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Rising vacancy in downtown office towers fuels concern over future of Rochester's Center City

Downtown Rochester skyline with kodak building in background.
Max Schulte
Downtown Rochester skyline with kodak building in background.

There was a time when the city had to hold back all the food trucks angling to set up shop downtown.

Tony Simone remembers.

“We used to do like 97 to 112 orders with five trucks there,” he said. “They would come from all over downtown.”

The former Midtown block was one of the busiest locations. Simone and his Tuscan Wood Fired Pizza truck would need to get there by mid-morning just to secure a spot. And now?

“You look through the windows, and there's nobody in the desk,” he said of office buildings in the area.

Mergers and company downsizing with employees working from home are driving up vacancy rates in downtowns and suburban office parks across the country. The Rochester Downtown Development Corp., or RDDC, estimates that nearly a third of offices downtown — 31 percent — are empty. Many of the vacancies are in the Four Corners area around Main and State streets that was once filled with law offices.

“We really need to step carefully here,” said developer Ken Glazer, whose Buckingham Properties is one of the largest property owners downtown. “You know, we're on the brink of kind of losing all of it, everything that we've really been working so hard to do; to rebuild.”

The glass front of the Gateway building on East Main Street is show with the lower rise of the Atrium building and then the Granite Building continuing into the background toward St. Paul Street. The building is vacant.
Brian Sharp
The glass front of the Gateway building on East Main Street is among the downtown buildings still awaiting redevelopment. The building is currently vacant.

Retail vacancy is 60 percent along Main Street between State and Franklin streets, according to the RDDC. The residential market, though, remains strong, with less than 2 percent vacancy.

But empty desks in rented office spaces are a likely harbinger of things to home. The exodus fueled by remote and hybrid work arrangements is evident in the parking garages that are barely half full.

All of this mirrors a national trend. The shift is a big reason why Glazer and others are so motivated to create a Business Improvement District, or BID. The idea is that the district can fund events – lunch-hour gatherings, guides or “ambassadors,” anything that will build back vitality.

“We were really in a good place, you know, pre COVID,” Glazer said. “And this has just changed everything. So we're having to re-create it again.”

A draft plan for the BID, including boundaries and proposed uses for the special taxing district, is expected next month.

Read more: Showdown over a downtown business improvement district.

'Moment of crisis’

“The vacancy rate is pretty gaping at this point in the downtown central business district. And that's growing,” said Ana Liss, director of planning and development for Monroe County.

She was speaking at a meeting of the County of Monroe Industrial Development Agency, of which she is also the executive director. The agency’s board members were discussing waivers on job requirements tied to tax breaks. One specific waiver that caught their eye of officials came from Glazer, whose Legacy Tower (formerly Bausch & Lomb tower) had seen an exodus of several hundred workers over the past year.

"So it's a moment of crisis,” Liss said.

Rochester is not alone.

“A lot of cities have significant issues that are that are much greater than Rochester is experiencing today,” said Angelo Nole with the commercial real estate firm CBRE. “We still have vibrancy with a lot of diversity. … There's a lot of positives indowntown Rochester today.”

That is not to downplay the significance of what is happening. A market that has been relatively consistent over the past 20 years is being upended.

A sign at State and Church streets in downtown Rochester announces "Yes!!! We are still open for business" and lists several businesses on the block.
Brian Sharp
A sign at State and Church streets in downtown Rochester announces "Yes!!! We are still open for business" and lists several businesses on the block.

“This is a monumental, significant … all these words that describe what is happening to our office market in the country,” Nole said. “It's really disruptive. And it's hard to determine the impact yet.”

Concern is highest in major cities with heavily leveraged commercial real estate markets like New York, Seattle and Los Angeles. That is not a problem here. But the office vacancy rate is comparable.

CBRE and another firm, Pyramid Brokerage Co., put downtown vacancy lower than RDDC, at 18.5 percent and 26 percent, respectively. Both are roughly double pre-pandemic numbers.

The local office market totals 15 million square feet. Well over half of that is in the suburbs.

The strength of the market is in employers with 10 to 15 workers, Nole said. Larger employers tend to have positions that are duplicated or with employees who don’t need to be in the office every day. And Rochester historically has had a lot of satellite offices of larger, national tenants, he said. Many of them have determined their staffers can work remotely.

