Stability in commercial real estate during times of change

Casey Saucke

As the saying goes, “The only constant is change.”

The past three years have certainly demonstrated that we must all be financially prepared for unexpected changes to stay on course with our goals — and to stay ahead of potential issues. From rising interest rates, to inflation, and continued supply chain issues, the business landscape continues to be in a state of flux.

The Fed has continued its efforts to tame inflation with seven increases in the Fed’s funds rate in 2022 taking the rate from its low of 0 – 0.25% to its current level of 4.25 – 4.50%, marking the fastest, sharpest increase in lending rates since the 1970s.  While the effects of these rate increases are not fully clear at this time, recent market data suggests inflation is retreating but not to the Fed’s target of 2%. The Fed continues to suggest a higher fed funds rate is needed.  Employment strength persists, the housing market continues to experience high rates and prices and new home construction has slowed.  Long-term clarity on the debt market is still evolving.

Understanding the commercial real estate marketplace and its performance is a topic our business customers frequently inquire about. Our portfolio at ESL and the Greater Rochester marketplace overall continues to perform and remain strong. The local market continues to show overall resilience in performance albeit there is no question construction costs have risen significantly in the last 12 months, supply chain issues remain but are improving. Finding and retaining quality labor is a top priority to business owners and timelines on development projects have increased almost across the board. However, the business landscape trajectory continues to be positive as new developments are absorbed in the marketplace, and stabilized asset performance remains strong.

The multifamily market continues with exceptional strength achieving double digit rent growth in 2022 with more anticipated in the second half of 2023. For the most part, occupancy levels were at some of the highest levels ever in 2021 and further increased in 2022. Projects that came online were absorbed well and justified additional costs through higher-than-originally-projected rents.

We continue to closely monitor the market holistically as it reacts to the changing interest rate environment and the effect of higher rates leading to any value reduction through cap rate compression; we have started to see a little of this recently but not enough to note any trends as of yet.

While overall absorption levels and new household formations have recently slowed, the impact on occupancy levels is not anticipated to be material as the housing supply is still low and new construction starts have dipped.

Retail occupancy levels trended up in 2022 with some of the adaptive re-use of multiple big-box and mall anchor locations. Flex space remained healthy but saw some uptick in vacancy as some of the office component space struggled. However, part of the available inventory was successfully moved to accommodate the exceptionally strong industrial marketplace demand which had overall vacancy levels of around 5% at the end of 2022. Vacancy rates in the industrial market are forecasted to remain low as new construction is anticipated to slow in 2023. The office market continues to evolve post-pandemic to adapt to the changing overall employee experience through remote work, hybrid plans, and full in-office experiences. Overall vacancy levels hovered around 18% at year-end 2022.

While the market continues to wane on recessionary fears and the state of commercial real estate continues to evolve, businesses must remain ever-vigilant on market changes, turning to lenders for information and guidance to navigate the frequent changes we have seen. Lenders, like ESL, will continue to use this lens as our compass to address the questions, concerns, and needs of our customers. Regular communication is instrumental as we must work together to determine the best course of action as needs arise and market variables change, which, as we’ve seen time and time again, is to be expected.

More listing prices reduced, time on market rises

(photo by Curtis Adams from Pexels.)

A little normalcy continues to return to the housing market, with the average home taking longer to sell while a larger percentage of listing prices are being reduced.

There haven’t been drastic shifts, just trends that match the economy and interest rates, said Lanie Bittner, president of the Greater Rochester Association of Realtors.

The median time on the market rose to 25 days in August, up two days from July and up four days in a year-over-year comparison, according to the Monthly Housing Trends Report. In July, the median number of days on the market was 23, and it was just 12 in May.

The number of houses that saw a reduction in listing price also remained in double-digits for the third consecutive month: 12.2 for August, 11.6 for July and 12.3 for June. By comparison, just 5.7 saw a reduction in March when the traditional buying season was ramping up.

But as mortgage rates rise — they’ve doubled since the start of the year, climbing past 6 percent — more would-be buyers are putting their plans on pause.

The median listing price in August was $223,000, up 6 percent year-over-year.

“For sure it was a crazy sellers’ market but we’re seeing a little bit of a shift and a market adjustment,” Bittner said. “With mortgage rates going up, there has been a shift in buyer mentality and some buyers are pulling back for now.”

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2022 Leaders in Construction & Real Estate honorees announced

The Rochester Business Journal and The Daily Record have selected 28 honorees for the 2022 Leaders in Construction & Real Estate awards.

The 2022 Leaders in Construction & Real Estate Awards celebrate the individuals and companies who are changing the landscape of the Rochester region through design, construction, project management and more. These individuals and organizations are creating jobs, building healthy spaces, helping families and companies achieve their dreams, and leading the way toward growth and prosperity for the community.

Honorees in the construction category include architects, developers, general contractors, homebuilders, lifetime achievement, project managers, residential contractors and subcontractors. Real estate categories are commercial real estate agents and residential real estate agents.

Honorees for the 2022 Leaders in Construction & Real Estate Awards were chosen by the editorial staff of the Rochester Business Journal and The Daily Record.

“This year’s Leaders in Construction & Real Estate winners are innovators who lead the way for businesses and families in the multifaceted construction and real estate fields,” said Suzanne Fischer-Huettner, senior group publisher of the Rochester Business Journal and The Daily Record. “They are leaders in the community who work hard to make the Western New York area a wonderful place to live and work. We at the Rochester Business Journal and The Daily Record congratulate them on receiving this honor.”

This year’s Leaders in Construction & Real Estate recipients will be honored Oct. 25 at 11:30 a.m. at a luncheon celebration at the Joseph A. Floreano Rochester Riverside Convention Center, 123 E Main Street, Rochester.

Attendance is limited for this event. Honorees and sponsors get the first chance to secure tables. Sponsorship includes a table for guests, multimedia marketing, logo usage and more. To secure a sponsorship, contact Suzanne Fischer-Huettner at [email protected]. The event hashtags are #RBJevents and #NYTDRevents.

