Call it a comeback.
First Columbia is showing a strong first quarter in 2014 occupancy levels at its Troy properties, following a banner year for attracting new tenants in 2013. The good news comes just one year after the state’s workforce consolidation plan removed more than 600 Department of Health jobs from First Columbia’s Hedley Park Place and Flanigan Square buildings.
Today, not only is the Hedley building once again approaching full occupancy, but the tenants there now represent a healthy mixture of education, healthcare, Fortune 500, high tech and professional companies, in addition to government offices.
Nine new leases, consisting of 144,000 square feet, and 45,540 square feet of renewals, bring the building to more than 86 percent occupied — a 13.6 percent increase from 2012. The building now serves as office space for more than 500 workers.
According to market research by global real estate firm CBRE, these positive results for Hedley buck the overall trend in the Capital Region as a whole, which saw area office vacancy rates remain steady or increase since 2012. In Troy, however, First Columbia’s rapid turnaround at its Hedley and Flanigan buildings helped bring the city’s vacancy rate down from 19 percent in 2012 to 10 percent in 2013, the lowest in the region according to CBRE.
“There was a sharp rise in occupancy rates in this city,” said Erin Pihlaja, executive director of the Downtown Troy Business Improvement District. “Those numbers really support the fact that Troy is a desirable place to invest.”
As the following chart shows, the tenant mix at Hedley Park Place has shifted from heavily government-occupied in 2010 to a well-rounded mixture of industry types in 2014.
A diverse tenant mix, such as what we now have at Hedley, provides a more enjoyable experience for our tenants and promotes economic growth for our city,” said Victoria Harris, marketing director of First Columbia. “Our goal was to attract tenants from around the region, not simply lure them from other parts of Troy. Our focus was on professional and high tech companies.”
The following tenants relocated to Hedley Park Place in 2013: MacSource Communications, a business communications subsidiary of Meridian Group International; KW Mission Critical Engineering, International Data Center Engineers, Guth DeConzo Consulting Engineers; LinguaLinx Solutions, a multilingual marketing and technology services company; Capital District Educational Opportunity Center (EOC); Stockton Barker & Mead LLP, and Workforce Development Institute.
To attract these types of high quality tenants, First Columbia committed to investing $10 million to renovate the historic 1917 building, which once housed the Cluett Peabody shirt manufacturing company. This investment is paying off at Hedley Park Place and setting the tone for the rest of the city, as well. Not only are First Columbia’s tenants supporting the surrounding restaurants and business by patronizing them, but their presence is inspiring confidence in other entrepreneurs to set up shop in Troy. According to City Economic Development Coordinator Monica Kurzejeski, 35 new businesses opened in Troy in 2013 with a strong 2014 underway.
The city of Troy released its own report indicating the total dollar value of construction within its borders in 2013 rose by 10.5 percent over 2012, totaling nearly $51 million. This figure increased for the second consecutive year.
“The totals for the past two years are remarkable,” said Mayor Lou Rosamilia. “Almost $100 million in construction is an incredible amount and indicative of the interest investors have in Troy. Even more remarkable is the fact that the number has been contributed to by so many people and such a broad spectrum of projects.”
HOW FIRST COLUMBIA GOT HERE.
In Dec. 2011, New York State Gov. Andrew Cuomo announced the state’s workforce consolidation plans, which included vacating 136,000 square feet of office rental space at Hedley Park Place and the adjacent Flanigan Square building along with properties located throughout New York State.
“Our property was heavily dependent on government leases at the time,” said Harris. “We were blindsided by the news that our state tenants would be leaving for Albany.”
Left with a vacancy rate of over 60 percent during a global economic crisis, First Columbia’s Troy properties were facing severe financial difficulties if something was done soon. But rather than throw in the towel, First Columbia partners Kevin Bette and Deborah Mikhitarian-Russell put together a plan in place to re-position the property.
Mikhitarian-Russell and her team initiated the first big step toward stabilization by persuading Troy’s city government to move into the fifth floor of Hedley. Since 2010, Troy’s “City Hall” has been without a permanent home. The city now has a 10-year lease, renewed every 2 years, for nearly 36,500 square feet in Hedley.
Next, First Columbia’s marketing and leasing team focused its efforts on bringing a diverse tenant mix to the Hedley Building through targeted campaigns. Their goal was to attract high tech and professional companies, whose employees are capable supporting the city and its economy. As the charts below confirm, the marketing worked.
In 2006, First Columbia commissioned a master plan to redevelop roughly 25 city blocks surrounding its Hedley Park Place and Flanigan Square properties. Plans for “The Hedley District” include dozens of new office and condominium buildings, a seven-story hotel and a riverside promenade. After suffering a setback, those plans are now back in motion in 2014.
“Our goal is to help make Troy a place where you can truly live, work and play,” Harris said. “And that’s just what we’re doing.”