NORTHEAST SNAPSHOT, SEPTEMBER 2011

UPSTATE NEW YORK INDUSTRIAL MARKET

High tech development in the “Tech Valley” portion of New York State has the market poised to begin accommodating the needs of companies that support and supply the high technology manufacturing industry.

In Malta, New York, which is near Saratoga Springs, the construction of the new $4.6 billion Global Foundries chip plant has created a need that is unfulfilled. The support functions for this plant, along with the related supply functions, will cause an unprecedented demand for high tech space that can be flexible in its format to accommodate the needs of the users. In addition to current development, there is a rumor that Global will construct the second module of the three approved and planned for Fab 8 at the Luther Forest Technology Park in Malta. Considering this information, the stars seem aligned to bring substantial growth in the high technology category to Upstate New York.

Tech Valley, which runs from the lower Hudson Valley to Burlington, Vermont, is being developed with some of the most sophisticated elements of technology in the world. Sematech’s world headquarters is in Albany, New York, at the University at Albany. The College of Nano Scale Science and Engineering is located at the university, and Rensselaer Polytechnic Institute is in Troy, New York. These institutions have created a hub of research, development and manufacturing in the semi-conductor industry at the geographic center of the valley. This cluster of high technology and semi-conductor initiatives in Upstate New York has created an opportunity to meet the needs of the users of industrial space for servicing the high tech industry.

Industrial real estate usage — both buildings and land — is about to make a major turn. Meeting the needs and the requirements of the support and supply companies tied to these high tech users will result in increased demand for space that can be flexible enough to change with the speed of the industries it is going to serve — or be adapted to the needs of the high technology industries. This is a portion of the market that has not been on the radar of most developers until recently. Now the need is here and it will continue to expand. The exponential levels of growth that will come from this cluster in New York could prove more meaningful than ever imagined.

The market is now in a quandary in terms of where the rent numbers will need to be to support this new development effort, while incorporating the necessary attributes of the building in order to meet the changing demands of the industries that will be the occupants. The development community will need to address the requirements of the support function for a plant of this magnitude (nearly 1.3 million square feet). Companies related to the semi-conductor industry will need to have a presence in the market, while delivering their goods and services to this facility, which should be completely operational by 2013.

The impact to the market in Upstate New York will be significant. As the buildings, that more closely meet the needs of the support companies, are absorbed by the first wave of the users, a secondary level will evolve to meet the needs of the remainder of the market. The existing inventory of buildings with high cube/large bay space is very limited in most of the locations they will need to be in. This lack of adequate facilities will give rise to new development to meet this need, while providing newer, more modern facilities in areas that have not had high levels of development within the past decade. Development will result in demand for land to accommodate these buildings in locations not previously supporting these types of uses. The result will be increasing land values and higher rents to support the new development format.

The western portion of the state has a substantial number of buildings, but not many that would meet many of the needs of the users. While warehouse/manufacturing rents remaining stable, those high tech companies that can adapt their needs to operate within the confines of the standing inventory will find some bargains. Companies that need high floor loads, large bay spacing, high ceilings, and vibration-free environments may experience difficulty in locating adequate facilities. This spells good news for those who can adapt existing buildings to these needs, or develop new ones to accommodate those companies that will be supporting and servicing the high tech industries as they move into and expand in New York State.

— Howard Carr is president of The Howard Group/TCN Worldwide

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