Commercial market remains on steady heading, banker says

SYRACUSE, N.Y. — The commercial real-estate market in Syracuse and surrounding areas remains stable post-pandemic, bucking the trend some other cities are seeing with increasing vacancy rates. The much-feared recession hasn’t happened, says Lindsay Weichert, senior VP and commercial group practice manager at Community Bank, and the market has avoided any big swings. Across the nation, news headlines have decried vacant commercial spaces in urban areas, but Syracuse just isn’t seeing that, she says. “Generally, it’s been fairly quiet,” Weichert says. There is some movement, much of it is businesses moving between locations, which isn’t impacting the overall vacancy rate. According to the Downtown Committee of Syracuse’s Spring 2024 commercial occupancy report, the vacancy rate for Class A space is 22.37 percent, 11.7 percent for Class B accommodations, 39.64 percent for Class C space, and 79.36 percent for manufacturing space. On the flip side, retail space saw an increase in occupancy, dropping its vacancy rate to 19.5 percent. “We’re definitely starting to see more stores coming in than leaving,” Weichert says of downtown. According to the report, 12 businesses closed between September 2023 and April 2024, but 14 new businesses opened during the same period. Downtown appears to be bustling, Weichert says, with increased foot traffic and full parking garages. She attributes that in part to more people returning to in-person work at the office following the pandemic. Looking ahead, Weichert expects the arrival of Micron to have some significant impacts on the greater Syracuse market, with increased demand for commercial space and even more demand on an already competitive housing market. “In Syracuse and Central New York, the multifamily market is very strong,” she says, adding that Syracuse is becoming one of the most competitive markets with rent growth of about 20 percent in recent years with a vacancy rate of just 1 to 2 percent. A few class A projects in the region have achieved $3-per-square-foot rents, while the average rent is closer to $1.52 per square foot for all classes of apartments, Weichert says. Area experts, including CenterState CEO, say the area needs to add 2,500 new housing units annually to meet the current demand, but the average is only 350 units right now. With Micron coming to the area, population growth of anywhere from 75,000 to 100,000 people is projected, which will definitely crunch the market even more, Weichert says. Much of the new developments have focused on higher-income tenants, but there is a growing need for workforce housing, she says. “That’s something I think we definitely need to focus on.” Current higher interest rates may be combining with a wait and see approach that has delayed any real housing development activity so far, Weichert notes. “Once the shovels start, that’ll be a pretty good indicator it’s [Micron] really happening,” she adds. Another area of growth the market needs to focus on for the future is the hospitality segment, Weichert advises. “I would say pretty definitively … we do not have enough high-quality rooms here,” she says. With two hotels recently pulling out of the hospitality business to transform into apartments and student housing, the area has lost nearly 500 rooms it couldn’t afford to lose, she says. “The university can’t solicit NCAA tournaments,” Weichert says. “We may find ourselves off the convention circuit [too].” She praises the city’s and county’s efforts to head off the crisis by reinvesting occupancy tax dollars into funding opportunities to spur hotel development. “Our local politicians are definitely trying to do a good job, to be proactive,” she says.