NORTHEAST SNAPSHOT, JULY 2005

Buffalo and Rochester, New York, Industrial Market

The Buffalo/Rochester area of New York has long been a popular locale for distribution companies with ties to both the United States and Canada. And that remains the case now, as logistics companies are driving continued industrial real estate activity throughout the region. “Logistics companies are absorbing a majority of the space as our proximity and easy access to the international border between the United States and Canada is always appealing,” says Robert McDonnell, director of business development for Ciminelli Real Estate Corporation and Ciminelli Development Company.

Recently, prospective tenants have focused their attention on securing large blocks of logistics and manufacturing space greater than 30,000 square feet with ceiling heights in excess of 20 feet and demanding low base rents in the neighborhood of $3.50 triple-net per square foot. Rental rates for industrial product in the area typically range from $2.50 to $7 per square foot.

Another trend, according to McDonnell, is the acquisition and conversion of dilapidated and functionally obsolescent industrial facilities in downtown and suburban areas into flex and Class A office space. This is helping take some of the less desirable industrial product off the market and lower vacancies.

The existing inventory is well occupied — large blocks of more than 25,000 square feet have a vacancy rate of 8 percent and smaller blocks of space are averaging a 12 percent vacancy.

As for new development, Ciminelli Development Corporation recently completed a 100,000-square-foot build-to-suit project at Colvin Woods Business Park on Colvin Boulevard in Tonawanda, New York, as well as a 110,000-square-foot expansion to Airport Commerce Park at 475 Cayuga Road in Cheektowaga, New York. Property owners and landlords are seeking warehousing and manufacturing tenants that wish to be located near the border and various transportation options. A majority of the development is taking place in Cheektowaga near the Buffalo Niagara International Airport. “Properties around Cheektowaga are benefiting from excellent access and close proximity to the airport itself,” says McDonnell.

In the near future, McDonnell believes that the Lancaster/Cheektowaga corridor surrounding the airport will continue to be a center of activity due to the cost of available land parcels and because it enjoys access from nearly every corner of Western New York.

As long as the Western New York market provides intermodal transportation options and easy access to and from Canada, the industrial market should have no problem attracting warehouse and distribution users to the area. With low vacancies rates and the potential to grow out into the available land in suburban submarkets, the region should experience strong activity through 2005.

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