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Downtown trend running against condos

Downtown trend running against condos

Sibley Square, on Main Street near Clinton Avenue, offers a variety of apartments for different income levels. Such offerings are more popular than condominiums with those who are choosing to live downtown. (provided photo)
Sibley Square, on Main Street near Clinton Avenue, offers a variety of apartments for different income levels. Such offerings are more popular than condominiums with those who are choosing to live downtown. (provided photo)

Between 2000 and 2018, Rochester Downtown Development Corp. estimates that the city of Rochester’s downtown’s population grew by 140 percent, from 3,239 residents to 7,780 residents. In 2020, that number has reached 8,000, and RDDC expects that figure to climb to 10,500 by 2024.

RDDC’s 2018 downtown housing market report notes a total of 4,670 residential units in downtown Rochester’s 13 neighborhoods, 4,519 being a mix of market rate and income restricted rentals and 151 owner-occupied units. RDDC is a nonprofit that accelerates development and drives economic vitality in the downtown Rochester area.

There are currently 17 residential projects in the pipeline for downtown, all of which are rentals. Of the 1,183 new units, approximately 978 will be market-rate and 205 will be income-restricted. Heidi Zimmer-Meyer, RDDC president, adds that in addition to the 1,183 new units, there are also 460 units currently being rehabbed.

Given that 97 percent of downtown housing units are rentals and that all 17 residential projects coming down the pike are rentals, there’s a noticeable trend in downtown’s housing market. Condominiums and single-family homes are harder to come by downtown.

“Condos have never been all the rage here, meaning our community 15 to 20 years ago was very leery of condos,” said Zimmer-Meyer. “That originated from places of discomfort on the part of lenders for mortgages.”

Anecdotally, Zimmer-Meyer said that buyers have expressed interest in purchasing property downtown if they plan to sell their single-family home in the suburbs, but condos have been slow for developers to adopt.

“If you take a property, either a conversion of a commercial building or building something from scratch, the minute you turn them into condos and sell them all off, the project is no longer yours,” she said. “Some developers, in my opinion, don’t want to let go of these properties because they’re emotional projects.”

Building condo units or converting commercial property into condo units is typically more complicated than rental units because every condo unit must have an individualized heating and cooling unit so they can be billed separately.

“And the finishes are generally a little higher with condo units,” added Zimmer-Meyer, “Finishes like what you choose for kitchen surfaces and that kind of thing are generally done at a higher level if you’re planning to sell them.”

Therefore, creating rental units like apartments tends to be more efficient and affordable for developers than condominiums.

Rochester as a whole has a remarkable number of affordable single-family homes, and condos often end up being high-end, reflected in the price, so attracting buyers can be a cause for concern.

Ken Greene, asset manager for Sibley Square, said that younger generations are graduating college with more student loans, making it difficult for them to invest in property until they’re older. Until then, renting is the more affordable option.

“The challenges with condominiums are the same challenges we face for houses,” said Greene. “Students are graduating college with higher debt levels, which constrains the market. Plus, there’s a population who will downsize their suburban homes when they become empty nesters, but a lot of those people only spend six months here because they spend winters in warmer climates, which puts a strain on whether or not somebody wants to make an investment into property downtown.”

Furthermore, there’s a population of people who are attracted to living downtown, but have spent their whole lives living in suburbia, so they feel more comfortable renting downtown before deciding if and where to invest in property.

Zimmer-Meyer contends that despite these factors limiting the amount of condos popping up, downtown is the most diverse neighborhood in Rochester, except for recent immigrants.

“Who’s moving into the downtown market is a blend,” she said. “Early on, it was heavily dominated by people who were boomers and older and people with money. But that has been changing as we have more affordable units and income-restricted units that are being built.”

Zimmer-Meyer and Greene agree that walkability and convenience are big factors that appeal to populations who live downtown.

“They want to live somewhere with convenient places to eat, easy access to gyms and walkable urban food markets,” said Greene. “If they’re going to live in an urban environment, they don’t want to get in their car and drive; that’s what suburbia is.”

Sibley Square, at 250 E. Main St., is an amalgam of populations that Greene believes reflects the downtown community as a whole. There are three types of rental units available at Sibley Square: Spectra, which are higher-end market rate apartments that are rent adjusted based on income; Landmark, which is the 55 and older fixed income apartments that cost $600 to $900 per month; and Liberty Lofts, still in development, which will be workforce housing where rents are adjusted for incomes up to $85,000 per year.

Sibley Square has been focused on bringing all the amenities that the downtown living population is looking for. Currently in the works is a restaurant/marketplace known as The Mercantile on Main, which will be located in the atrium of Sibley Square. There will be eight different restaurants for meals that average for about $10. The Mercantile is expected to open in the fall.

“We believe that downtown’s epicenter used to be at State (Street) and Main (Street), but we believe the new epicenter is at Main and Clinton (Avenue),” said Greene. Sibley Square is located at the Main and Clinton intersection.

“I do expect that there will be condos coming into the market within three-to-five years,” he added. “We think Sibley, because of the three different residential communities and nine income levels we have, we have this basket of the community in our building that represents the community at large.”

There are similar residential communities to Sibley Square around downtown Rochester, such as Tower280 on East Broad Street, formerly known as Midtown Tower, The Metropolitan on South Clinton Avenue, 44 Exchange on Exchange Boulevard and the Nathaniel at Court Street and South Avenue. All four buildings have both commercial space and apartments, like Sibley Square.

“At a certain point in time, the rental market will become saturated. It hasn’t gotten there yet, and it may very well get saturated in some segments and not others,” said Greene. “Someone will build an apartment complex that pushes that over the edge, which presses on the occupancy levels in an uncomfortable way—it’s not an unlimited demand. When that happens, my suspicions are that the condo market will start to expand.”

Greene noted that he thinks it is a natural evolution for rentals to precede condos.

Main and Clinton is an area that’s been seeing a great deal of development both commercially and residentially. The area has become ground zero for tech start-ups and business incubators, which residential interest has fed off for employees seeking workforce housing near their offices.

“What we’re finding in the downtown residential population is a broad cross section by income, age, lifestyle and race,” said Zimmer-Meyer. “We’ve gone from 3,200 people living downtown and 20 years later we have 8,000 during a time when the city itself has been consistently losing population, so downtown clearly has a different trajectory.”

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