Buffalo Niagara Commercial Real Estate: Good Challenges, Great Opportunities

by Tom Kucharski, BNE President & CEO

Buffalo Niagara has had one of the country’s most affordable commercial markets since the 1980s, when manufacturing decline, sprawl and economic uncertainty depressed the area’s real estate values. Now, however, as the local economy’s gained a level of momentum not seen in 60 years, what’s the impact on commercial real estate?

From 2012 to 2013 Buffalo Industrial Market experienced a sizable decrease in the overall vacancy rate, decreasing from 9.2% to 5.7%. The 2013 results mark the eighth consecutive year the Buffalo Industrial Market vacancy rate has remained below the national average, currently 11.7%. (CBRE, Inc. U.S. Industrial MarketView Q3 2013).

The region’s growth and expansion has caused a decrease in vacancy rates, driving factors behind new medical and office developments from the south campus of the University at Buffalo through the Buffalo Niagara Medical Campus. And brownfields between Buffalo and Lackawanna, as well as several northward through Niagara Falls, are bursting to life with facilities to support advanced manufacturing and future-looking technologies. Local development is currently estimated at approximately 700,000 sq. ft. of new construction planned for the first and second quarter of 2014.

Offices are filled with employees, of course, and we’re also seeing subsequent demand for residential properties, particularly mid- and high-end rentals. More people means a need for more service-oriented businesses, too, like coffee shops, restaurants and grocers – providing opportunities for small business entrepreneurs and a need for refurbished, ground-level spaces. Residential and commercial vibrancy also creates a more robust destination for tourism and recreation, and cranes are high in the sky with ongoing work at Canalside and the hockey-centric HarborCenter development.

This low vacancy rate may also be an opportunity for developers. Steve Blake, a partner in CBRE Buffalo expects the 3rd quarter/2013 vacancy of 5.7% to tighten even further by the end of 2014. Blake recently commented that, “This will inevitably result in higher lease rates and require longer lease terms as tenants turn to developers for new product to  meet their demands. While the Buffalo industrial market rarely has ‘true’ speculative development occurring, with market conditions there is a good probability that by simply publicly announcing a proposed, high bay, distribution warehouse project, a developer will have a good chance of pre-leasing a major portion of that project”.

Overall, while the market is stronger than it has been in decades, strategic reuse of existing buildings coupled with targeted new development means that commercial properties in Buffalo Niagara will continue to be attractively priced while still reflecting the region’s economic and cultural resurgence. And with potential support through “Buffalo Billion” allocation and the STARTUP NY Tax-Free Zone program, there’s unprecedented financial support for Buffalo Niagara business development.

Comprehensive sector overviews and up-to-date listings of new construction and redeveloped properties, available brownfields, and shovel-ready sites can be found in the Real Estate section of the BNE website. Our team also offers a range of services including assistance with financing and incentives to help new, relocating and expanding businesses take advantage of one of the country’s most affordable and dynamic commercial real estate markets.

 

 

 

 

 

 

 

 

 

Revitalizing Former Industrial Land

by Jenna Kavanaugh, Marketing Director

The last decade has seen the Buffalo Niagara region have a new spirit of collaboration through public and private partnerships that focus on creativity, flexibility and a shared vision with strategic and attainable goals for business and community development.

RiverBend, a 200 acre urban redevelopment project on the
Buffalo River.

New projects include the evolution of the region’s manufacturing base from its steel roots to clean technologies and advanced manufacturing. Brownfield redevelopment and innovative reuse projects have resulted in the transformation of former industrial land into vital business communities, such as Buffalo Lakeside Commerce Park.

Plans have also been developed to create a 200 acre urban redevelopment on the Buffalo River featuring sustainable mixed-use development and a multi-modal transportation.

The site, RiverBend, and the surrounding Buffalo neighborhood was previously home to the city’s heavy industries, including Republic Steel. Relics of the former era remain in the form of industrial structures – historic grain elevators, bridges, and iconic structures that mark the skyline and establish a distinctive visual identity for RiverBend, unique from downtown and other areas.

Learn more about plans for RiverBend at http://www.ecidany.com/budc-riverbend.