A limited number of individual tickets will be available after the sponsor deadline, if the event does not sell out.

Honorees will be profiled in the Oct. 28 issues of the Rochester Business Journal and The Daily Record and online at and For more information, including the most updated listing of sponsors, visit

The 2022 Leaders in Construction & Real Estate honorees are:

Construction – Companies


  • Edge Architecture
  • Greater Living Architecture P.C.
  • HUNT Engineers, Architects, Land Surveyors and Landscape Architect DPC
  • Rozzi Architects


  • Buckingham Properties
  • DiMarco Group
  • Maguire Family Properties
  • Rochester’s Cornerstone Group

General Contractors

  • Christa Construction
  • DiMarco Constructors
  • John W. Danforth Company
  • Taylor – The Builders


  • New Energy Works
  • Riedman Homes

Project Managers

  • Campus Construction Management Group
  • DGA Builders

Residential Contractors

  • 3rd ROC Solar
  • Long Construction NY LLC


  • American Custom Exteriors & Interiors
  • ID Signsystems
  • Nuflow Services of Upstate NY LLC

Construction – Individuals


  • Marlee Finestone, SWBR


  • Monica McCullough, MM Development Advisors Inc.

General Contractors

  • Christopher DiPasquale, DiPasquale Construction Inc.

Lifetime Achievement

  • Grant Malone, Operating Engineers Local 158/ Rochester Building Trades

Real Estate – Individuals

Commercial Real Estate Agents

  • Tod Myers, Keller Williams Realty Greater Rochester

Residential Real Estate Agents

  • Anthony Butera, Keller Williams Realty Greater Rochester
  • Nick Wenderlich, Keller Williams Realty Greater Rochester

Poor Rochester kid, now a NYC real estate mogul, offers scholarships to others

Rochester-area high school students who are the first in their families to seek a college education will be eligible in 2022 to apply for a full-ride scholarship to the University of Virginia established by a wealthy New York real estate developer who grew up poor in Rochester.

UVA recently announced a $100 million gift from David and Jane Walentas. David Walentas grew up on Herald Street, off Hudson Avenue on the city’s north side, and graduated from Benjamin Franklin High School. He was the first in his family to attend college, graduating from UVA in 1961 and from its business school in 1964.

“Growing up I didn’t know anyone who had been to college, but I knew that it was a way out of poverty and a path to opportunity,” Walentas said. “Thanks to a scholarship, I was the first in my family to attend college, and my time at UVA completely changed my life. There are so many talented young people in this country — in places like New York City and Rochester, where I grew up — who can help make our society a better place if given the opportunity. I can’t wait to see how these first-generation college students change the world.”

David Walentas Photo supplied.
David Walentas (Provided photo)

Besides Rochester, scholarships will be made available to first-generation college students from New York City, where Walentas made his fortune, and the commonwealth of Virginia.  UVA aims to enroll 60 undergraduate Walentas scholars.  A spokesperson for the university said Rochester-area high schools will be invited to nominate students for the UVA scholarship.

“This gift will have a profound and lasting impact on first-generation college students. We look forward to establishing the preeminent scholarship program in the nation for first-generation students and bringing an exceptional group of smart, resilient and industrious Walentas Scholars to the University of Virginia,” said Jimmy Wright, president of the UVA’s Jefferson Scholars Foundation.

Half of the Walentas gift will be directed to the first-generation scholarships and matched by $20 million from a fund for that purpose. Another $25 million will be directed to fellowships and professorships in UVA’s Darden School of Business. The final $25 million will be dedicated to scholarships for first generation graduate students seeking MBA degrees.

The Walentas gift is the cornerstone donation in a $5 billion “Honor the Future” fundraising campaign UVA has launched in conjunction with the 200th anniversary of its charter.

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Luxury homes a specialty market in Rochester

Setting the correct asking price matters when selling any home, but that is doubly true when it comes to luxury properties. A glass-enclosed wine cellar, a steam room or a horse stable may be the X factor that sparks an offer, but sellers cannot bank on uncommon features resonating with every buyer who comes through the door.

The complexity linked to pricing high-end homes when few comparable properties exist makes the luxury market a specialty among Realtors, says Gar Lowenguth, licensed broker and associate at RE/MAX Realty Group.

“Not everybody can deal with it,” said Lowenguth, a 35-year veteran of

The State of Real Estate supplement; 6 Malm La. Rochester 14618
For some buyers, luxury living means being on the water. One property that fits the bill is 340 Rock Beach Road in Irondequoit. Built in 2003, this six-bedroom home has 84 feet of frontage on Lake Ontario. Photo credit: Kate Melton

the real estate industry. “Not everybody is known for it.”

Selling a high-end home without the representation of a broker or an agent is even more difficult than doing so with a starter home, Lowenguth added.

“You either give it away…or you put $100,000 or $150,000 on top, over what it should be, and you don’t sell it,” he said. “Then it gets a bad rap.”

When a home has a price tag of $750,000 or more, buyers look for “upgrades from what you would typically see in a more standard cul-de-sac or development kind of house,” said Trip Pierson, owner of Mitchell Pierson Jr. Inc. Realtors. A gleaming kitchen with top-shelf kitchen appliances and a master bathroom with a soaking tub and a walk-in shower with multiple body jets are at the top of a well-heeled buyer’s checklist.

Uncommon exterior features, including broad swaths of facade accent stone, also have become part of what buyers of luxury homes expect, said Jeffrey Smith, CEO of Pittsford-based Woodstone Custom Homes Inc.

“Over the last two years, we’ve seen substantially more money being spent on tile work in the homes, both in selections of the tiles that are unique as well as quantities,” he added.

“One thing that has been very constant has been expenditures on cabinetry in kitchens and bathrooms, countertops in kitchens and bathrooms, and appliances,” Smith noted. “And that clearly is where we see substantial differences between a modest-priced home and a higher-end home.”

