Upstate New York Retail Market

Despite mixed economic news for the region, the Upstate New York retail market shows growth in pharmacy and big box market segments.


In Syracuse, the massive Destiny USA mixed-use project remains delayed by on-going negotiations with governmental jurisdictions. If constructed, the overall project would rival the Mall of America as one of the largest shopping and entertainment destinations in the country. At the same time, major de-malling projects continue to be active with the former Camillus mall being converted to an open strip shopping center anchored by a Wal-Mart Supercenter and a Lowe’s Home Improvement Warehouse. Previously converted malls include Penn Cann, which is now Driver’s Village and the Fayetteville Mall, now  the Target-anchored Towne Center. Target has also announced a plan to re-anchor the Wal-Mart position at the Fairmount Fair shopping center.


In Rochester, Wal-Mart Supercenters are driving new strip center development with two proposed in Greece and one in Victor. In suburban Webster, COR Development’s Towne Centre debuted in 2005. The 600,000-plus-square-foot center is anchored by Target, Kohl’s and a future Wegmans superstore. Also in 2005, the former Irondequoit Mall was purchased by Bersin Properties, a Rochester-based development company. Recent retail additions here include Steve and Barry’s University Sportswear, which occupies a portion of the former JC Penney store, and a new freestanding Target is under construction. In January, Wegmans Food Markets announced that it would exit the home improvement business and close its twelve Chase Pitkin stores. This decision adds significant available inventory to the retail market, but most experts agree these vacancies in well anchored centers will provide strong prospects for retenanting. In the pharmacy sector, Walgreens is actively pursuing at least a dozen signalized corner locations in suburban markets, and their first store in this market recently opened in the town of Gates.


In the greater Buffalo market, Bass Pro Shops announced plans to build a store at the auditorium site in downtown Buffalo. The new store is due to anchor a significant mixed-use development at this site. Like the other upstate markets, new development in Buffalo is being driven by Wal-Mart Supercenters and Walgreens pharmacies. Wal-Mart has announced plans to build a new Supercenter in Hamburg, and Walgreens is looking at numerous sites across the trade area. In the suburban town of Amherst, Benderson Development has acquired the 30-acre Buffalo Shooting Club property where it is proposing a $40 million mixed-use development, which would include upscale shops, offices and a new hotel. All three markets continue to experience strong investment activity in all sectors of the market place. Cap rates are historically higher than in first tier markets and stable vacancy rates continue to drive strong investment activity. 

— Andrew Dollinger, Associate Broker, CB Richard Ellis

Upstate New York Industrial Market

The Western New York manufacturing sector continues to redefine itself. The days of labor-intensive manufacturing operations are being displaced in favor of manufacturing processes using state-of-the-art manufacturing technologies. These areas include food processing, medical products manufacturing and research, as well as steel fabrication and automobile parts assembly.

Upstate Milk has just completed the construction of a new 200,000-square-foot, $30 million manufacturing facility, incorporating technologies that improve productivity and quality. This new facility is located in Commerce Business Park, a development geared to light manufacturing, warehousing and distribution.

Colbey Steel, located in the Buffalo Lakeside Commerce Park, currently has 90,000 square feet under construction, which represents a total investment of more than $10 million. This is the second large manufacturing entity to locate in this Business Park, CertainTeed Vinyl Fencing being the first, whose 200,000-square-foot facility is now online. CertainTeed’s parent company, Saint Gobain, an international manufacturing conglomerate, chose Buffalo as its preferred site to grow and consolidate CertainTeed’s operations, a signal that companies from outside the area are finding Buffalo a unique place to invest in manufacturing operations. A skilled work force, positive work ethic and geographic location all contribute to Upstate New York’s attractiveness.

Hauptman Woodard’s new $30 million medical research facility is operating in conjunction with the Center for Excellence in Bioinformatics, The Roswell Park Cancer Institute and the State University at Buffalo School of Medicine.

