ITHACA, N.Y.—It’s a great time to be involved in the residential real estate business. But on the commercial office and retail side? It’s a lot more uncertain.
While large-scale problems persist with supply chain issues and inflation, Ithaca’s housing market is hot, as are the home and apartment markets in many parts of the country. However, the retail and office situation has been hit hard by moves toward more online shopping and remote work as a result of the pandemic. With fewer offices filled and storefronts occupied, being a commercial real estate owner, whether in a suburban office park, strip mall or downtown business district, is an anxiety-inducing experience.
However, some are still willing to take the plunge. The Demarest and Modisher families just put down $1.45 million on the Ithaca Agency Building at 108-112 West State/Martin Luther King Jr. Street in Downtown Ithaca. The four-story, 11,416 square-foot building hosts street-front retail, offices above, and apartments on the third and fourth floors.
“We love that this building has been standing tall since 1867. We have always been believers that commerce should happen in our downtown core and that providing moderately priced housing downtown in a mixed-use
building is even better. It is large enough for a long-term investment, but not too big to handle for our first significant real estate venture. We like the idea of investing in something tangible and local. It is another opportunity for us to interact with our community and hopefully create a positive experience for others, whether they are lessees, customers of the commercial spaces, or our clients,” said Noah Demarest.
“Personally I had been looking for something to invest in for a little while now, and I’m not a huge believer in the stock market. I like seeing whatever I’m investing in. I come from the background of a builder, I used to build custom homes. As a contractor, I liked seeing the product of my work, and similarly in my investing, I wanted to have something tangible. I had been looking around for a couple of years, and when I started working with Jen and Noah, conversations started coming up about them wanting to purchase the building where the office was, and that seemed like a good possibility to me. An existing building, something Downtown was exciting,” said Craig Modisher, Demarest’s colleague and co-owner of the building.
Demarest and Modisher are two of the most visible faces of Ithaca-based architecture and planning firm STREAM Collaborative; if you’ve watched a Planning Board meeting sometime in the past several years, chances are you’ve seen their work, sometimes with multiple projects in the same meeting. STREAM had been a renter in the Ithaca Agency Building for the past several years, and a mixed-use building in an urban setting similar to many of the projects they like to take on behalf of clients.
“When we relocated from around the corner at 123 South Cayuga Street about five years ago, we really wanted to find something we could invest in, but we were nowhere near ready to do that financially. So, when we signed our new lease, we negotiated a right of first refusal on the building. We had talked about buying the building back in 2019, and just before the pandemic started we had a purchase agreement ready to go,” said Noah Demarest.
“The pandemic grounded that process to a halt, but we were able to pick it up again in mid-2021 after both parties felt more comfortable with how things were going. The previous owner lives in NYC and liked the idea of selling it to one of the building occupants, and we liked the idea of owning our office space and making an investment in our local community.”
It should be pointed out that some kinds of businesses are better suited for remote work than others. A call center staff member or an accountant is more capable of working from home than most doctors or scientists, because the convenience of working from home can be outweighed by the need to meet with clients or work with specialized equipment. The same holds through for an architecture firm like STREAM.
“We recognize there is a lot of buzz about working remotely for our
profession and professions like ours but we don’t believe the need for office
space and face-to-face interaction is going away completely,” Demarest said. “Having face-to-face in the office is a good thing, especially given what we do. Not everyone likes to work remotely or has the ability to. Distractions or slow internet can really limit the productivity of working at home for some people. Having said that, I think we adapted pretty quickly and easily to remote work, being as small as we are, and the nature of most of our work being on computers anyway. But there’s something better about being in-person, especially with clients. Fortunately, we have a flexible arrangement that allows for both in-office and remote work.”
As one might guess since they have the cash equity to put towards this purchase, business has been very good, even during the pandemic. Demarest spoke enthusiastically about a number of ongoing projects STREAM is or has been recently involved with, include a sustainably-powered “passive house” in Lansing village, the Incodema/Cliff Street Retreat project by developer Linc Morse, and a redesign and expansion of the former Ithaca Country Club facilities, now called RaNic (Ray-nick). Modisher agreed that the passive house and Cliff Street were among his recent favorites as well.
“Just in terms of the kinds of inquiries that we get, there’s no doubt in my mind that there’s an influx of people looking to relocate to Ithaca from other urban areas because of the pandemic, because of the ability to work remotely,” said Noah Demarest. “Whatever may happen nationwide or globally on real estate, I think it only benefits a place like Ithaca. We have a lot of people looking to find a new location in Ithaca.”
Modisher added that they’ve seen no change in the kinds of projects their firm is approached for, but that they’re seeing a higher volume of people from out-of-state looking to build or renovate custom homes. “We do a diversity of projects, small to large…you never know what’s going to come through the door, it’s whatever people are interested in doing.”
As for those who like to keep their eyes on all things development (thank you, loyal readers), don’t expect anything that really changes the appearance of this 150 year-old building all that much. Jennifer Demarest, the office manager and “Chief Anxiety Officer” for STREAM, has been tasked with managing the property. says they are seeking grants for energy efficiency improvements to the structure, but otherwise retain its appearance and program mix of stores, offices and apartment lessees.
“The building is ideally located directly across the street from the State
Theater. One of our ground floor commercial spaces is currently vacant
and we are looking forward to filling it with a good fit. Recently renovated,
the space really is a blank slate ready to go in whichever direction desired.
In these early days, we are just trying to get to know the rest of the building
better, and thinking about how to accomplish some of the needed
renovations. The residential apartments on the 3rd and 4th floors are
established, moderate-income units and we don’t plan to change them
apart from some cosmetic and energy-efficient upgrades. We are also
happy to see The Pretty Peach, a new retail business (waxing salon), in the other ground floor space.
We recently applied to the Main Street grant program to help us with
historic window replacements, heat pumps, and other building code-related
issues. That would greatly improve the energy efficiency of the building,” said Jennifer Demarest. “I’m excited to improve the space for lessees, both upstairs and down on the first floor, and make it a nice place to live, work and to be.”
Now, they’re not approaching this with sunshine and rainbows. Jennifer Demarest says that the lack of foot traffic on the Commons during the pandemic does give her pause, though she remains optimistic that a post-pandemic return to something closer to normal will happen eventually.
“This is a very long-term investment for us. We’re not flipping, we’re sort of understanding that this a break-even venture for us for the next five, ten years. But if you look term as a kind of retirement nest-egg, it can only go up in my opinion, with the rest of the market in Ithaca,” said her husband Noah. Quick note, both Demarests and Modisher are the same age (45) and retirement is a way’s off.
“We’re certainly not making any larger sums of money off this. If we’re breaking even and doing alright, than it is for me solid. I’m excited to see how the building and the surrounding spaces will evolve over the coming years,” said Modisher.