Given that the median sale price of a home in the Rochester area was $130,000 in 2017—marking an increase of 4 percent over 2016, according to Greater Rochester Association of Realtors Inc.—luxury homes are far from common in the Rochester area. Only 30 houses listed at $750,000 or more were available in Monroe County as of early March; Ontario County had 13 in that price range.

Across the price spectrum, a lack of inventory continues to be a challenge for the local residential real estate market.

According to Greater Rochester Association of Realtors, 3,135 homes were for sale in the region in 2017, a 12.4 decline when compared with the 3,578 homes on the market in 2016. The inventory of available homes was 4,818 in 2015, versus 5,009 in 2014.

For some buyers, luxury living means being on the water. One available property that fits the bill is 340 Rock Beach Road in Irondequoit. Built in 2003, the six-bedroom home has 84 feet of frontage on Lake Ontario and a spacious patio with elaborate awnings. Its interior features range from radiant heated floors to a three-story turret. The home is listed at $1,295,000.

“The master suite has beautiful views, but it also has beautiful walk-in, his-and-hers closets,” said Pierson, whose company has the home’s listing.

For other buyers, luxury living means having minimal upkeep. A three-bedroom townhouse built last year at 81 Barrington St. in Rochester falls in that category. Listed at $729,000, the home has 10-foot ceilings, 8-foot doors, and “you can go in and pick all your (finishes),” said Lowenguth, who has the listing.

Over the past few years, the luxury home market has slowed a bit, said James Yockel, CEO of Greater Rochester Association of Realtors.

“Everything seems to be driven by a critical—at this point—lack of inventory” affecting every price range, he said.

Exactly how the recently enacted federal tax reform law will affect the market remains to be seen, Yockel said. One provision in the law caps the mortgage interest deduction at $750,000 of debt—down from $1 million.

“I don’t think (the law) will stop deals from happening,” he added. “But certainly, it’s an impact on value, and we’ll see over the next couple of years if property values take a hit.”

Some people who own waterfront homes in the Finger Lakes are having a hard time staying put because of rising taxes, Yockel noted.

Even so, surging consumer confidence bodes well for the future.

“The spring always brings flowers and optimism,” Pierson said. “The last several springs have been very hot (in terms of sales) in most of the markets for a percentage of houses available. And so, hopefully, that will carry through this year as well.”

Sheila Livadas is a Rochester-area freelance writer.

All generations seek convenience in housing options

When it comes to what people want in their living space—homeowners and renters alike—nothing is too much to ask for.

From millennials to Generation Xers to baby boomers, each generation has different asks when it comes to housing, but one common thread weaves its way throughout: Convenience.

“This, I think, is a general statement that affects all groups who are living in apartments: They want convenience, they want what they want when they want to use it,” said Sibley Square asset manager Ken Greene. “They don’t want to pay for it if they don’t need it and at the same time, they want access to it when they do need it.”

The Landmark at Sibley Square features one- and two-bedroom subsidized apartments for those 55 and older who are on a fixed income. Photo credit: Provided by Winn Cos.

At Sibley Square, for example, Winn Cos. offers 130 or so market-rate apartments that go for $1,700 to $2,700 per month. The Spectra at Sibley Square apartments are occupied by empty-nesters who are downsizing, as well as millennials who do not need a lot of space, Greene said.

The Spectra apartments occupy floors nine through 12 of the 110-year-old Sibley building. Winn Cos., the building’s owner, has incorporated a number of amenities based on the apartments’ demographic. Downsizers and millennials have access to a conference room for meetings, a library and a kid’s playroom adjacent to an exercise facility.

Opening in the spring is a rooftop terrace. Residents also have access to an indoor dog park that connects to an outdoor pet area.

The community space also includes a living room, a TV room that resembles a small theater, a kitchen area and common space with game tables, a pool table and plenty of seating. All of the amenities are available 24-hours a day, Greene noted.

“People’s schedules are so different today,” Green explained.

Sibley Square also features apartments for those 55 and older. The Landmark at Sibley Square features one- and two-bedroom subsidized apartments for those on a fixed income. Winn Cos. found that the older generation wants amenities that are similar to their younger counterparts, so they too have access to a fitness center, community space with a kitchen and living room, a library and more.

Another common thread among each of the generations who occupy housing at Sibley Square is the need to feel safe, Greene said. To that end, Winn Cos. has spent some $500,000 in security cameras that are monitored 24 hours a day.

Sibley Square has a daycare center and the company is in conversations with a healthcare provide to add an urgent care and pharmacy to the building, Greene said. Eventually the building will feature a food hall, a vertical greenhouse, co-work space, an art gallery and, Greene said, the company’s objective is to put in a virtual, augmented reality arcade and programming studio for its younger tenants and others.

“We think the millennials want entertainment space that is cutting edge and we think the virtual, augmented reality is just the way to go,” he said.

Greene noted a move away from McMansions, especially as Baby Boomers age and their children leave home.

“So they’ve built themselves these staycations in Pittsford or Penfield or Webster and then all of a sudden the kids are gone, they’re empty-nesters, now there’s two people living in this house,” Greene explained. “And their kids observed it, their kids watched it and now the kids are saying, I may want access to those things but I only want to pay for them when I’m using them. I don’t want to pay for them all the time. It’s almost like the Uber effect for homes.”

Also affecting what millennials want in homes is the fact that they came out of school during the Great Recession, said Nathan Rozzi, principal of Rozzi Architects PLLC and a director of the American Institute of Architects Rochester.

“Millennials came out of school at a time when it was very difficult for them to find jobs and often they had to postpone some of their home-buying or family development because of that,” Rozzi said. “So we’ve seen a great uptick in the amount of rental units that millennials were seeking, especially in urban environments.”

Overall, Rozzi said, lifestyles have changed. They are less formal than they were 30 or 40 or 50 years ago.

“And spaces tend to reflect that,” he said. “You have open areas, multipurpose rooms, great rooms, less defined spaces such as formal dining rooms and things like that.”