How Real Property Can Provide a Real Tax Benefit

Guest Blog: By Robert J. Bauer, CPA, Principal, Tronconi Segarra & Associates LLP

It’s not often that a company can use real property to significantly decrease its tax obligation and increase its cash flow. However, businesses that have recently or plan to construct, renovate or acquire a facility do have an opportunity to maximize the tax benefit of these capital costs, and potentially increase their cash flow.

This opportunity comes in the form of a Cost Segregation Study, a formal accounting-engineering process designed to accelerate depreciation deductions on the component parts of real property. As a result of having a Cost Segregation Study performed, a business can reduce its tax liabilities for the current and future tax years and free up those previously designated tax dollars for business expansion, to improve cash flow, or to pay down high-interest debt.

Whenever a business constructs a new facility, a Cost Segregation Study can be done simultaneously with the construction so that the tax advantages can begin immediately upon completion of the building. This is perhaps the most simple and straightforward type of Cost Segregation Study, because the property’s components are brand new and more easily identifiable.  A Cost Segregation Study can also be performed when an existing building undergoes major capital improvements, for example, due to renovation or a build-out.  Businesses can also have a Cost Segregation Study done when they acquire and take ownership of an existing facility. Finally, there is also an opportunity for businesses to perform a Cost Segregation Study on property acquired up to 15-years ago and “catch-up” depreciation in the current year.

Wetlands & Site Development

Lesta Ammons, a biologist from the US Army Corps of Engineers’ Buffalo Branch, spoke at this month’s breakfast meeting of the WNY chapter of the New York State Commercial Association of Realtors (NYSCAR). The topic of wetlands is a critical concern for commercial real estate and site development. While the issues of wetlands can pose challenges to site development, being properly educated and prepared can help mitigate any development delays.

– What are wetlands and why are they important?

3,281 – Number of Shovel Ready Acres In Buffalo Niagara

Thomas A. Kucharski, President & CEO, Buffalo Niagara Enterprise

Click on the map above to learn more about Buffalo Niagara Shovel Ready Sites

If you follow BNE’s reporting of our project wins, you may have heard us refer to a company selecting a “shovel ready” site for their expansion into our community. This designation significantly impacts our economic development and attraction efforts.

The title “shovel ready” is granted to sites deemed ready for new development and job creation.  The designation means that the owner or developer of the site has worked proactively to address major permitting issues prior to a business expressing interest in the location.  This advance work creates a site where construction can begin rapidly.  As part of New York‘s formal application process, each site formally certified by the state is reviewed to match the needs of growing industries and commercial interests.

Today there are a total of 3,281 shovel ready acres across our region.  Roughly 2,200 of these acres are on prime development sites primarily in Genesee, Orleans, Niagara and Erie Counties and virtually all of these acres are currently being marketed.  The remaining balance of a little more than 1,000 acres has actually received formal certification status from New York State.  These acres are spread across ten sites and include 656 acres in Erie County, 247 acres in Niagara County and 140 acres in Chautauqua County.  Of this land, 830 acres are being marketed.

Business leaders, site selection consultants and corporate real estate executives nationwide recognize the shovel ready designation as a mark of excellence because they know that these pre-permitted sites will reduce construction costs and development delays, and greatly reduce risk, saving them time and money.

The value shovel ready sites add to an economic development organization’s marketing message and the competitive advantage they offer a region are tremendous.  This is proven by the fact that two of the largest and most impactful projects that chose our region recently did so in large part because of their ability to access a shovel ready site – the Genesee Valley Agri-Business Park in Batavia.

In October 2011 Alpina Foods broke ground on their $15 million manufacturing facility where they anticipate creating 50 new jobs.  This week, less than twelve months after breaking ground, Alpina held the grand opening of their first North American facility.  Last month Muller Quaker Dairy, a joint venture between PepsiCo and German based Theo Muller Group, announced their plans to invest $206 million and create 186 new jobs with the construction of their new yogurt manufacturing facility.  The 211 acre shovel ready agri-business park was selected over 50 different sites nationwide, and Muller Quaker plans to be fully operational by next summer.  Beyond the project specific investment and new jobs created, these two projects combined are projected to have an additional economic impact on our region of $95 million.

I hope this provides more insight and a greater appreciation of the importance of shovel ready land to the economic development attraction industry.  To learn more about shovel ready sites in our region, click here to go to the shovel ready page on the real estate portion of our Buffalo Niagara Enterprise website.