Last fall talked about shovel ready sites and the impact that this designation of real estate development had on BNE’s economic development attraction efforts, primarily outside our urban core. This month I would like to share some thoughts on the past, present and proposed development in downtown Buffalo.
Longtime residents or newcomers to our community might very well be surprised to learn that over the last decade 83 different development projects have successfully been completed in downtown Buffalo. Covering a wide array of uses ranging from office and mixed use to commercial, residential, tourism and research & development space, these new structures are distributed across the geography of our central business district, the Buffalo Niagara Medical Campus, the Canalside/Waterfront district, the Larkin District and the fruit Belt Infill & Redevelopment area. Just as remarkable is the more than $1.3 billion of investment associated with these projects in what can accurately be depicted as an impressive resurgence of development in New York State’s second largest city.
In both real estate and economic development, new potential investment often follows prior investment. This dynamic is supported by the additional 20 development projects currently under construction in the city limits that represent an approximate investment of $339.7 million. But it doesn’t end there. Another 29 proposed projects are in the early stages of the development process representing an additional minimal investment of $577.5 million across the City of Buffalo. So what can we discern from all of this development completed, underway and in the pipeline?
First, smart business people with money to invest (a rare thing in a lingering recession) are betting that our region is a good place to invest their hard earned dollars. Developers and companies considering expansion are extremely risk averse. The fact that so many projects with such large price tags are in, underway or contemplated for downtown Buffalo is a tremendous message to the economic development industry outside our community. It speaks to the legitimacy of our potential in targeted industries like life sciences, advanced manufacturing, advanced business services and tourism/hospitality. It is a compelling story that BNE tells as part of our marketing and business development outreach efforts and it is well received by our audience.
With this type of success come new challenges, some of which were revealed in the 2012-2013 Annual Market View presented by CBRE Buffalo. This comprehensive review of four key commercial segments showed declining vacancy rates in office and industrial space. These two markets share a cyclical cause and effect relationship with BNE. If we succeed in our mission, available real estate comes off the market. In order to succeed in our mission, we need available office and industrial space on the market.
Growth in the expanding health care industry is contributing to the increased absorption in office space, an encouraging sign for the region’s life sciences industry and our attraction efforts there. Even with the exodus of major tenants from the 38-story One HSBC Center, office space is not expected to be as plentiful as it has been in recent years. The 9.3 percent vacancy rate in our central business district is well below the national office rate of 15.5 percent. Our ability to successfully place prospects into desired office space will be directly impacted by how quickly current and proposed projects come on line, and to what degree the trend of renovating older and historic buildings in the city continues.
Even more challenging to our attraction efforts is the steep drop in the industrial vacancy rate which is compounded by the fact that no new industrial space is anticipated to come on the market for at least the next twelve months. That means companies who don’t have the time or the resources to build new may find it difficult to accommodate their needs in the pool of space remaining. Despite all the new development I referenced earlier, new industrial construction would be a great addition to our tool-kit.
The degree of downtown development in a community is a widely considered variable in the economic development and site selection industries. So much so that the development maps we maintain on our BNE website have become vital pieces of the marketing collaterals we provide to our client prospects. To get a better sense of the downtown/economic development in our community, check out our two new updated maps, one that identifies these projects based on the various stages of their completion, and the other that identifies these investments by their industry type.