Office vacancies in the Buffalo Niagara market – and particularly in downtown Buffalo – shot up to new highs at the end of last year, as the after-effects of the Covid-19 pandemic started to make an impact.
According to a new report by commercial real estate brokerage firm CBRE Buffalo, 15% of the office space in the city and its suburbs was empty as of the end of last year. That’s a big jump from 12.8% a year earlier, though it’s less than the national average of 17.3%.
Even worse from a real estate perspective, the vacancy rate in the central business district – the region’s commercial hub – soared to 17.9% from 12.5%. That’s a jump of more than 5 percentage points in a measure that often changes by no more than a point or two from year to year.
CBRE traced the cause primarily to two big downtown buildings that were formally emptied out and sold late last year – the HSBC Atrium and The Buffalo News office building, both near Canalside. Both buildings are expected to be redeveloped or repurposed. Excluding those two buildings, the downtown vacancy rate would have been in the low 14% range, which is more in line with historical trends.
“That was a huge chunk,” said Sarah Cashimere-Warren, director of office sales and leasing for CBRE. “A lot of that space is going to be converted or changing use.”
The data also includes projections of future office space in buildings like Trico, which is not yet available for lease. And it doesn’t formally reflect the impact of sub-leasing.
“People are just flying to quality and more efficient space. That’s the reason for the big jump,” Cashimere-Warren said. “We’re sitting on a lot of obsolete office space that may never be filled.”
CBRE, which released the data at its annual MarketView event Tuesday evening, also reported data for the industrial, retail and multifamily markets.
Industrial space is scarce
The already-tight industrial market got even tighter, as vacancies fell to just 1.3% of the overall market, or 925,233 square feet of available space.
That’s down from the previous record low of 1.5% a year earlier, as nearly 800,000 square feet of manufacturing and warehouse space was taken up – mostly in the eastern suburbs – while only 558,000 square feet was built, largely by Uniland Development Co. and Sonwil Distribution.
That’s the 19th straight year that availability of space locally remained below the national average, which was 4.8%. It was also lower than Cleveland, Pittsburgh and Rochester, but not as low as Albany, Toronto or Montreal.
Approximately 1.5 million square feet of construction is planned for this year – about a third without tenants lined up in advance, as companies and economic development leaders cite the lack of options as detrimental to growth, prompting developers to respond.
More retail space
On the retail side, vacancies increased to 13.6% from 12.9%, but mostly in properties that are already expected to be “reclassified” and redeveloped into something other than traditional retail.
So-called power strip centers performed much better than enclosed malls, CBRE reported. Still, the vacancy rate was nearly triple the national average of 4.9%. Localized rates ranged from 3.3% in the city to 18.3% in the area around McKinley Mall in Hamburg.
An apartment boom
And the units are being rented out, with many landlords reporting at least 98% occupancy. Average rents for one-bedroom units range from a low of $710 in parts of Niagara County to a high of $2,295 in some buildings in downtown Buffalo.
Source: The Buffalo News