Rozzi also noted a national trend among millennials for micro rental units.

“We haven’t seen too many of those locally at this point, but I suspect we may,” he added. “The micro-units are much more compact, individualized units but then there’s more communal space, more game rooms, more spaces where people can co-mingle and also that could be available to sign out if you wanted to have a dedicated gathering.”

Karina Chamberlain Ribis, an associate broker with Howard Hanna, said younger generations are open and receptive to fixer-uppers with some potential.

“They’re wanting to do some of the upgrades themselves, maybe at a later point,” Chamberlain Ribis said, noting that taxes are a big component of that.

School districts still play a large role in where and what millennials buy, and families with kids with special needs are looking for convenience as well.

“There’s a growing segment that are dealing with that and it’s very important that they get the services that they want for their children,” said the 15-year veteran of the industry.

By comparison, empty nesters are looking for a different kind of convenience, that of fewer stairs, walk-in showers, grab bars placed strategically in bathrooms and entryways and walk-out basements. That’s had an effect on both selling price and availability of ranch and patio homes, Chamberlain Ribis said.

“When I started you could get a ranch in Henrietta in the $70s, $80s or $90s (thousands), and now some of them are going as high as $139,900, if not higher sometimes because there’s such a shortage,” she added. “It’s a bidding war.”

Rozzi noted that while Boomers may be downsizing, the overall size of a home that a millennial might look for would be smaller than previous generations wanted. That’s part of the less formal lifestyle with multiuse spaces, each of the generations are looking for right now.

“The residential market is demand driven,” Rozzi said. “I think we’ll continue to see integration of smart devices, and as we peak in the housing stock we’ll begin to see more renovations for folks who really like their location and renovate in place.”

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Local malls are adapting to new shopping trends

Eastview and other local malls are adapting to the new reality of consumers shifting their shopping habits. Photo credit: Provided by Wilmorite Corp.

In a time long ago and far away, before teenagers began to walk around absorbed in in a handheld device all the time, they went to the mall.

They met their friends there, played in arcades there, grabbed a snack and – perhaps most importantly for the economy – they shopped there. And so did their parents and their grandparents – well, maybe not the arcade part. The grandparents might even have been spotted walking the mall early before the stores opened in the morning to get their exercise.

But changing demographic and consumer patterns, much of it owing to the onslaught of easy online shopping led by mega-retailer Amazon, is forcing brick-and-mortar malls to rethink themselves in order to grab a share of the consumer dollars and time that are being spent elsewhere. Some experts say the changes may even drive a difference in the way mall real estate business is conducted.

“On a macro level, there’s no question that online commerce has created a headwind for brick-and-mortar sales,” said Dennis Wilmot, senior vice president for leasing and development at Wilmorite Corp. The company owns Eastview Mall, Greece Ridge Center and Marketplace Mall in the Rochester area, as well as malls in other parts of the country.

Online activity has also shaped how people interact – in malls and elsewhere. Teenagers communicate with their friends by Snapchat and other online apps. They shop for their prom gear online. Parents might go to the mall to return the items they ordered online in multiple sizes, but they stay home to watch movies through streaming services instead of visiting the mall multiplex. And even the grandparents – aware they can get a better buy on Zappos — might be buying their walking shoes online instead of in long-gone local mall stalwarts Altiers or Thom McCann.

“The value of the store and the value of the shopping experience is going down,” said Raj S. Murthy, the J. Warren McClure professor of marketing at Rochester Institute of Technology.

The economic impact of that trend is substantial: “2017 was one of the worst years for brick-and-mortar retailers,” Murthy said. Approximately 8,000 stores closed nationally, he said, a 220 percent increase over 2016. “It’s an accelerating trend.”

“There’s no doubt there is a shift in consumer expenditures,” Wilmot agreed. “However, I think the notion that Amazon is going to be the death knell of brick-and-mortar is grossly overstated.”

Across the globe, owners of retail malls have already been adapting to the new reality, just as Wilmorite’s Marketplace Mall is evolving into an entertainment and outlet mall. Eight traditional stores have converted to a discount model, Wilmot said, but that doesn’t preclude full-price stores from operating. Other options, including non-retail, are a possibility.

“The good news with Marketplace: we’ve got a few things we’re working on that could be transformative for the property,” Wilmot said.

And as for a certain Scandinavian homewares and furniture store coming to Henrietta? Wilmot only said anything’s possible, but deals take time. He noted it took 15 years between the time Wilmorite pitched to L.L. Bean and the venerable New England-based company opened a store at Eastview Mall.

Retail and mall experts say the following trends are shaping the malls properties of the future:

Entertainment playing a bigger role. Researchers for McKinsey & Company, a marketing and retail consulting company, wrote in a 2017 report that “malls of the future will be less about in-store shopping and more about giving people novel in-person experiences they can’t get on their smartphones—what some call retail-tainment.”  Examples include the amusement park in Minnesota’s Mall of America, or the Michigan Women’s Hall of Fame at the Meridian Mall. Locally, this trend has been seen with RPM Raceway and Dave and Busters taking over space formerly used by Bon-Ton department store at Marketplace Mall in Henrietta.

Shrinking apparel stores, or smaller apparel sections of department stores, so space can be devoted to other uses, particularly restaurants.  “Apparel occupies less square footage in a mall,” as more experiential tenants take up more space, Wilmot said. McKinsey reports that some Chinese malls are devoting 40 percent of their space to food and beverage options now, leading a trend that Americans are starting to follow. At the Greece mall, Wilmorite remade one wing to feature restaurants and bars a few years ago. With the recent addition of furniture retailer Ruby Gordon, Wilmot said, “in terms of occupancy, we’re in the best position we’ve been in in years.”

