Brokers Bullish on Commercial Office Market in Region With Exception of Northern Westchester
John Jordan | January 11, 2018
WHITE PLAINS—Commercial brokers believe that the commercial office market in Westchester County is strong enough that if conditions continue over the next few years the county could see the first new commercial office development project in decades.
Approximately 80 real estate professionals attended the annual Commercial Broker Roundtable program staged by the Hudson Gateway Association of Realtors’ Commercial Investment Division. The CID broker roundtable held at the HGAR offices in White Plains on Jan. 11th featured William Cuddy, Jr., executive vice president, CBRE; Sarah Jones-Maturo, president, RM Friedland; Glenn Walsh, executive managing director, Newmark Knight Frank; and Paul Adler, regional manager, Rand Commercial.
CBRE’S Cuddy and Walsh of Newmark said that the key commercial districts, in particular the City of White Plains, are doing particularly well. Cuddy related that large deals, such as the more than 100,000-square-foot relocation deal that brought Sumitomo Bank to the Gateway Building in Downtown White Plains, have fueled a drop in the district’s vacancy rate to approximately 17%. The tight conditions fueled an 8.6% increase in the average asking rent in Downtown White Plains to more than $35-a-square-foot. He added that lease deals for prime space in the White Plains CBD are closing at significantly more than asking price.
Walsh related that in the past year approximately 800,000 square feet of commercial space was taken off the market, mostly due to adaptive reuse projects. The county’s available office stock has shrunk from about 33 million square feet 10 years ago to approximately 27 million square feet today.
Walsh related that in the CBDs, the market is “running out of quality product.” Cuddy said that current market conditions do not yet make it economically feasible to build new office product. He estimated a property owner building a new office building with structured parking would need approximately $60-a-square-foot or perhaps $50-a-square-foot with incentives to make the numbers work.
“We are not ready (for new construction), but it’s coming,” Walsh said… “There are a handful of deals that are in the market today that if they happen we will be down to virtually no space. So if anybody wants to come up from Manhattan they are going to have to build themselves a building if they want to be in Westchester.”
The sore spot for the region’s office market is in Somers where 1.6 million square feet of vacant space is available in two former IBM and PepsiCo properties. Both Walsh and Cuddy believe that those properties will most likely need to be repurposed.
Rand’s Adler and RM Friedland’s Maturo said that national retailers are mostly downsizing, while local retailers are doing deals. Maturo said that asking rents vary depending on location. Many major retail corridors and downtown spaces are securing approximately $30-$40-a-square-foot in Westchester. She did note, however, that some space in the Getty Square section of Yonkers has commanded approximately $100-a-square-foot.
She added that while the Bronx retail market is strong, the downtown White Plains market along Mamaroneck Avenue continues to suffer.
Alder said that the Orange and Rockland County retail markets can be best characterized as a game of musical chairs. He added that not-for-profit and religious organizations are bolstering activity by leasing vacant retail space.
Maturo said that the region’s industrial market is tight, but the cost of new construction just makes new construction difficult at best.
She related that her firm represented an industrial developer that contemplated building new product, but decided to forego the venture in spite of the sub 7% vacancy rate for industrial space in the region. Maturo said that demand for industrial space in the area far outstrips the supply.
Adler noted the need for regulatory reform and shovel-ready sites already approved for development.
“I think one of the bigger problems we have is that to foster a better economic generator you need to get sites shovel-ready, to have generic SEQRA processes done,” Adler said, noting that significant cost and time involved in securing entitlements that sometimes takes two to three years or longer to obtain. “That is a hell of a lot better than burdening these towns and villages with these onerous PILOT programs and subsidies that come from the state (Empire State Development),” he added.
Adler believes that property owners/developers would trade what he termed “corporate welfare” for zoning certainty and a shovel-ready site.
The sponsors of the CID session were Rand Commercial and Webster Bank.