News Room
Gem Holds Luster Despite Job Losses
By Maura Webber Sadovi-Wall Street Journal
August 10, 2005
Compared with other midsize industrial cities in the Northeast, Rochester, N.Y., looked like a jewel. New York's third-largest city by population could boast the headquarters of Eastman Kodak Co., which gave a boost to the overall manufacturing sector, plus it had a healthy telecommunications industry and a growing health-care sector.
Rochester, which sits next to Lake Ontario, has started to look more like such struggling neighbors as Cleveland, Buffalo and Syracuse. The Rochester region took hits from the nation's manufacturing shakeout, the rout of the telecommunications industry and a shrinking Kodak, which by some measures has lost the title of the area's biggest employer to the University of Rochester.
From early 2001 through late 2004, Rochester suffered its steepest decline in employment in more than a half century, according to the Federal Reserve Bank of New York. The job losses will likely continue. Kodak is in the process of cutting as many as 25,000 jobs, roughly one-third of its world-wide work force, and plans to demolish, sell, close or find a new use for roughly two-thirds of its manufacturing assets associated with its traditional film business. Though the local impact is unclear, Kodak's Rochester-area work force has already dropped to 16,300 positions from 24,568 in 1999.
Rochester's commercial real-estate market has been battered by the losses. From the end of 2003 through the end of 2004, vacancies for warehouses and factory buildings rose both in the city and suburbs, according to CB Richard Ellis Group Inc., a Los Angeles-based real-estate services company. About one-quarter of the city's office space is empty, although vacancies are down slightly.
The industrial sector has been hit by the fallout from Kodak because its vendors have seen their orders dry up. "Kodak is not doing as much business and the trickle-down effect is significant," says Laurence C. Glazer, chief executive of Rochester-based Buckingham Properties, an industrial developer that has rented out warehouse space for as low as $2.50 a square foot six months ago, down from $3.75 that he would have gotten five years ago. Mr. Glazer believes rents have bottomed out.
The news isn't all bad for the area. Some economists say Rochester's highly educated work force, below-average housing costs and cultural offerings such as the Eastman School of Music will help it retain and attract more businesses. "What happened were layoffs, not mass murders, and there are a lot of things that have kept a large group of very talented people here," says Clifford W. Smith, professor of finance and economics at University of Rochester's Simon Graduate School of Business.
The area had 504,000 jobs in June, 5.4% below peak prerecession levels reached in early 2001, according to consulting firm Economy.com, but unemployment is falling. Meanwhile, the five-county metropolitan region's population edged up by less than a percent to about 1.04 million from April 2000 through July 2003, according to the U.S. Census. Rochester, with its population of 212,481, is the third-largest city in the state, after New York City and Buffalo.
Bright spots include payroll giant Inc.'s $10.5 million purchase of a 125,000-square-foot building in suburban Brighton and the decision by Xerox Corp. to build a $59 million toner plant in suburban Webster. CooperVision, a Lake Forest, Calif., maker and distributor of contact lenses plans to build a 241,000-square-foot North American distribution center outside Rochester, creating 225 jobs.
Matt Marks, senior vice president of Tower Investments, which bought a 150-acre suburban office complex from last year for $3.5 million, said Rochester is an underpriced market. At less than $10 a square foot, he said the price was substantially below replacement cost. "We're hoping to go out and attract companies that are looking for an overall lower cost of living than in New England," Mr. Marks said. The company is hedging its bets, though, and is considering turning the site into a casino.