January and February were bitterly cold in Western New York, but the commercial real estate market was burning hot.

Nearly $120 million worth of commercial property changed hands in Erie County during the first two months of the year, setting a pace that local brokers say hasn’t been seen here in years.

Moreover, that occurred in what is normally the slowest season of the year, in what has been one of the coldest and snowiest winters in decades.

“It’s almost staggering, I’ve got to tell you,” said Robert Strell, a broker and owner of MBA Consulting, and current president of the Western New York Commercial Association of Realtors. “We knew there was action and activity, but the total is a big number and there’s a lot more coming down the pike.”

At that rate, the local market could be on track to blast through the half-billion-dollar mark and post more than $720 million in deals for the full year.

“It’s highly busy in this first quarter,” said Amy Nagy, a broker at Hastings Cohn Real Estate. “There’s a lot of momentum in the market that’s generating things moving along.”

The activity is high-priced, too. Seven deals exceeded $5 million in value, led by three for over $15 million each:

• The $22.1 million sale of a pair of retail shopping centers in the City of Tonawanda – both anchored by a Tops Friendly Markets store – from one joint venture to another.

• The $16.25 million sale of the Windsong Medical Park on Spindrift Drive in Amherst, from John and Dr. Janet Sung, retiring founders of Windsong Radiological Group PC, to others in the group.

• The $16.15 million foreclosure purchase by special servicer CWCapital of the Maple Crossings Plaza on Maple Road in Amherst. CWCapital will now seek another buyer.

In all, according to the Erie County Clerk records, more than 45 transactions of at least $250,000 each occurred during the two-month period, totaling $117.9 million. Twenty-three of the deals were over $1 million, for a total of $107.69 million.

“There’s no question the market is loosening up,” said Paula Blanchard, a broker at Realty USA Commercial. “Buyers, investors and tenants are getting off the couch and jumping in... Confidence is up, prices are rising and we’re heading toward critical mass.”

But not everyone agrees with the rosy picture. “It’s a false positive that fools buy into,” said developer Carl Paladino, founder and chairman of Ellicott Development Co. “People are investing for no discernible and logical reason. The local economy is as bad today as it was 20 years ago.”

Despite that opinion, Paladino said his company has been actively investing in “residential conversions and hotels,” not offices and retail space.

Some of the sales spike could reflect yearend activity from 2013, as buyers and sellers rushed to complete deals that carried into the new year. “I think things are coming to fruition at the same time,” said Peter Jaremka, a broker at J.R. Militello Realty. “It’s not a real increase, but just the cycle of deals closing.”

The burst of sales comes after several years of lackluster deal-making during and following the mortgage crisis and lingering recession.

“The level of my activity is far greater than it’s been,” Strell said. “There’s much more momentum than we’ve seen in the last three to four years.”

Dr. Fadi Dagher, a Buffalo General Medical Center transplant surgeon, bought two Waterfront Village office buildings. One will house the offices of his investment firm, and he’s also planning a seafood restaurant there.

Dagher has been investing in Buffalo-area real estate for a decade, but has picked up the pace more recently, with several more deals in the works in conjunction with an out-of-town partner.

“I’m a big believer in the potential of Buffalo. I’m confident that Buffalo is the right place to invest,” he said. “It took me some time to convince others that Buffalo was the right place to invest. It wasn’t easy. But now everybody sees it.”

Available money

Part of the change is due to a loosening of capital markets, as more lenders and other finance companies – such as Wall Street firms and insurers that invest in real estate deals – have returned to the market in force after pulling back when the crisis hit. That is coupled with the continued low interest rates that are poised to start rising. So real estate investors and developers are eager to lock in loans at current rates.

“We think the financing world is being kind,” said Jeffrey P. Lehrbach, chief financial officer for McGuire Development Group. “More lenders are active in the market and they’re looking for quality transactions to meet their 2014 goals.”

Also, many businesses held off on capital investments for real estate expansion during the last few years because of worries about the economy. Now, they’re taking action.

And the limited supply of good properties, especially for industrial use, is driving up prices, while the returns on real estate investments are once again better than many other options.

And on an emotional level, brokers say it reflects a sense of optimism and excitement in Western New York, driven by more than a billion dollars of public and private investment in the Buffalo Niagara Medical Campus, Canalside and downtown Buffalo in general.

“Once you see further explosion of the medical corridor, then there’s going to be so much spin-off business. It’s exciting,” said David Pawlik, president and co-founder of Creative Structure Services, a contractor and developer that has been involved in numerous local projects, including the planned renovation of 550 Seneca St. in Buffalo.

“About five to 10 years ago, everybody was just hoping to see some activity, and now you see everyone’s doing well, and it just spurs good development,” he said. “There’s more to come, that’s for sure.”

Momentum could be driving some of the deals.

“Activity breeds activity, and we may just be getting the snowball rolling,” Lehrbach said. “When’s the last time you’ve seen four cranes in the Buffalo skyline?,” he said, referring to cranes at Canalside, the Coventus Building on the medical campus and at Rosewell Park Cancer Institute.

One buyer said the steady quality of the regional market is attractive.

“People look for stability, as opposed to some markets that have fluctuation. Buffalo is a stable market,” said David M. Dworkin, managing partner of LLD Enterprises, a Rochester property investor and developer that has made several purchases in the Buffalo market in recent years.

“I think whenever you invest in any community, it goes without saying that you’re always going to look at what’s going on in the community you’re investing in... There are so many markets that have gluts of vacancies because they have these up-and-down swings. One of the nice things about the upstate marketplace is that you do have some growth, but it’s more of a stable growth.”

As a result, “we’ve invested more in Buffalo in the last couple of years than in many prior years before that,” Dworkin said, including a plaza at Eggert Road and Sheridan Drive in the Town of Tonawanda. “We’re showing with our dollars that we’ll invest in Buffalo, and we’re still reviewing assets now. There are a number of assets that I’m reviewing now in the Buffalo marketplace to make another acquisition.”

Outside investors

Meanwhile, as major markets like New York City and Chicago heat up again, secondary markets like Buffalo look more attractive to nationwide investors. So as out-of-town investors see local firms and individuals putting more of their own money on the line, it makes them more comfortable investing in the region.

“Buffalo is one of the best places to invest in real estate,” said Tony Kissling, owner of Kissling Interests LLC. “Prices are 10 percent of what they would be in major cities, and rental and property values are increasing rapidly. All this leads to long term potential for a major upside in real estate values.”

“It’s just incredible. I’ve never seen that much activity in my little world here. That just tells me what’s happening,” Strell said. “Everybody I’m talking to is busy. I wish I could have 10 years like the year I’m starting out with.”

Kissling sees the commercial real estate market transforming the region.

“I am very confident that within five to 10 years, Buffalo will be hardly recognizable,” he said. “For the last 50 years, Buffalo has been in a slow decline, but what has happened to the city in the last four years is truly unbelievable. When I first came to Buffalo in the winter of 1999, there was hardly any private renovation or new construction. During the last four years, there is 10 times more new construction and renovation than the past 50 years combined.”