Click-and-collect shopping. This is a hybrid of online and in-person shopping in which the consumer orders on-line, but is able to get purchase more quickly by picking up at a local store. European consumers have been doing this for more than six years, while most American shoppers are still neophytes at shopping this way, according to a September 2017 report by the International Council of Shopping Centers. Murthy’s all in. “Once you know your brand and your fit, what is the point of going to the store?” he asked. A Gen-Xer with a 3-year-old child, he enjoys the ease of curbside pickup provided by online ordering service from Wegmans. Murthy trades a service fee for buying groceries in one-tenth of the time. He also avoids having to buy a Hot Wheels car to occupy his son, “and anything he could throw into the cart or throw out of the cart.”

Fewer national retailers or anchor stores driving mall traffic. Click-and-collect shopping, Wilmot said, “is driving traffic to the stores. But what it’s also doing is it’s eroding the store’s productivity.” As a result, he predicted national stores will chose to have just one store in a community of Rochester’s size instead of three or four. The current online shopping model sees about 40 percent of purchases returned, and customers would prefer doing that without shipping charges. With more and more people entering malls for returns or purchases that take place online, McKinsey suggests, malls may have to offer a different kind of rental price structuring that relies on footfalls rather than store sales.

More local and unique stores and experiences. “More people go to public markets now and it’s not just because of price. It’s also for the public experience,” Murthy said. McKinsey reports that public space in malls is growing to as much as half in some places. “When this happens, these expanded public spaces will need to be planned and programed over the year much like an exhibition.” Hipster shoppers expect a more curated experience, willing to spend more on a single shopping trip or restaurant meal that’s special, even if that means less frequent expenditures, Murthy said.  Local malls have started looking regionally to help create these unique experiences, bringing in the Village Bakery from Pittsford, Happy Earth Tea from the South Wedge.

Malls that no longer strive to be one-size-fits-all. Within the three malls Wilmorite manages in the Rochester area, Eastview is trending toward luxury brands, Marketplace is evolving to an outlet mall, and Greece Ridge “really is everything under one roof in terms of big-box stores,” Wilmot said. “Every mall is taking its own course.” Nationally that trend is also underway, with some malls proving the luxury experience, particularly with higher levels of service, and others catering to the value-driven customer. “I think retailers have become more skewed to value these days because of the pricing transparency that has been created by the internet,” Wilmot said.

Most experts seem to agree that retailers who embrace change are those who are most likely to navigate the whirlpools and eddies of consumer trends successfully. Wilmot, in particular, remains optimistic.

“Malls still have very powerful locations in terms of draw and convenience that will provide the platforms for these concepts to come into the market,” Wilmot said. “The malls that are still standing will be … in an even better position than they were before. A flight to quality, if you will.”

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Commercial real estate focuses on flex buildings

This spacious, airy lobby graces The Metropolitan, the Gallina Development Corp.’s adaptive reuse project in Rochester. Once it is completed, the building will house 16 floors of office space, five floors of condos and five of apartments. Credit: Provided by Gallina Development Corp.

As commercial real estate projects sprout around the Rochester area, developers and builders offer mixed views of the future market for such properties.

Commercial projects account for about 30 percent of the $200 million in business that DGA Builders LLC does in New York State annually, said Kevin Nowack, DGA’s vice president.

“Anything that isn’t going to be occupied as a residence pretty much falls under our commercial umbrella,” he said. “We do a significant portion of that work in Monroe County.”

Back in 2015, the firm, which has offices in Pittsford and in Cranberry Township, Pennsylvania, began extensively renovating 140 Canal View Boulevard, Brighton, for UR Medicine.

“It was essentially taking what was there down to a shell, and then rebuilding it,” Nowack explained.

Completed in 2017, the 40,000-square-foot building is now home to UR Medicine Heart and Vascular’s Rochester Cardiopulmonary Group and its Cardiac Rehabilitation program.

DGA is involved in a lot of renovations or rehabilitations of this kind, according to Nowack.

“That’s one of the trends that’s out there,” he said. “If you have good bones to a building and the infrastructure’s in place, it certainly is a lot more cost-effective to repurpose a building than to build it from the ground up.”

Projects that take advantage of the assets in existing buildings are more common in Rochester than in its suburbs.

“In the city, there’s a lot of adaptive reuse,” said Kurt Sertl, Director of Leasing for the Gallina Development Corporation, which engages in commercial real estate development in Monroe and Ontario counties.

Adaptive reuse goes beyond renovation—once construction is completed, the structure involved is put at least in part to a different purpose than that for which it was originally built.

The Metropolitan, Gallina’s only adaptive reuse project in Rochester, is a good example of that process. Gallina gutted most of the old Chase Tower building on Rochester’s East Main Street, and is in the process of turning it into a mixed-use structure.

“We’re adapting that building to new uses—it’s not 26 floors of offices anymore,” Sertl said.

The finished project will encompass a total of 16 floors of office space, five floors of condos and five of apartments. Thirteen floors of the office space are already committed, two floors of apartments have been rented, and a restaurant has opened in the building.

Other types of Gallina projects have recently risen up out in the suburbs, where most of the firm’s portfolio—which totals 2.5 million square feet—is found.

Back in December, the firm cut the ribbon on Lehigh Crossing, a new 27,000-square-foot flex building that it erected and owns in Victor.

“Flex buildings are generally office, warehouse, manufacturing-type buildings, where you can give someone different size spaces,” Sertl explained.

The $3.5 million project was undertaken on spec; Gallina didn’t have on tap all the tenants needed to fully rent the place.

“We had one tenant on tow when we built the building, and then we leased the balance of the building to the one additional tenant,” Sertl said.

Lehigh Crossing isn’t the only commercial project that Gallina has done on spec. 957 Panorama Trail South, a 24,000-square-foot, $1.5 million building that the firm erected at the Panorama Landing office Park in Pittsford, is just a shell at this point.

“We’re awaiting the assigning of tenants so we can build it out,” Sertl said.

Spec projects do pose a bit of risk for a firm. What if the tenants don’t appear?

“You’re not able to find somebody when you’re in your construction process, and then the building sits there for a little while,” Sertl said.

