it up with real and significant financial resources has given our region and economy a huge economic boost.

“It was never the governor’s intention to get Western New York perpetually reliant on state funds, but rather to jump start and stimulate the economy so that it could begin producing jobs and wealth through the private sector.

“The governor’s vision and goals have been met on both fronts.  In addition to the infusion of more than $1.5 billion from New York State, the private sector has invested additional private capital during the same period on a wide range of highly visible and game changing projects, i.e. Delaware North headquarters, HarborCenter, Conventus and many others.”

“Now is the time for area, government and private sector leaders to begin mapping out a ‘Post Buffalo Billion’ strategy,” Richardson said.  “This white paper advises local leaders to assess the economic and demographic trends that offer the best opportunities for economic and job growth, design the best public policies for maximizing those trends and implement the right policies to continue the momentum started under the Buffalo Billion.”

The white paper was previewed for members of area IDAs (Clarence; Hamburg; Cheektowaga; Cattaraugus County; Chautauqua County; Cheektowaga Community Development Corp.; ECIDA, City of Buffalo) on Sept. 12 and presented to area elected officials and their staffers on Sept. 26.

Rowley's Rochester Report 2018

Joe Rowley with Bob Richard, NAIOP Upstate New York preisdent.

While job growth in Rochester and Western New York is somewhat stagnant, the view for commercial real estate developers is moving in the right direction according to Joe Rowley, Managing Broker, SVN | Realty Performance Advisors, who delivered his Rowley’s Rochester Report 2018 to NAIOP members and guests at Locust Hill Country Club on Jan. 25.

“Retail, office and industrial vacancies are down,” Rowley said.  “It is great to see the revitalization. Some spaces that have been vacant for a decade are now occupied.”

Over the last 18 months, Rowley and the team at SVN have generated over $50 million in sales and leasing.

Rowley said dozens of Rochester-area businesses are expanding, going through a laundry list of developments in Rochester and its surrounding suburbs: 

General Electric announced it will keep its Rochester plant open, retaining all 90 employees. “We have a lot of high tech individuals in the workforce, a great testament to the Rochester market.”

About 2,000 new residential units are coming online in Rochester.  “While it’s a pretty minimal amount,” Rowley said the new housing products are focusing on amenities, which renters are looking for.

Eastman Business Park has about 60 tenants.  “When you add up the former Kodak companies, there are still 20,000 to 30,000 employees there.”

Rowley said bonuses being handed out by U.S corporations (a result of the federal tax cut) could impact Rochester commercial real estate developers: “I think there is going to be a trickle down, hopefully in New York state.  We are open for business. It’s a question of how competitive we can be against the rest of the country.”