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Four Signs Rochester Remains Attractive for Commercial Real Estate

By Keith Cleary
Senior Vice President, Director, Business Banking, ESL Federal Credit Union

There has been a buzz of activity taking place in downtown Rochester over the past few years with many exciting projects in the works. These are all large-scale, high-impact projects worthy of the attention, but I’m here to tell you that it’s not just downtown that’s ripe for development.

The Greater Rochester area and economy continue to show positive signals that commercial real estate is in a solid place and continues to grow. Aside from the boon of downtown development, based on a strong pipeline of projects in 2019 we’ve seen of late, below are four key points that prove Rochester is moving upward in commercial real estate development:


Not everything can be a new build, and redevelopment of current properties is popular throughout the Rochester area, including downtown. The redevelopment taking place touches on everything from hotels, to multifamily units, to commercial offices making room for new companies or expansions. With multifamily units, redevelopment has become a necessity throughout the Greater Rochester area as established properties look to compete with the new units that were recently or are currently being built. Additionally, the redevelopment of office spaces (which have had higher vacancy rates) into new multifamily units has allowed Rochester to make productive use of its downtown space as proven by the population in the center city growing from 4,000 people in 2000 to 7,200 as of March 2018 (source: Rochester Downtown Development Corporation).

Multifamily and Growing Sectors

Construction of multifamily residential space continues to be the most popular sector for new builds. Not just in the projects you see going up in downtown Rochester, but throughout the county and Greater Rochester area. A wide variety of facilities are seeing impressive growth as vacancy rates in Rochester multifamily units remain strong—one and two-bedroom units and living accommodations for the older populations as many baby boomers and retirees look to downsize. Aside from multifamily units, healthcare is the next biggest real estate driver. The two major healthcare systems in our market have been expanding throughout the region, including new builds and redevelopment of formally vacant properties (e.g. urgent care facilities). All positive signs for the systems and job growth in our region as the expansions continue.

Industrial & Manufacturing

Manufacturing activity in Rochester has been performing well throughout 2017-18, and into 2019. For a time, industrial and manufacturing was seeing contraction throughout Rochester. With a contracted workforce, that has left fewer companies to provide high-value special process manufacturing, and the companies that remain in this space have excelled. Real estate for this sector is in strong demand as these companies are outgrowing their spaces and looking for expansion opportunities.

Favorable Economy

Lending is still in a very favorable state for developers. While short-term rates increased one percent in 2018, the long-term 10-year Treasury bond rate is still at a point (as of this writing) that presents a strong lending environment for commercial real estate.

With the Rochester commercial real estate market and economy still showing positive signs, there are a couple areas to keep an eye on that impact costs.

The first is the workforce. We have such low unemployment that there is a shortage of skilled labor. Many construction projects are in need of electricians, carpenters, plumbers, etc. and there aren’t enough of them to go around. This can put a strain on project costs, as well as timelines.

The second is the increase in construction costs. Along with a lack of skilled labor, increasing commodity prices and wages lead to more expensive projects overall. While we are not seeing these increased costs as being detrimental to local commercial development, it is still worth monitoring, as high spikes in costs have the potential to impact projects, while gradual increases are expected and easier to adapt to.

Overall, the state of commercial real estate in Rochester is strong and should remain strong throughout 2019. While the opportunities downtown will continue as occupancy rates remain strong, it is promising to see the rest of Rochester and the surrounding areas being in a positive state that is ripe for development.