The city of Buffalo and the state of New York have teamed up to create the Buffalo Lakeside Commerce Park. Already experiencing success, Phase I, with more than $10 million invested in infrastructure and site preparation, has created 70 acres of shovel ready land. Phase II will create an additional 20 to 60 acres of shovel ready land for development. The Brownfields Incentive Program, designated as an Empire Zone and  offering ECIDA incentives, make this Business Park unique.

Well-established, local developers continue to market their properties. In some cases, projects are tenant-driven facilities built to suit the specific needs of the client. Other developers are constructing flex-type space that could be used for warehousing, distribution or light manufacturing. A positive signal in the marketplace is the continued efforts on the part of all developers to create and maintain an inventory of shovel ready sites. Geographically speaking, those sites are located both in the inner city of Buffalo, as well as the surrounding suburban ring. These locations provide direct access to Interstates and routes to Canada, making it easy for anyone to capitalize on the existing highway systems.

Overall growth has been conservative, yet positive. Low vacancy rates, competitive rental rates and development costs continue to make Western New York an attractive area to grow one’s business.

— Joseph Giusiana, Hunt Commercial Real Estate Corp.

Upstate New York Multifamily Market

From garden-style product with direct access garages to mid-rise and high-rise developments focused around geographical attributes, residents of Upstate New York have several housing alternatives available for both rental and ownership. With the impact of the housing boom being felt throughout just about every sector in the housing market, the upstate market is just now coming into its own in terms of the newest multifamily formats, for both rental and sale. From the market demands fostered by empty nesters and baby boomers looking for housing alternatives to the increased employment resulting from the high-tech industries, the market is once again showing signs of growth and increased demand.

Due to the lack of higher paying employment opportunities, many of the upstate markets have been lagging behind much of the major population centers along the Northeast corridor. However, as high-tech initiatives gain more momentum in the upstate markets, we have begun to see increased household formation than had been experienced previously in the region, especially in younger age groups.

From Buffalo to Albany, from Glens Falls through the lower Hudson Valley and the northern edges of the New York City metropolitan market in Westchester, Putnam and Rockland counties, we continue to see expanding housing markets, especially in the multifamily formats.

Within the last 5 years, the greater Albany/Schenectady/Troy market has had more than 1,100 new units developed in various multifamily formats. Condominium development continues to gain momentum as about 400 units are under construction or proposed to begin construction this quarter. In the cities of Albany, Cohoes and Troy, loft redevelopments such as Harmony Mills, Powers Lofts and the new mixed-use projects proposed for North Albany have sparked new interest in alternative living formats in the urban environment.

Buffalo continues to make strides, mostly in the rental market, with rents holding in the $1.00-per-square-foot range for most of the updated and newer products. Some isolated properties are garnering higher numbers as they reflect the desired product for the aging baby boomers and those looking for new style urban alternatives. The bulk of the new development has been in garden-style rental and condo product, while the for-sale market continues to support condo products featuring direct access garages and amenities-driven formats.

The central portion of the state, including Rochester and Syracuse, is also finding a receptive market to the alternatives of newer design. Projects that feature direct access garages and on-site auto storage, coupled with modern design, are showing improved performance in terms of rents and desirability. Holding these performance levels may prove difficult if the employment market were to experience any major setbacks, but for the foreseeable future, the market indicators remain strong for stability and growth in those sectors which are most sought after.

Syracuse in particular has shown strength in terms of being able to support new development. Urban redevelopment efforts continue in this market as developers bring loft style and higher-end urban alternatives at rents unheard of in the past. With the success of these new products, higher density condo alternatives are sure to show improved performance levels.

The Hudson Valley area continues to impress the development community. As the need for housing increases due to the rental and cost pressure from the New York City market, the number of high-density, multifamily developments continues to grow. With an excellent commuter transportation system, the Hudson Valley has taken on a new appeal with housing alternatives in all sectors, specifically multifamily formats. The market has shown huge growth with housing alternatives in all sectors, and because of the costs related to ownership and commuting expenses, the area offers a wide range of alternatives for both primary and secondary homes.

