Buffalo, New York Industrial Market


Since the beginning of 2007, most industrial activity in the greater Buffalo, New York, market has involved buyer-users. Leasing activity has slowed, perhaps because it is still cost effective for most companies to purchase facilities under the current lending rates. Additionally, the Buffalo market is not traditionally a speculative market, as landlords and/or user-owners build as demand dictates. Consequently, the market is not typically flooded with excess industrial space.

For example, in 2006, overall vacancy in this market dropped to 8.3 percent. This was a decline from 9.8 percent in 2005, with just under 1.2 million square feet of space absorbed by the market. While this is a small amount relative to the high-velocity activity seen in primary industrial markets, Buffalo’s inventory of contemporary, functional facilities only totals approximately 63 million square feet. Although vacancy declined in the past year, rental rates have largely remained stagnant. Manufacturing and warehouse space of varying degrees of quality can be leased from $3 to $5.25 per square foot, triple- net, in most submarkets. Flex space can typically be leased from $5 to $7.50 per square foot, triple-net. Obviously, all of these prices are contingent upon the quality of the space, the required build-out and the lease term. 

Perhaps, most surprisingly, the majority of the activity in the Buffalo market is still driven by manufacturing. Similar to the rest of the country, the manufacturers that are surviving (and in some cases, thriving) are those with a higher technology focus.  Manufacturers of medical devices, transportation equipment and industrial machinery are among those succeeding in western New York. Within the transportation equipment category, automotive manufactures, such as General Motors, Ford, Delphi, American Axle and Visteon, are all represented in western New York, sometimes with multiple facilities. Fortunately, this market has largely been able to weather the troubles of the domestic automotive producers, with only Visteon closing a local manufacturing facility.

In the context of warehouse/distribution, western New York is largely serviced by facilities of 150,000 square feet or less. Most distributors locate here to service local customers and/or those located in southern Ontario, Canada.

Product distribution may become a larger component of the industrial market as rail continues to regain prominence. There currently are three intermodal rail yards in western New York, with CSX Transportation beginning construction on a fourth in Lackawanna, New York.

Looking forward into 2007, the Buffalo market will likely experience incremental growth, with new construction remaining tenant driven. This is keeping with historic trends, as the market continues to evolve away from its heavy manufacturing roots. The future of industry in western New York clearly lies with higher technology manufacturing, and, taking advantage of Buffalo’s transportation infrastructure, particularly its geographic link to greater Toronto, Ontario, Canada, and metropolitan New York City.   

— Tony Kurdziel is market analyst for CB Richard Ellis in Buffalo, New York.

©2007 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.

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