At the same time, such projects reflect his firm’s view of the market for commercial buildings.

“We wouldn’t put up a spec building if we weren’t optimistic about the future, and thought it was in a good location and thought there was a market for it,” Sertl said

Gallina will also build to suit, erecting a brand-new structure that meets its future tenant’s needs, and renovate existing structures.

“We’re always renovating and re-leasing existing office and flex and warehouse space,” Sertl said.

Richard LeFrois, president of Russell P. LeFrois Builder, Inc., describes the current market for commercial real estate development as “stable.”

“It’s basically some new construction and some repurposing existing buildings,” he said.

Just last October, LeFrois broke ground in Henrietta on a new project for IDEX Health & Science, a segment of the IDEX Corp.

“We’re building a pretty exciting project for the city—for the whole area,” LeFrois said.

An IDEX press release refers to the new facility as its “Optics Center of Excellence.” Those working in the 100,000-square-foot, $14 million building, which is slated to be completed this July, will engage in the design and manufacture of high-performance lens assemblies, lasers and other high-tech optical components and devices. LeFrois will own the building and lease it to IDEX.

While the IDEX project seems to highlight another area where local development is expanding, LeFrois doesn’t speak of the future of local commercial real estate development in glowing terms.

“It’ll be stable, but I don’t see it growing much,” he said. “Since our population is basically stable or stagnant, it has reduced the need for new projects.”

Sertl said he is “cautiously optimistic” about the current market for commercial real estate properties. In the coming years, demand for some types of commercial buildings—like those that house medical offices or high-tech companies—could grow.

“There seems to be a lot of young, growing IT kind of tech companies in town that I think are going to be doing well and looking for office space in the future,” he said.

Mike Costanza is a Rochester-area freelance writer.

Spectra at Sibley Square joins thriving downtown rental landscape

Spectra at Sibley Square is now leasing studio, one-, two- and even some three-bedroom luxury apartments, with monthly rent ranging from $1,400 to $2,690. (Courtesy of Tipping Point Communications)
Spectra at Sibley Square is now leasing studio, one-, two- and even some three-bedroom luxury apartments, with monthly rent ranging from $1,400 to $2,690. (Courtesy of Tipping Point Communications)

For the better part of two decades, all that remained of the landmark Sibley, Lindsay & Curr Co. building in downtown Rochester were memories and dust.

Maybe more dust than memories, too.

Plaster was crumbling off the walls. Windows on the 12-story tower along Franklin Street were broken. There were cobwebs. There was tattered tile. There were water stains on the ceiling.

But mostly there was just an aging building with an iconic past and a tarnished present.

Then along came WinnDevelopment, the real-estate advancement branch of Boston-based WinnCompanies.

The firm launched what has become a $200 million renovation to create Sibley Square, the cornerstone of which will be 104 luxury apartments on floors nine through 12, and another 72 senior/mixed-income apartments on the seventh and eighth floors.

One of the bedrooms in a two-bedroom apartment at Spectra at Sibley Square. (Courtesy of Tipping Point Communications)
One of the bedrooms in a two-bedroom apartment at Spectra at Sibley Square. (Courtesy of Tipping Point Communications)

Spectra at Sibley Square is now leasing studio, one-, two- and even some three-bedroom luxury apartments, with monthly rent ranging from $1,400 to $2,690.

If you think that might be a little pricey for Rochester, the cost is actually in line with the recent surge of upscale downtown apartments.

The range at Tower 280 at Midtown, a joint venture of Buckingham Properties and Morgan Management, is between $1,641 and $2,928, according to the building website. At 88 on Elm, a DHD Ventures renovation, rent runs from $1,500 to $3,300.

And for the most part, leasing agents are filling vacancies, whether it’s at The Temple Building at 14 Franklin St. or Charlotte Square at 50 Charlotte St. off East Avenue. Vacancies for downtown apartments: 2.1 percent. The norm is 5 percent, said Heidi Zimmer-Meyer, president of the Rochester Downtown Development Corp. (RDDC).

“They’re relatively high priced for this market, yet they fill up fast,” Zimmer-Meyer said. “Every project that has hit the market has leased up faster than the developer’s expectations.”

So far, that has been the case for Spectra at Sibley Square.

“Before we even had a model unit available, we had a handful of signed leases,” said Dave Ginsberg, the Sibley project director for WinnDevelopment. ”There’s a renaissance to the downtown/urban living style.

“And every person I’ve run into or talked to from Rochester has some historical tie or familial tie to the Sibley Building. It’s an icon in the city.”

Why the desire to rent in the heart of the city? It’s been a trend in the country for nearly a decade, albeit perhaps a slowing one in major metropolitan markets like Boston, Seattle and Denver. But it still has traction in smaller cities like Rochester and Rapid City, S.D.

“It’s happening in Syracuse, it’s happening in Buffalo, it’s happening in Toledo, it’s happening in Columbus. It’s happening in all these mid-sized cities,” Zimmer-Meyer said. ”Part of it, we think, is driven by pop culture.”

Television shows such as “Seinfeld,” “Sex in the City” and “Friends” made it “cool” to live in the heart of downtown, she said.

Since 2000, 48 downtown buildings in Rochester have been converted to residential space, according to the RDDC. Since 2014, about 1.65 million square feet of office space has turned into housing, and 96 percent is rental property.

The bathroom in a two-bedroom apartment at Spectra at Sibley Square. (Courtesy of Tipping Point Communications)
The bathroom in a two-bedroom apartment at Spectra at Sibley Square. (Courtesy of Tipping Point Communications)

Millennials make up a strong percentage of the renters. They enjoy the city life, and many don’t want a 20-minute drive to work. That in turn drives start-up companies downtown. The sixth floor of Sibley Square will house High Tech Rochester.

Millennials aren’t chasing the dream of the Cape Cod or ranch in the suburbs “with the big yard and the white picket fence,” Zimmer-Meyer said. They’re happy to walk to work. Or bike to work. Or take the bus to work.

