Pre-Coronavirus—Commercial Brokers Bullish on Hudson Valley Market in 2020
John Jordan | March 27, 2020
WHITE PLAINS—A panel of veteran Hudson Valley commercial real estate brokers agreed that the commercial office and industrial markets were strong entering 2020 and were prime for continued brisk activity.
Editor’s Note: The meeting of the Hudson Gateway Association of Realtors Commercial Investment Division’s Broker Roundtable was held in late January, before the onset of the Novel Coronavirus (COVID-19).
The annual broker roundtable event held in late January was moderated by CID President John Barrett and included panelists: Paul Adler, chief strategy officer with Rand Commercial; William Cuddy, executive vice president with CBRE; Sarah Jones-Maturo, president of RM Friedland and Glenn Walsh, executive managing director with Newmark Knight Frank.
Barrett, who also serves as senior vice president, managing director of investment sales at RM Friedland, began the program by noting that companies are now locating offices where their workforce resides. Company workers, particularly Millennials, are seeking to live in vibrant 24-hour urban locations. He noted that landlords in Westchester and the Hudson Valley need to be in tune with the needs of business. In particular, Barrett stressed that the county’s lack of affordable housing could pose a problem going forward.
Newmark Knight Frank’s Walsh related that rental rates in Downtown White Plains have risen approximately $5-per-square-foot in the last 18 months.
“The (commercial office) market is a hell of a lot better than it was five years ago,” Walsh said. “Downtown White Plains is seeing unprecedented growth with tenants wanting to be there.”
He noted that Newmark Knight Frank recently conducted a deal with several suburban companies that wanted to relocate to Downtown White Plains to gain better access to workers.
Walsh said that a very good sign is that some Millennials are now considering White Plains as a location to live due to the escalating cost of living in New York City. He noted that for Westchester and the surrounding area to take advantage of this fledgling demographic trend the area must provide affordable housing and proper amenities, such as fitness centers.
Walsh added that the Tarrytown office market is very strong, fueled by the Montefiore Health System, which has leased approximately 100,000 square feet there of late. Rents in that market have increased recently between $2 to $3-a-square-foot. The southern Westchester office market has the lowest vacancy rate in the county, while the northern section of the county continues to struggle.
CBRE’s Cuddy said the Westchester County office vacancy rate stands at approximately 16% thanks in large part to the reduction of approximately 7 million square feet of office space from the county’s inventory.
Walsh added that Westchester could be facing a shortage of quality available space if the proposed STEM school project at the former IBM facility in Somers moves forward. If the IBM Somers property is taken off the market, the county’s office vacancy rate would drop to approximately 11%, he noted.
Cuddy related that the office market ownership profile is much different than in years past and is dominated by well capitalized, and experienced companies.
“We are seeing an extraordinary amount of new capital being invested into our office buildings,” Cuddy said, “which are rationalizing the higher rents.”
Looking forward, Cuddy predicted, “2020 we will see, I suggest, the highest increase in office rents Westchester has ever experienced.”
Rand Commercial’s Adler reported that the development of the LEGOLAND New York project in Goshen is sparking additional closed real estate transactions, including land deals, in Orange County. The much-anticipated theme park is scheduled to open in July.
He also reported that Simone Development closed on the purchase of approximately 200 acres at New York Stewart International Airport in New Windsor. Adler related that Simone acquired the property from the Town of New Windsor and is now looking to possibly develop health care and high-tech space there.
Adler noted that multifamily development is booming in Orange County, particularly along the Route 17 and Newburgh regions.
In Rockland County, he related that health care-medical office space is now being converted to industrial use or retail space.
RM Friedland’s Jones-Maturo said the industrial vacancy rate for Westchester County entering 2020 stood at approximately 6.7%. Asking rates increased approximately $2-a-square-foot in 2019.
However, a host of move-outs of large users in the Bronx, including Jet.com and others, could eventually impact the Westchester industrial market as well.
Jones-Maturo related that Westchester County was not immune to the turbulence that now exists in the bricks and mortar retail market. She noted that Westchester saw an additional 600,000 square feet added to the retail market in 2019. However, despite that fact, the average asking rental rate increased by approximately $4-a-square-foot.
She noted that the Walmart-Burlington space in Downtown White Plains came on the market in late 2019, as did the Kmart store in Yorktown. She also noted that there could be a host of retail space coming on the market via Bed Bath & Beyond leased stores.
In the Bronx, despite the addition of approximately 400,000 square feet of space in 2019, rents rose by an average of approximately $5-a-square-foot.
She stressed that conventional bricks and mortar retail is not dying, however, “the big box retailers that occupy 50,000 to 100,000 square feet are the ones that are not evolving. They are the ones that are dying.” she said.
The emerging sectors in retail, such as the fitness and boutique medical users, are in the market for between 3,000 to 5,000 square feet of space, Jones-Maturo related.
Sponsors of the CID event were Webster Bank and Robison Oil.