Downtown office occupancy increased by 345,428 sq.ft. last year according to an end-of-year market report by CBRE Buffalo. M&T Bank’s monster lease of 330,000 sq.ft. of space at Seneca One accounted for the bulk of the increase with 330,000 sq.ft. Other big leases downtown were CannonDesign and The Yield Book with 49,500 sq.ft. combined at 40 Fountain Plaza and 43North taking 15,000 sq.ft. at Seneca One. The leases were offset by a decline of 52,631 sq.ft. of occupied space in Class B buildings downtown. Downtown’s Class A vacancy rate fell by 6.2 percent to 11.3 percent.
The Buffalo office market hit a record positive net absorption with over 700,000 sq. ft. absorbed. The last time Buffalo achieved positive absorption in excess of 700,000 sq. ft. was in 2008, before the financial crisis aftershock and weak economy rattled office users and stalled development. While Buffalo’s central business district (CBD) carried the numbers, the suburban submarkets showed steady progress with the North and East submarkets each posting over 100,000 sq. ft. of positive absorption. These numbers, paired with the forecasted demand in office using job growth, paints a positive outlook for the office market.
Over 350,000 sq. ft. of office space is currently under construction and/or slated to begin in 2020. The Krog Group’s redevelopment of the former Trico plant is a massive brownfield redevelopment that will certainly impact the market connecting the Buffalo Niagara Medical Campus to the CBD, much like Seneca One Tower will bridge the CBD to Canalside.
The CBD submarket led the share in market absorption with the large M&T Bank signing at Seneca One Tower. This and others caused Class A office space vacancy to drop to 11.3% from 17.6%. Ellicott Development’s new mixed-use redevelopment at 500 Pearl proved the demand for quality, amenity-filled space with its successful launch, while the Class B office space vacancy increased with negative absorption of 52,631 sq. ft. Total vacancy in the submarket dropped 2.5% year-over-year down to 12.7%.
The vacant space at Seneca One has put a damper on downtown office development. A few new chunks of space have been added in recent years, typically part of mixed-use developments, geared towards those wanted to be near the Medical Campus, or driven by an anchor tenant. Those include Uniland’s 520 Ellicott and Delaware North buildings, Ellicott Development’s 1091 Main Street and 500 Pearl projects, Ciminelli Real Estate’s Conventus, and Pegula Sports and Entertainment’s conversion of 79 Perry Street. Besides the Trico project, another big chunk of space being marketed is the redevelopment of Main Place Mall into office space.