BCW Survey: Westchester Businesses Expect a Slow Recovery
John Jordan | August 24, 2020
RYE BROOK—A majority of Westchester businesses from a good cross section of the county’s economy say they are slowly recovering from the pandemic and expect to continue to struggle for some time, according to a survey released today (Aug. 24) by the Business Council of Westchester’s Economic Recovery Task Force.
Some of the key findings of the survey included a total of 44% of businesses predicted that they would remain open but would continue to struggle over the next three months, with 17% saying they would thrive and 25% saying they would break even. Despite the dour economic conditions, only 1% of the survey respondents anticipate they will close operations.
Approximately 53% of those surveyed said that business was down or significantly down compared with last year at this time, with 6% saying it was the same and 6% saying business activity was up. Thirty-five percent said it was not applicable or they didn’t respond.
Another data point indicates that 43% of those surveyed said they were essential businesses and had never closed; 36% said they had reopened in phases 1-4. Only three businesses said they had not yet reopened.
In a positive trend for the real estate sector, 73% of respondents indicated they paid their July rent, with 10% stating they had not and 17% noting that the question was not applicable.
A total of 11% of respondents indicated that their landlord offered some form of concession, while 58% indicated no concession was offered.
Those results are counter to national trends as office building owners contend with the impacts of the coronavirus pandemic. Commercial brokerage firm CBRE released a report today that notes an increasing number of office landlords are offering concessions to attract tenants and retain tenants.
The CBRE report contends that office building owners provided more free rent and larger tenant-improvement allowances in the second quarter to secure new office leases and renewals amid a general slowdown in leasing activity due to the pandemic.
The impact of these concessions is evident in the second quarter’s 6.6%, year-over-year decline in net effective office rent in the 15 largest U.S. markets, according to CBRE. Net effective rent takes into account financial concessions (periods of time that a tenant does not have to pay rent, contributions toward the construction of a tenant’s space, etc.) that will be subtracted from a lease’s contracted base rent. In comparison, base rent—before concessions—declined by only 1.1% in the second quarter from a year earlier.
Meanwhile, the average length of free-rent periods provided to induce a new lease signing or renewal in the second quarter amounted to 10 months. That’s a 13.7% increase from the first-quarter average.
Another measure of concessions—tenant-improvement allowances—increased by 5.1% in the second quarter from the first to $75.57-per-square-foot. Landlords provide tenants these allowances to build out their new space to their individual needs. That percentage gain might have been greater if not for declines in construction pricing.
“Overall, U.S. office-leasing activity declined by roughly 43% in the second quarter from a year earlier, so it is to be expected that building owners would need to occasionally use some sweeteners to nail down a new lease in this tough environment,” said Whitley Collins, CBRE Global President of Occupier Advisory & Transaction Services. “This means that office tenants can find some advantageous terms in many markets, at least until the U.S. economic recovery gains more momentum.”
Other results from the Business Council of Westchester survey included:
When asked what type of support would be most important, most businesses said obtaining grants and personal protective equipment, followed by marketing support. When asked if they needed PPE, a majority said they did with the most needed items being sanitizer and masks.
Representatives of businesses sectors that responded to the survey included Education, Energy, Health and Wellness (fitness, beauty salons etc.), Manufacturing, Not-for-Profit, Professional Services (PR/media, accounting, legal, finance), Real Estate/Construction, Retail, Technology, Transportation, Hospitality and Restaurants and Bars.
The survey is the latest communication from the Economic Recovery Task Force, a 47-member group of business leaders from across all sectors of Westchester’s economy. The Task Force recently released its second report to Governor Andrew Cuomo and County Executive George Latimer.
“In addition to the two reports that the Task Force has issued since our formation in April, we will be providing officials with the results of this survey to help them better understand the state of Westchester business across many sectors and their continuing needs,’’ said Marsha Gordon, president and CEO of the Business Council of Westchester. “We hope this information will give our elected officials a glimpse into how our recovery is proceeding and what more they can do to assist the business community.’’