Investor Confidence Leads to Rise in Speculative Construction
Real Estate In-Depth | September 2018
GOSHEN—As any real estate investor knows, speculative development has its inherent risks that a buyer/lessee be secured relatively quickly and at a price that will yield acceptable returns on investment.
The significant economic development activity that has taken place in Orange County recently has led to vacancy rates in the low single-digits for prime industrial space and a short supply of available space for new companies moving into Orange County as well as for existing firms looking to expand their operations here.
Over the past six years, Orange County has enjoyed a significant amount of investment and job growth, according to the Orange County Partnership. The economic development organization, headquartered in Goshen, reports that in 2017 alone, 1,840 new jobs were created, 1,788,056 square feet were occupied and more than $693 million was invested.
Combine those heady results with the fact that there has been no significant speculative construction in Orange County for the past 10 years, the vacancy rate for prime industrial space in Orange County has fallen to an all-time low of just 3.3%.
Orange County Partnership President and CEO Maureen Halahan reported that investor confidence in Orange County is at all all-time high and has prompted a number of veteran developers to embark on major speculative projects.
In 2017, speculative development resulted in the addition of the most new industrial space in Orange County in more than 20 years.
For example, in the Town of Newburgh, the Matrix Development Park, located at the prime intersection of Intestate 84 and the New York State Thruway (I-87) added 248,000 square feet of speculative industrial space that was leased prior to completion by Amscan, the largest designer, manufacturer and distributor of party accessories in the world. Amscan joined AmerisourceBergen, which maintains a 565,000-square-foot warehouse distribution facility at the park.
Matrix is embarking on another speculative venture, the Orange County Partnership reported, a 250,000-square-foot industrial/distribution complex in the Town of Wawayanda.
Another major developer in Orange County has been The Frassetto Companies of Upper Saddle River, NJ, one of the largest privately-owned real estate developers of high-tech office and industrial space. The more than 60-year-old firm that has developed more than 5 million square feet of space throughout New York and New Jersey, recently completed a 55,000-square-foot speculative project at 54 Turner Drive in the Town of Wallkill. The property sits in a high-tech manufacturing corridor that is home to Pratt & Whitney, a subsidiary of United Technologies, and other high-profile users. The Orange County Partnership also noted that 60,000 square feet of industrial flex space was also recently completed at 17 Cannon Hill Drive in the Town of Goshen.
The development pipeline for industrial/warehouse/distribution space is filling up as well, according to Halahan. For example, two major projects are in the approval process in the Town of Montgomery—Bluewater Industrial Partners’ 1-million-square-foot warehouse and National Realty Development’s 332,000-square-industrial building. In addition, plans call for the construction of a 110,000-square-foot flex building at the Oxford Commerce Center in Goshen.
“Old and new developers have made the decision that speculative construction in Orange County is not a risk, but rather a sure bet,” said Halahan.