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The Clouds Burn Off in Schenectady
By SHAWN G. KENNEDY
Published: Sunday, October 18, 1987


WHEN General Electric made known its plans a few years ago to cut back its manufacturing operations in its birthplace, Schenectady, N.Y., the economic future looked pretty dim for the town that once billed itself as ''the city that lights up the world.''

But rather than serving as a catalyst for further decline, the G.E. plant layoffs were more like a wake-up call for the city.

''We realized that we had to stop looking to G.E. for everything,'' said Karen B. Johnson, who is in her fourth year as Mayor of Schenectady. ''We decided that diversification was the key.'' Now, thanks to public and private efforts, the unemployment rate in Schenectady County has dropped to 4.1 percent, its lowest point in 12 years; property values are rising and real-estate development has spurted. In addition to many smaller projects, there are plans to build an $80 million office complex near City Hall - which will give downtown Schenectady its first new office buildings in 20 years - and a $70 million regional shopping mall in Rotterdam, just outside the city.

Local officials predict that within the next two years Schenectady County will gain between 200,000 to 300,000 square feet of office space and up to one million square feet of industrial space.

''A major goal today is to keep and attract young people, including those laid off by G.E.,'' said Robert McEvoy, the Schenectady County Manager. ''We decided that the county and the city should join forces to provide commercial space and the right atmosphere for a much broader range of companies and businesses - from high-tech to small office to manufacturers and retailers.''

Mayor Johnson said the city and county decided to sell developers and businesses on Schenectady's assets, including its skilled labor force, its quality of life and its proximity to New York City, Boston and Montreal. Schenectady is about 180 miles from New York City and Boston, and 220 miles from Montreal.

In addition, G.E. has played an active role in insuring that the local economy remained vital. Among other things, the company provided financial assistance for start-up businesses and started a program to donate unused G.E. building space for new businesses and training programs.

''Our goal was to mitigate the impact of the loss of jobs, the tax dollars and the money our employees and business units generated for local economy,'' said Leonard Doviak, a spokesman for General Electric.

Just like other aging industrial cities in the Northeast, Schenectady had been battling the effects of a national economy that was moving away from manufacturing to service-oriented businesses.

For decades the town's two major employers were G.E. and ALCO, the American Locomotive Company. As those giants reduced their operations, the city lost manufacturing jobs. Meanwhile, service companies and retailers were increasingly locating in Schenectady's suburbs.

In the early 70's, a peak employment period for G.E., about 29,000 people were employed by the company in the Schenectady area, according to Mr. Doviak. But by January 1986, cutbacks had trimmed the workforce to 16,700 and by the end of this year, G.E. expects the figure to stabilize at about 12,400.

The 1980 census showed Schenectady's population at nearly 68,000, with the county population at nearly 150,000. County estimates in 1985 showed both the county and city populations growing slowly.

CREDIT for the city's first steps toward economic revitalization is given to a nonpartisan support group that includes county and city officials as well as representatives from private industry and the city's two major educational institutions, Schenectady County Community College and Union College.

George L. Robertson, the executive director of the Schenectady Economic Development Corporation, who was recruited from South Dakota where he was director of the state's economic development office, said that last year 205 companies received assistance, ranging from technical advice to financial packaging services. The development corporation manages some commercial space, usually for start-up companies, provides information on commercial space throughout the county and has a $500,000 loan fund.

For 1986, the corporation reported that well over $20 million of construction was completed.

In addition to the planned $80 million office project near City Hall, the Schachet Company - the new owner of the 186-room Holiday Inn nearby - is putting $4 million into upgrading its meeting and recreational facilities to attract, in part, small-convention business.

Earlier this year, work was completed on renovations of the former Foster's Hotel. There are now 43 middle-income apartments as well as office and retail space in the former downtown flophouse.

Last year Barney's Square, a 72-unit, high-end rental apartment complex on State Street, was finished. The residence, developed by the Wade Lupe Companies, was carved out of a string of the old Barney's Department Store buildings that first opened for business in 1873.

''We wanted to take the old department store buildings and turn them into something that would serve downtown,'' said Shelly Lupe, who was involved in the development project. ''The apartments have rented well to young professionals who want to be close to their jobs but who also want the kinds of things that are in apartments in other cities.''

Many of the units in Barney's Square have fireplaces, loft dens, window seats and balconies that overlook the interior courtyard.

Not far from that residential project, in the riverfront historic district known as the Stockade, Daniel Ben-Shmuel, a sculptor and developer, converted a former public school building on Front Street into 32 condominium units.

And in nearby Rotterdam, construction is to start soon on a $70 million regional shopping mall that is to have up to 100 retailers. The builder of that project is Wilmorite Company, a Rochester real-estate development company.

''We have been able to get a lot done,'' said Mr. Robertson, ''but I think the real start-up for the recovery happened several years ago when the community was able to save Proctor's Theater. That success gave people in this town the idea that they could do something to turn the city around.''

