Buffalo Niagara's office real estate market is showing signs of improvement, as developers cautiously add properties and fill some existing space, according to a survey.
CB Richard Ellis-Buffalo reported a downtown vacancy rate of 3.4 percent for Class A, or top-tier space, up slightly from the year before. It reported a 22.3 percent vacancy rate for Class B space, which is categorized as older space with fewer amenities.
While downtown saw its Class A vacancy rate increase, it absorbed more than 250,000 square feet of a 400,000-square-foot increase in inventory, the survey said.
A prominent downtown addition was 130 S. Elmwood Ave., a joint project of Acquest Development and Uniland Development. The 270,000-square-foot office building is now 80 percent full.
"They've made great progress over the past year," said Shana Stegner, director of office sales and leasing for CB Richard Ellis-Buffalo.
The office building, whose tenants include government agencies, quickly changed hands: a Nebraska-based buyer purchased it for $71 million.
Across Western New York, the region added more than 1 million square feet of office space in 2005, a significant one-year increase, the survey said. The South Elmwood project accounted for a large chunk of that total, as did GEICO Direct's new office complex in CrossPoint Business Park in Amherst. The insurance company is filling all 250,000 square feet of that center.
In the Town of Tonawanda, Ciminelli Development's Colvin Woods Business Park is adding to the region's inventory. Definity Health has moved in, and the U.S. Border Patrol will occupy its own building. Ciminelli has also announced plans for a "spec" building in the park, without commitments from tenants.
Such development has been rare in the Buffalo area in recent years; developers have typically waited until they had tenants lined up.
Developers in the region are expected to add about 430,000 square feet of office space in 2006, which is considered a modest increase.
HealthNow New York, parent company of BlueCross BlueShield of Western New York, has started work on its new downtown complex. When it is ready to be occupied in 2007, HealthNow will move operations from its current home near Canisius College.
Ciminelli bought and put on the market the former Federal Reserve Bank of New York Buffalo branch building on Delaware Avenue, and has lined up New Era Cap Co. as a tenant. Meanwhile, Uniland Development is considering a 110,000-square-foot Class A building on Delaware near Chippewa.
CB Richard Ellis says the combined Class A and B vacancy rate in downtown was 12.9 percent, versus 6.4 percent in the suburbs.
In recent years, a large amount of office space available for sublease in the region has impacted the vacancy rate by an additional 1 to 2 percentage points, but most that sublease space has been filled, Stegner said.
CB Richard Ellis' survey included office buildings with more than 10,000 square feet in Erie County.
A survey prepared by J.R. Militello Realty, using different criteria, is due out early next year. Its most recent survey, released in early 2005, reported a much higher downtown Class A vacancy rate, although the rate had fallen for each of the past several years.