WinnDevelopment is still committed to the landmark Sibley Department Store building in downtown Rochester, N.Y., even after a setback that could rob the firm of its anchor tenant.
“We are bullish on Rochester,” says Joseph Eddy, vice president for Boston-based WinnDevelopment. Winn’s plan for Rochester includes a mix of office, retail space and the new construction of more than 100 apartments. It’s just the latest example of a major company committing to build far from the hottest real estate markets in a few gateway cities like New York, San Francisco and Boston.
At the end of 2012, Winn paid $7 million for the Sibley building, once a beloved department store on Rochester’s Main Street. “It was the largest department store between Chicago and New York,” says Eddy. The price works out to just $7 per-sq.-ft. for the 1-million-sq.-ft. landmark, which has stood mostly empty for more than a decade. A local community college fills roughly a quarter of the space, along with another 21 local companies and nonprofits.
WinnDevelopment plans to rent the first floor of the six-story department store to shops and restaurants. The next five floors would fill with office tenants. The antique escalators and elevators from the old department store make it easier to re-purpose the building by providing many different access routes. Winn plans to build a new lobby for Sibley’s suitable for class-A office space, along with streetscape improvements along Main Street. Construction will start in March on a new police substation.
WinnDevelopment plans to build 150 to 200 apartments in a 12-story tower that once housed Sibley’s corporate headquarters. “The footprint works out very well for apartments,” says Eddy. Half would be luxury apartments, the rest would be reserved for lower-income seniors.
Rochester is a relatively small city of about 200,000 people on the shores of Lake Ontario in upstate New York. But the real estate market is strong and steady. “We are more of a tortoise than a hare,” says local expert Gar Lowenguth, a broker for Re/Max Realty. “We don’t get the big highs and we don’t get the big lows.”
Rochester’s apartment market had an average vacancy rate of just 3.2 percent in the fourth quarter, according to data firm Reis. That’s very low—even in today’s tight apartment market. The average effective rent was $776. “The rents aren’t like Boston, but the vacancy rate is,” says Eddy.
The apartment market was strong enough to absorb a little new construction, as the apartment inventory increased 0.4 percent in 2012. More new projects will in grow the inventory 1.9 percent over 2013 and 2014. The office market is also relatively strong, with a vacancy rate of 16.6 percent, according to Reis. That’s down from a high of 18.3 percent two years before.
Rochester benefits from several colleges and universities, including the Eastman School of Music at the University of Rochester. “They have an excellent intellectual capital base. It’s an affluent city,” says Eddy. The city is also investing in a new, $50 million transit center just across Main Street from the Sibley building.
WinnDevelopment’s plan for Sibley suffered a setback in February when Monroe County officials voted to allow Monroe Community College to potentially move its campus from the Sibley building downtown to the Kodak campus, a few miles from downtown. However, WinnDevelopment is confident that the project can survive the loss of its largest tenant—if the move ever becomes a reality.
“The college has 4.5 years left on their lease with us,” says Eddy. “We have enough time to do the apartments and find new office tenants.”