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Downtown development bucking trends

Millennials seeking ‘cool, urban lifestyle’ driving growth

Datto is renovating space in The Metropolitan, where it will occupy offices on floors 11 through 15. (Bennett Loudon)

Datto is renovating space in The Metropolitan, where it will occupy offices on floors 11 through 15. (Bennett Loudon)

Heidi Zimmer-Meyer, president of the Rochester Downtown Development Corp., has been working with the organization since 1984 to promote the city’s central district.

But even she is surprised by the scope of the development boom going on in the downtown area.

“It’s been a long road, and frankly, I’ll be candid and say that I didn’t think I would live long enough to see what we are seeing in the center of the city,” she said during a recent interview at the RDDC offices on the 19th floor of the Five Star Bank Plaza Building.

Since about 2000, downtown has played host to about $2.2 billion in development projects involving 49 buildings either already converted to housing or currently in the process.

After World War II, Rochester was a “big three company town,” she said — referring to Eastman Kodak Co., Xerox Corp. and Bausch and Lomb Inc.

At its peak, the city’s population was about 330,000, but it ultimately lost 37 percent of those residents.

The impact of downsizing at the major employers has been devastating. At Kodak alone, the workforce dropped from about 65,000 at its height to less than 2,000 now.

“And we wake up in the year 2018 going, ‘My God, what happened?’ ”

What’s happening now in downtown Rochester “is reflective of the general trend that’s kind of reversing our regional development pattern,” she said.

Like much of America, the Rochester region has been “suburbanized,” over the past few decades with lots of residential developments, office parks, malls and shopping strips built in the surrounding towns, while the cities emptied out.

But the move back to the cities began around 2000, Zimmer-Meyer said.

Heidi Zimmer-Meyer

Heidi Zimmer-Meyer

“It started as a trickle and we thought it was a blip on the radar screen,” Zimmer-Meyer said.

Within a few years it became undeniable and recognized as a “real force” influenced largely by pop culture.

During the first half of the 20th century, the popular television programs included “Leave it to Beaver” and “Ozzie and Harriet,” where families lived in colonial homes with a white picket fence on a cul-de-sac in a suburb.

“And then, all of a sudden, you start seeing ‘Sex in the City,’ and ‘Friends,’ ‘Seinfeld,’ and ‘Girls.’ All of those pop culture iconic programs feature an urban lifestyle that’s kind of been glorified,” she said.

In the early 2000s, the first consistent effort to repurpose downtown buildings for residential use emerged. In other places, such as New York City, the pioneering tenants of repurposed commercial property were artists and students who demonstrated that the idea worked and it was a cool lifestyle.

“In Rochester, we kind of skipped right over that phase,” Zimmer-Meyer said.

“We saw very very early on our developers responded to this. People with money coming in, we’re talking about wealthy retirees. We’re talking about executives and people that are farther along in their careers,” she said.

There are now more than 7,000 people living downtown and the demand doesn’t seem to be fading.

“The last group of townhomes and condos sold for $500,000 to about $660,000. In Rochester that’s absolutely unbelievable,” she said.

“When projects hit the market they lease up shockingly fast. Nobody anticipated this,” Zimmer-Meyer said.

The changes downtown aren’t just the result of residential development. There has been a surge in the number of high-tech and creative sector companies.

Historically, the major tenants in downtown office space included law firms, insurance companies, banks and financial services and government agencies.

“Those sectors are relatively flat in terms of growth,” Zimmer-Meyer said.

But the “Innovation Zone,” an area with no hard-and-fast borders now includes about 170 companies in and near downtown.

For example, Datto, a Connecticut-based computer data backup and disaster recovery business founded by a Rochester Institute of Technology alum, first moved into downtown about three years ago with a handful of employees and now occupies five floors in the Metropolitan (formerly the Chase Tower).

“People are paying rent premiums for this cool urban lifestyle that we’re seeing,” she said.

“The critical massing of people brings more interest in the marketplace. You don’t want to go to an empty place. It’s going to be very interesting to watch over the next five years how this all plays out, but so far the developers that are tracking this, and the absorption rates we’re seeing, and the vacancy rates as low as they are, we’re not seeing an end in sight on this,” Zimmer-Meyer said.

Traditionally, the development of retail business, usually in street level spaces, has been expected to accompany the influx of new residents. But that school of thinking is changing.

“Thinking on it to some degree has changed,” Zimmer-Meyer said.

“All of us would agree that perhaps what we’re really talking about is an activated street-level experience however that happens.”

Experts used to expect retail businesses to be attracted after about 5,000 residents moved into a downtown area. But downtown Rochester has surpassed that milestone with no sign of significant retail.

Zimmer-Meyer said consultants see the same phenomenon elsewhere, even in much larger markets, such as Pittsburgh and Cleveland.

“I think our rules of thumb that were always applied to retail have just been blown up,” Zimmer-Meyer said.

Street-level activity is now being led by food and beverage enterprises, such as restaurants and craft brewers.

“If you go to our sister cities Syracuse and Buffalo you’ll find a very different kind of urban retail has taken hold in those cities for years. We don’t have it here,” she said.

“What is it about the shopping culture in Rochester that makes us different?”

“In downtown Syracuse there have been high-end retail shops for years, and we have never managed to hold on to that kind of thing until Culver Road Armory was built, and that’s the one place in the city where we do see that happening,” Zimmer-Meyer said.

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