(Rochester, N.Y.) – Drew Costanza’s firm turned the Temple Building downtown and the old train depot at the Public Market into lofts. The economy has him thinking twice about new projects.
“I think the overwhelming reaction on a lot of developers parts is to sit tight,” he said.
Rochester has about $700 million in downtown projects in the pipeline.
At least one project is scaling back. After realizing it couldn’t lease out a huge amount of space, PAETEC downsized its headquarters planned for the Midtown site.
Financial analyst George Conboy expects a lot of developers to take a step back.
“There's no doubt in my mind with investors pulling back, downtown development will slow. No question whatsoever,” Conboy said.
In a sign the downtown office market has weakened, last week the city agreed to lower Bausch and Lomb's assessment on its headquarters building. B&L blamed a soft rental market and competition from suburban office parks.
“Are any developers not spooked?” said Larry Glazer of Buckingham Properties.
Glazer said his Alexander Park is going forward, but one bank refused to finance a building in the complex unless it was fully leased. Glazer said he has other lines of financing, because he’s an established developer and he uses local banks. Glazer closed on a large loan last week.
Glazer, however, said he knows of other companies that are deferring projects.
Heidi Zimmer-Meyer of the Rochester Downtown Development Corporation said projects without secured financing will feel the heat.
“I think those projects are going to be in a much tougher place than they were even a month ago,” she said.
Despite the rough ride on Wall Street, Zimmer-Meyer said she’s still getting calls from investors.
City Economic Development Commissioner Carlos Carballada said Rochester is more insulated from boom and bust cycles. Like Glazer, Carballada said strong local banks and credit unions help the situation.
“We haven't had any kind of indication of panic from any of our developers. It's been just the opposite,” he said.
Zimmer-Meyer said the state’s ability to help with projects could be limited. As for Midtown, Carballada said state help for the project is secure.
Glazer believes other developers will join PAETEC at the downtown site once they see Midtown come down and PAETEC go up.
All agree it could be some time before we know for sure how Rochester projects will be affected by the credit crisis and weak economy.
“There's just a sense of uncertainty now that I don't recall in my working career in terms of what's going to happen, in terms of your ability to finance a project and rent it,” Costanza said.