“The whole generation has a different view about the world in general,” she said. “The bike-riding, bus-riding quotient is significantly higher with this generation.

“And it’s impacting the location of innovation startups and expansions.”

But 35-and-unders aren’t the only ones doing the leasing. So, too, are folks at the other end of the spectrum.

“We’re seeing a lot of older and wealthier retirees, or mid-income executives,” she said. “It doesn’t mean the suburbs are emptying out, but it’s not how it was in the time period of 1945 to 2000.”

Tom Pomidoro and Cathe MacInnes moved into Spectra and Sibley Square in October. Their house on Gibbs Street was just too big. He’s 70 and recently retired. She’s 65 and still working.

“We had four stories and 48 stairs,” Pomidoro said. “When somebody was on the fourth floor, you wouldn’t know they were home. But we liked living in this area and we didn’t want to leave the area.”

Pomidoro said the renovated Sibley building was perfect.

“We’ve been living down here 12 years, and 12 years ago there was nothing,” he said. “I like what they did to the building. It’s a beautiful location and it’s not much different than living in a house except it’s a big building. For the apartment we got, we consider it to be the most reasonable value for our money.”

The kitchen in a two-bedroom apartment at Spectra at Sibley Square. (Courtesy of Tipping Point Communications)
The kitchen in a two-bedroom apartment at Spectra at Sibley Square. (Courtesy of Tipping Point Communications)

Spectra at Sibley Square combines the nostalgia of the Sibley Building with immaculate living space.

“The blend of history with absolutely modern amenities is what’s so attractive,” Ginsberg said. “The fixtures and the cabinetry together with the historic beautiful windows and the historic façade of the building—it’s a unique intersection of those qualities.”

WinnDevelopment is active in reclamation projects. The company renovated a 112-year-old Fitchburg (Mass.) Yarn Mill into a 105-unit property that opened in the spring. The Philip Livingston Magnet Academy building was used by the Albany city school district from 1932 until 2010. It’s now home to 103 rental units.

“Historic adaptive reuse,” the company calls it.

The Sibley Building is on the National Register of Historic Places. As such, the construction crew couldn’t just gut the building and create from within. Much of the original look needed to be preserved. For instance, the windows, some 2,800 of them, were required to match the original specs. And before the project could proceed, the New York State Historic Preservation Office needed to give its blessing on design/framework of the refurbished windows.

“There are very strict guidelines to adhere to,” Ginsberg said.

He’s quite proud of what is nearly a finished product.

“We’ve done projects up and down the east coast,” he said, “and this is the shining star/best example of our projects.”

The first tenants arrived in late September. Ginsberg said they’re essentially opening a floor a month, with completion of the residential floors set for sometime in the winter.

A food hall and farmer’s market are still in the design stages. So, too, is an outdoor dog park.

“The more people that move in,” Zimmer-Meyer said of the downtown upscale living projects, “the more people that want to move in.”

[email protected] / 585-653-4020

Conifer recognized for new House of Mercy

Conifer Realty LLC was named winner of the 2017 International Award for Corporate and Social Responsibility from the Institute of Real Estate Management.

Conifer was recognized for initiative and leadership in developing the new House of Mercy, an 82-bed homeless shelter located just north of Central Avenue and the Inner Loop at 285 Ormond St.

Entrants for the Real Estate Management Excellence (REME) award in the Corporate and Social Responsibility category came from residential and commercial sectors and included firms from the U.S., Canada and China. The award recognizes exemplary corporate responsibility and contributions to the community that enhance the reputation of real estate management.

The new House of Mercy opened in March and more than triples the size of the former facility, which was just off Hudson Avenue. The building was designed by NH Architecture. Construction was a joint venture between Conifer and LeChase Construction, with the work performed as a donation. Another $100,000 of subcontractor work also was donated.

“The House of Mercy is a true testament to ‘greatness of many,’ ” Conifer Chairman and CEO Tim Fournier said in a news release.

Fournier and Conifer Vice President Dick Crossed co-chaired a capital campaign for the House of Mercy and raised more than $3.6 million in private financing to develop, construct and maintain the facility. The New York State Homeless Housing Assistance Corp. contributed a $2.3 million grant and the City of Rochester provided $500,000.

House of Mercy was founded in 1985 by Sister Grace Miller. She continues to oversee operations. She said the donations and work of Fournier and Crossed have given the homeless hope.

“The fact that we have a beautiful building like this does a lot for their own image, their own ego, their own self-worth,” she said. “They really feel they’re important, that they are human beings and they’re being treated like human beings.”

More buyers than houses on real estate market in 3rd quarter

Would-be home-buyers outnumbered available houses in the third quarter of 2017, according to a report the Greater Rochester Association of Realtors released on Thursday.

There were fewer houses for sale compared to recent years but mortgages remained favorable, GRAR said. As a result, some home-buyers are more receptive to viewing a wider assortment of properties.

New listings wereimage001 down 3.4 percent during the quarter in Monroe County, to 3,254 houses compared to the third quarter in 2016, and closed sales fell 6.3 percent to 2,597. In Ontario County, new listings were up 9 percent, to 617, though closed sales dropped 14.2 percent, to 364. In Genesee County, new listings rose 6.3 percent, to 186, but closed sales dropped 27.8 percent, to 117. Closed sales in Orleans county were up 5.5 percent, to 172, with the median sales price virtually unchanged at $91,000.

“Demand is still strong,” said GRAR President Linda Wilson in a news release. “Our members are busy showing their clients a greater variety of options than those same clients may have previously considered. Potential buyers are actively looking for the right fit and are more flexible.”

The median sales price increased in seven of the 12 counties served by the GRAR, including a 7.2 percent boost in Monroe County, to $148,000, and a 2.3 bump in Ontario County, to $163,628.

“We’re still seeing high demand and low availability as the spring/summer busy season wraps up,” association CEO Jim Yockel said. “These conditions are indicative of the narrow field of choices available and the compromises buyers are willing to consider as a result.”