While these markets continue to grow, the pressure to zone land that will provide the needed housing continues to mount going into the future. These markets will prosper into the future because the fundamentals for continued growth are sound and the barriers to entry remain. High single-family home prices, increased development costs, job growth, skilled labor, new employment initiatives and a lower cost of living will provide for continued growth well into the future.

— Howard Carr, President, The Howard Group, TCN Worldwide

Upstate New York Investment Market

Across Upstate New York, a hot investment market has maintained momentum through 2005 and early 2006. The market is driven by an abundance of equity capital seeking returns in secondary and tertiary markets that are no longer obtainable in the primary metro markets. The upstate markets, including Albany, Syracuse, Binghamton, Rochester and Buffalo, have experienced common trends — notably a dramatic shift away from locally-based, private ownership to out-of-state REIT’s and to private investors from downstate. Demand for multifamily has been unabated, driving prices per unit upward and cap rates downward. In contrast to primary metro markets, upstate cap rates have not fallen through the floor of 8 percent. Also notable is the absence of the condominium conversion impetus. Activity in the suburban submarkets has been strong and larger complexes are sought aggressively. The largest multifamily transaction in 2005 was the sale of 2,700 units in Clifton Park and Malta (north of Albany) by locally based DCG Development to private investors from New York City. The Buffalo suburbs experienced multiple transactions of 100-plus units, including two in Amherst and one in West Seneca. In the Rochester suburb of Greece, the 267-unit Grecian Gardens sold in 2006 to Coolidge Equities, a downstate private investment group. In Binghamton, the student housing niche market has captivated downstate investors, resulting in the disposition of numerous properties and several portfolios, including 89 units that sold for $2.02 million and a 238-unit mix of student and garden-style apartments, which currently are under contract.

Suburban retail property has generated frenetic activity. REIT acquisitions from privately-held upstate developers have included five suburban Binghamton plazas sold by Vestal’s Newman Development Group to a group led by Kramont Realty Trust of Conshohocken, Pennsylvania, for $80.1 million; the blockbuster sale in 2005 of 18.8 million square feet by Buffalo-based Benderson Development Company to Ohio’s Development Diversified (DDR) for $2.3 billion, 80 percent of which is concentrated Upstate and in New Jersey; and the $2.33 billion sale in 2005 by Rochester’s Wilmorite Properties to Macerich Company of California, consisting of eleven regional malls, including two in Syracuse totaling 2 million square feet, and five Rochester centers.

Typical of the private investor deals were the Buffalo area sales of the 84,000-square-foot Grand Island Plaza for $4.3 million and a 120,000-square-foot Amherst center for $10.3 million to out-of-state buyers. In central New York, New Plan Realty of Manhattan offered upside potential in the sales of four plazas, ranging from 76,000 square feet to 144,000 square feet. Berkley Properties, another New York City investor, acquired eleven retail and two industrial properties from Syracuse developer Michael Muraco for $16 million. Suburban office developers have capitalized on high occupancy rates to entice investors into upstate markets. Most significant among the office investment deals was the 2006 sale by Widewaters Group of 24 properties in suburban Syracuse and Rochester to HRPT Properties Trust of Newton, Massachusetts — a total of 1.4 million square feet of Class A space. Albany-based Columbia Development Group sold its 60,000-square-foot Binghamton area office park, Carpathian Hills, to a New York City investor for $3.9 million. In the largest CBD sale in upstate New York in 2005, Marine Buffalo Associates sold the 896,000-square-foot HSBC Building in Buffalo, which is 80 percent occupied by the anchor tenant, to a New York City investor for $85 million. Another downtown landmark, the 226,000-square-foot Frontier Building in Rochester, sold in May 2006 for $26.4 million to Newkirk Realty. In general, investors in the central business districts have tended to be more entrepreneurial, more local and more focused on redevelopment of older commercial properties via residential conversion. Industrial sales have played a relatively minor role in investment activity upstate. The potential for more sale-leasebacks and dispositions of new build-to-suit properties could fuel additional activity.

— Maureen Wilson, NAI Pyramid Brokerage

©2006 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.

Search Property Listings

Requirements for
News Sections

Market Highlights and Snapshots

Editorial Calendar

Today's Real Estate News