Dana Miller, the city’s commissioner of neighborhood and business development, pushed back on the perception of a Center City in crisis.

“I think downtown is solid,” Miller said.

He points to ongoing and future investments. And he notes major residential conversions of former office towers including Midtown, The Metropolitan (previously Chase Tower), Innovation Square (former Xerox Tower) Sibley Centre, and now the Executive Building that make tracking office vacancy year to year a challenge.

Miller concedes there is shared concern in City Hall about the Four Corners – an area Glazer says has “some gaping holes” with substantial buildings experiencing significant vacancy and requiring sizeable investment to repurpose them.

The area was once buoyed by a concentration of law offices. COVID accelerated a shift to more remote and online work. But extensive road construction projects happening simultaneously on East Main and State streets hasn’t helped matters.

“It has made it difficult for people to get to the buildings,” Miller said. “It's made it difficult for people to get into and out of the Crossroads parking garage. It's made it, you know, difficult … enough that we've seen some out-migration of businesses from the Crossroads building, from the First Federal building, and from the Powers building because people have just said, 'I can't get my customers into the building.’”

Finding new footing

Investor-developer Chris Hill is trying to fill up the 21 floors of First Federal Plaza.

He won’t say what the vacancy rate is for the building. But it’s way off from its peak a few years ago, when there were 900 people working there.

"Fast forward to today,” he said. “I haven't taken any population surveys, but we definitely have a fraction of that on a daily basis. And we have suffered significant losses with regards to office tenancy.”

Hill and his partners are contemplating whether the signature building — once topped with a rotating restaurant — should follow the lead of other downtown towers and focus on apartments.

“The downtown office worker, (and) people who come into downtown to visit – whether it be a professional office, a lawyer, accountant, money manager, whatever have you — those numbers are off by like 50 percent from pre pandemic levels,” he said, citing cell phone tracking data.

If revitalizing downtown has relied on one thing, it’s people. The energy of workers stepping out of the office, seeing others on the street, visiting a nearby coffee shop or food truck. Count Hill among those advocating for the business improvement district.

The upper levels of the High Falls garage have been fenced off. City officials say the downtown parking garages are just more than half occupied. High Falls used to be filled on weekdays.
Brian Sharp
The upper levels of the High Falls garage have been fenced off. City officials say the downtown parking garages are just more than half occupied. High Falls used to be filled on weekdays.

But critics are wary of giving business interests greater influence over downtown.

One of the lead opponents is Kelly Cheatle, a local artist and business owner, who – while recognizing the causes of the shift that is happening – disagrees that a BID is part of the solution.

“I don’t think we can move forward into the next century using policies from the middle of the last century,” she said. Instead, “identify what the issues are, and then come up with a solution that is equitable.”

Cheatle and the No BID Roc group have argued that downtown has blossomed without a BID, that a district could expand existing economic inequities and that the ulterior motive is really about clearing the streets of people deemed undesirable.

BID supporters dispute the claim.

“There are more vacant storefronts on Main Street than there are occupied storefronts,” developer Andy Gallina said recently as he prepared to make the case for a BID to leaders inside City Hall, as opponents protested outside. “And those folks out there have no idea what the hell they're talking about. Because they don't understand the market.”

One of the latest to close up shop downtown, at least temporarily, was Starbucks.

One of the latest to downsize? The Rochester Area Chamber of Commerce.

“And we don't have the big businesses looking to come downtown right now,” Glazer said.

Constellation Brands is the exception.

The company is moving its headquarters from Victor to downtown. But when asked how many of its 300-plus workers will be coming with it, a company spokesman couldn’t say.

As for Simone and his pizza truck, he’s more often found these days at office parks with medical offices. Or, on one recent afternoon, parked on a quiet neighborhood street out back of Highland Hospital.

Several food truck operators contacted said they no longer come downtown. Like Simone, they get by on graduations, weddings, birthday parties.

“You’ve got to reinvent yourself,” he said, “as far as a food truck owner.”

Brian Sharp is WXXI's investigations and enterprise editor. He also reports on business and development in the area. He has been covering Rochester since 2005. His journalism career spans nearly three decades.