The national average interest rate for mortgage loans fell slightly, to 3.83 with a 1/2 point, compared to 3.88 with a 1/2 point at the close of the second quarter.

Rates are forecast to rise, says the Mortgage Bankers Association of the Genesee region.

The MBA continues to partner with community resources, such as the Monroe County Library System, to educate prospective home-buyers on loan programs, affordability and mortgage-loan qualifications. The next session, Know Before You Owe, will be from 6:30 to 8 p.m. on Nov. 29 at the Brighton Memorial Library.

Frances Apartments to hold official opening Oct. 12

frances-picThe opening of Frances Apartments isn’t just providing housing independence for people with developmental disabilities—it has created a new way for Lifetime Assistance Inc. to achieve its goals.

Lifetime Assistance traditionally has worked to guide people with developmental disabilities out of institutions and into group homes. The arrival of the Frances housing complex allows Lifetime Assistance to fulfill for those community members the opportunity to live independently.

“It’s a move of a philosophy, a mindset change,” said Ernie Haywood, vice president of residential and development for Lifetime Assistance. “We make sure people aren’t just put in a community, but that they’re part of the community.”

The 56 units at Frances Apartments have a mix of developmentally disabled residents, seniors and low- to moderate-income families. The “official” opening of the complex will be at 11 a.m. Thursday, Oct. 12.

Built in the town of Sweden through a partnership of Lifetime Assistance and Rochester’s Cornerstone Group Inc., residents began moving in on June 30 and the village was completed in September. All units are filled.

“It’s really the first project in the area to be an inclusive home,” said Jamie Rada, coordinator of development for Lifetime Assistance. “It brings us one step closer to showing that people with developmental disabilities can function very well in our community.”

The six-acre living community, just off Route 31 and not far from Lowe’s and the Walmart Supercenter, cost $11.75 million, with more than $10 million coming from state funding. Construction was completed on budget and ahead of schedule, Haywood said.

“We had great support from the town of Sweden and the Brockport community at large,” Haywood said. “We got cooperation instead of opposition.”

The apartments are named to honor Brockport native Frances Barrier Williams (1855-1944), the first African-American graduate of SUNY College at Brockport. She was prominent in the development of the NAACP in 1912. Lifetime Assistance says the Frances Apartments serve as a tribute to her courage in promoting civil rights and inclusion.

Report: Rochester among worst real-estate markets in US

Rochester has one of the worst real-estate markets nationwide and the fourth worst midsize market, according to a new report from WalletHub.

Using 21 metrics to compare 300 cities across the country, WalletHub ranked Rochester 281st overall and 95th among midsize cities. Frisco, Texas, ranked first in the report.

Rochester ranked 292nd for its job growth and 278th for its population growth. The region ranked 264th for its percentage of delinquent mortgage holders and 228th for its average days until sale.

Rochester’s affordability and economic environment rank overall was 232nd, while its real estate market rank was 282nd.

Experts polled by WalletHub say the millennial homeownership rate is low, which may have an impact on the overall housing market. In some cases that results from high student loan debt and underemployment among the under-35 age group.

Follow Velvet Spicer on Twitter: @Velvet_Spicer

(c) 2017 Rochester Business Journal. To obtain permission to reprint this article, call 585-363-7269 or email [email protected]

Legislation to hold absentee landlords accountable introduced

Councilmember Jacklyn Ortiz presents new legislation Wednesday that will hold absentee landlords accountable. (Gino Fanelli)

A new code amendment from Mayor Lovely Warren stands as an opportunity to force accountability and transparency for absentee landlords.

Presented at a press conference on Wednesday, the amendment to Section 90-20 of the City of Rochester Municipal Code will prevent landlords who live out of state from allowing properties to fall into disrepair by requiring streamlined avenues for community input. Specifically, all residential property owners will be required to provide a name and contact information for the property manager. If the owner lives outside Monroe County, a local maintenance person or manager must be listed. Likewise, a publicly available business number must be listed for all rental properties.

Set to go to vote on Tuesday, Aug. 15, a violation of the amendment, set as a medium violation outlined in 13A-11D(1)(b) of the municipal code, will carry a penalty of $75 for a first offense, $150 for a second and $300 on a third, the fee doubling with a default.

Part of the City’s Nuisance Abatement Program, Warren outlined the purpose of the new legislation as a means of protecting the people living in high-rental property areas.

“It is our objective and our duty to protect the property and residents of the city,” Warren said. “People who have to live in the areas of these rental properties suffer the consequences, and the city suffers the consequences.”

A fellow sponsor of the amendment, councilmember Jacklyn Ortiz said the potential impact of holding absentee landlords responsible is closure and safety for city residents.

“I’ve heard too many times ‘I wish I knew what was going on with that property across the street,’” Ortiz said. “Requiring a business name, address and phone is a small change, but it will be a powerful one.”

According to Director of Buildings and Zoning Gary Kirkmire, the number of rental properties in Rochester comes in at approximately 25,000. Of those, he estimated, 30 percent are owned by absentee landlords or LLCs.

The new code amendment is not alone in new city policies which aim to hold landlords accountable and keep a watchful eye on nuisance properties. On Tuesday, July 11, the city introduced a new mapping system which allows the public to report and view nuisance reports for properties throughout the city. Nuisances can include anything from noise complaints, properties in disrepair or reports of controlled substance violations, or generally anything considered a detriment for the quality of life for neighbors.

“This is one more example of keeping the city government transparent,” Warren said. “Whether a nuisance warning has taken place or a building has closed down, we will centralize all that data into one area.”

In September, the map is also set to add analytical tools for management of vacant and abandoned properties.

“This program allows us to develop relationships that would otherwise not be possible,” Ortiz said. “We all feel the City of Rochester should be a place people want to live.”

(c) 2017 Rochester Business Journal. To obtain permission to reprint this article, call 585-363-7269 or email [email protected].