By Bob Richardson, president, NAIOP Upstate New York, The Commercial Real Estate Developers
There was no Election Day drama in Buffalo as Mayor Bryon Brown won easy re-election.
As he prepares for another four-year term in office, he needs to be planning to make sure Buffalo’s economy is on sound footing.
It will not be an easy task.
The consensus nationally among the commercial real estate community is that a market correction is fast approaching. For example, under the direction of the Federal Reserve, banks are beginning to reduce the amount of capital they will lend on projects and some projects are already at risk for lack of financing. As an “under-banked” market, Buffalo is at an even greater risk.
Buffalo’s job market is not in good shape. Job losses in September and October bring to 2,700 the number of jobs lost from the previous year. The New York State Department of Labor said September’s was the worst monthly job loss in 7 1/2 years.
The Federal Reserve issued a report that noted a slowdown in job growth across upstate New York.
“The slowdown has been driven by steep declines in the region’s manufacturing, retail and business services sectors,” the report said. “In addition, job growth in Buffalo during the expansion had been buoyed by a surge in construction jobs associated with major projects such as SolarCity and the Buffalo Niagara Medical campus. As these projects have wound down, so too has construction-related employment.”
I believe that these factors are the leading indicators that Buffalo may experience a real estate correction like we have not seen in recent cycles. Because Buffalo did not go up when others did, it did not go back down when other cities did. That’s different now and we are much more likely to face downward pressures on the same cycle as other cities.
Mayor Brown and elected officials throughout the region need to be ready for the coming market correction. “Do no harm” may be part of the Hippocratic Oath, but it applies here, and should be their mantra.
Massive infusions of state cash to localities are likely a thing of the past. Leaders need to make sure that legislation does not impede development. Buffalo is a good example, where the city is considering new inclusionary zoning legislation which would put a significant burden on commercial real estate projects.
If the wrong policies are put in place, at a time of natural market retrenchment, the results could be very detrimental to individuals seeking housing options as well as the entire economic development and job creation environment.
We wish Mayor Brown the very best as he guides the city during the challenges that await. NAIOP stands ready to assist city planners in making sure that any development policies are fair, effective and productive, leading to positive results.
NAIOP, the Commercial Real Estate Development Association, is the leading organization for developers, owners and related professionals in office, industrial and mixed-use real estate. NAIOP provides unparalleled industry networking and education, and advocates for effective legislation on behalf of our members. NAIOP advances responsible, sustainable development that creates jobs and benefits the communities in which our members work and live.