Proctor's, designed by Charles Lamb, a well-known theater architect, was built in 1926 by F. F. Proctor who operated a chain of vaudeville houses. In the late 1970's, Schenectady residents and public officials rescued the dilapidated structure from demolition.

A nonprofit corporation was formed to oversee the restoration and operation of the opulent, 2,700-seat theater. Restoration work is ongoing, but today the theater has a year-round program that attracts audiences from a three-state area to its Broadway road company shows, film festivals and music events.

IN addition to strengthening support for downtown revitalization, Proctor's served as a catalyst for redevelopment in another way. Julian and Goldie Kossow, Florida developers who are also theater buffs, went to Schenectady two years ago to visit Proctor's and left with a tentative plan to build some sort of commercial project there. The result of their visit is the planned $80 million project near City Hall.

''You cannot go to Schenectady these days without being impressed with what is going on there,'' said Mr. Kossow speaking from his office in Florida. ''We met with local officials and decided to look into feasibility of an office project.''

A study showed that Schenectady's labor pool, location and cost of living made it potentially attractive to new businesses including large service companies.

''But we also found that any company of size would not be able to find office space there,'' said Mr. Kossow who has built in Florida and the Washington, D.C., area.

The office complex seemed to be a viable project for downtown, but to compete with other new office space in the region - which includes the cities of Albany and Troy as well as Schenectady - the Kossows and local officials realized that rents in the new complex would have to be a few dollars lower than those for comparable space in the vicinity.

The State Legislature provided $5.5 million loan for part of the construction financing, which will allow the builder to hold the starting rents about $4 below market rate for the first few years of the leases.

Because the legislative loan package requires the developer to partially prelease the building, construction cannot proceed until the leasing target of 62.5 percent of the space has been reached. So far the Schenectady County government has agreed to take one floor, the Lawrence Insurance Group will take at least one floor, possibly two, and Mr. Kossow said he is close to signing a lease with a tenant for three floors. ''We are confident that we can go ahead with demolition this winter and start construction next spring,'' he said of the project, which will rise on a site bounded by Broadway, Clinton Street and the Smith Street Pedestrian Mall.

To be known as Broadway Center, the three-building complex is to have 425,000 square feet of office space. The project has been designed by James Stewart Polshek, a former dean of Columbia's School of Architecture and a well-known New York City architect.

The first development phase will be the construction of a 750-car garage, financed by the city, which will serve as the base for an eight-story office tower.

A later phase will add a 10-story office building and five-story parking garage. A final phase calls for a seven-story office structure and a five-level parking facility.

The base rent in the first building will be $13.90 a square foot and the developer hopes to have the office space ready for occupancy by the middle of 1989.

''We will get a large downtown impact project with the office towers,'' said Mr. Robertson. ''But just as important to the future vitality of downtown are small commercial projects that hopefully will stimulate the retail base, which is still pretty weak.''

Much of the new office space opening in Schenectady in the last 18 months is in older buildings being adapted for new uses.

A former Two Guys retail store that stood vacant and derelict on a prominent downtown corner was turned into an office building earlier this year. The building, which now has a red-brick facade and reflecting glass windows, has 100,000 square feet of office space. It has been leased to a division of General Electric.

In another recycling job, an old firehouse on Erie Boulevard was turned into an office building. The structure now has arched, paned windows that were installed where the fire engine bays were situated. Known as Edison Plaza, it has 21,000 square feet of office space and one of the tenants is the Niagara Mohawk Power Company.

The expansion of the county's light industrial and high-tech design and manufacturing space has been another goal of local officials. At the forefront of this effort is G.E., which has donated some of its unused space to community development projects.

IN July the company released a 39,000-square-foot, three-story building on Nott Street to the Schenectady Industrial Corporation, a profit-making group formed in the 1940's to oversee community development. The building, which will be leased and managed by the local Economic Development Corporation, has been designated as the Schenectady Business and Technology Center to provide incubator space to small start-up companies.

One of the first tenants is BioQuest International, a company formed a few years ago to develop and manufacture medical testing equipment. BioQuest has leased 10,000 square feet of space there. Another new tenant is Applied Robotics, a company that designs and manufactures robotic hands. The company has 3,000 square feet of space.

The spaces in the incubator building, which range from 2,000 to 13,000 square feet, will rent for $8 a square foot. Tenants will have research and design, manufacturing and office space in the building.

Mr. Doviak said that G.E. is reviewing other buildings on its 650-acre compound and throughout the city for possible donation for industrial and technological development space. The company could have up to two million square feet of surplus space available in the next year or two.

Other locations for industrial space users in the region are in two former military installations just outside the city. Francesco Galesi, a real-estate developer based in the Albany area, has converted these former military depots to industrial parks.

The former Schenectady Army Depot in Rotterdam has 3.6 million square feet of floor space for warehouse, distribution and light industrial uses. Fifteen to 20 percent of the space is now available for rent. The Scotia-Glenville Industrial Park nearby has about 1.3 million square feet of space, with 500,000 square feet available for------[continued here
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