A healthy health care market
By Howard Greenberg, President of Howard Properties, Ltd.
The first new building constructed in the county since the mid 1980’s will open early next year at Harrison Corporate Park, now renamed Purchase Professional Park. Its entire 85,000 SF is preleased to WestMed. The 114,000 SF Memorial Sloan Kettering Cancer Center has opened at 500 Westchester Ave. And buildings like 440 and 450 Mamaroneck Ave., 550 and 600 Mamaroneck Ave. and others continue to lease space to new medical tenants, which are boosting their occupancy. New York Medical College is in process of renovating 17 Skyline Drive, a 248,000 SF building it purchased from Mack-Cali in 2013, and it has just opened a biotech incubator building on its campus.
A 184,000 SF portfolio of multi-tenant medical office buildings at 222-244 Westchester Ave. was sold by ProMed to Healthcare Trust of America for a whopping $350 PSF, which is “telephone numbers” compared to what office buildings are selling for today.
The biotech sector continues to grow in the county. Regeneron (named the best company to work for by Science Magazine) now occupies about 600,000 SF of primarily purpose-built laboratory buildings at Landmark at Eastview. There is apparently demand for the vacant space in the complex coming from companies out of the area. Acorda Therapeutics, the anchor tenant at Ardsley Park expanded by 25,500 SF earlier this year. And the North 60 project is reportedly moving forward in an effort to create a new medical and biotech park on county-owned land in Hawthorne.
A dearth of new tenants
Glenn Walsh of Newmark Grubb Knight Frank represents RPW Group as leasing agent, among many other building owners. His take on the market is consistent with his colleagues in that it was primarily renewal based. He sees smaller companies being very conservative, and opting generally for shorter term renewals rather than long term commitments. When that is the business plan, it is difficult for them to relocate to another building, as landlords cannot afford to build out space for short lease terms. Generally, he feels that tenants in the market are shuffling around within the county, looking for slightly better economics or upgrades to nicer buildings with more amenities. But, as usual, there is a dearth of new, inbound tenants that would actually increase space absorption and bring new support businesses with them.
The Manhattan office market is very strong now, and the delta between its rents and Westchester rents is as big as it has ever been, but we are still not seeing our fair share of Manhattan tenants migrating north to Westchester.
Image removed by sender.Landlords, while all needing deals, are trying to get enough Net Effective Rent (the rent they actually put in the bank after free rent, construction, legal and brokerage expenses are deducted) to make the deal a positive one economically. This is not an easy task, as operating costs, RE taxes and construction costs have all gone up significantly over the years, while rents have remained basically stagnant since the late 1980’s.
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.