By Howard Greenberg, President of Howard Properties, Ltd.
Westchester County is still “rearranging the deck chairs” in its office market. As in the past, virtually all our leasing activity is intra-county. But there are signs that the diversification of the market into the medical and biotech sectors are helping to shore up occupancy levels, and increased interest in multi-family development will provide housing alternatives for a younger workforce that could be a key to attracting new companies to the county in the future.
Leases of under 5,000 SF, which have traditionally been more than 80% of the deals, have declined in number this year. It would appear that smaller companies are being conservative in their commitments. Consequently, inventory of small office spaces has increased.
The mid-size deals (between 5 and 10,000 SF) have increased in number, but the larger deals (between 25 and 50,000 SF) are way off last year’s total. The largest lease of the year was MasterCard’s expansion and renewal at 100 Manhattanville Rd. for 121,000 SF. This is a major commitment to the county, as is Pepsico’s total renovation of its headquarters in Purchase.
While the final figures will not be in until mid-January, we will have negative absorption for 2014, and leasing velocity has been very slow this year. The great majority of our leases have been renewals, some with expansions.
Medical was the star of 2013, but it has taken a break in 2014, as the hospitals and physician groups figure out how to use all of the space they have leased and purchased. This sector could ramp up again in 2015 as new hospital alliances are finalized.
The leasing activity and absorption figures for the first ths taken a break in 2014, as the hospitals and physician groups figure out how to use all of the space they have leased and purchased. This sector could ramp up again in 2015 as new hospital alliances are finalized.
The leasing activity and absorption figures for the first three quarters of the year have been lackluster, with net absorption of negative 168,000 SF through the 3rd quarter, according to Karolina Pardo-Alexandre, Research Manager at Newmark Grubb Knight Frank.
She told me that during the third quarter, Westchester had declines in leasing activity in the Western submarket of 55%, in the White Plains CBD of 39% and in the Eastern submarket of 18%. These figures represent a 14.6% and 20.5% decline from last quarter and last year. Only the Southern and Northern submarkets posted leasing gains through Q3.
IBM continues to give back space to the market, as it has been doing for decades. But these days, it is on the campuses it owns in Armonk and Somers
In 2012 it put approximately 200,000 SF of its space on the market in Somers, and in 2013, it put an additional 285,000 SF on the market at its Armonk headquarters. The entire 287,000 SF MBIA campus in North Castle is on the market for sale. And Chappaqua Crossing (the former headquarters of Reader’s Digest) has had some leasing activity, but is still struggling to lease hundreds of thousands of square feet of office space. These properties represent well over 1 million SF of space on the inventory that is skewing the vacancy rates higher. We have had only one lease of over 100,000 SF so far this year, and two leases between 50,000 and 100,000, so there is not a high level of demand for large blocks of space.
One of the largest leases of the year was MBIA’s 85,000 SF at Centre at Purchase. Now the 287,000 SF campus owned by the bond insurance company is on the market for sale. It will be interesting to see who lands there. It could be a corporate headquarters, or some alternative use. The vacancy of the former campus means that the new lease is really a negative 202,000 SF of absorption for the market.
To Be Continued…
Howard Properties, Ltd., which is headquartered in White Plains, NY, specializes in tenant representation and real estate consulting. Founded by veteran commercial broker Howard Greenberg in 1998, Howard Properties has completed space acquisitions, dispositions, lease renegotiations and consulting assignments in 20 states.