Howard E. Greenberg, SIOR, President of Howard Properties, Ltd. of White Plains, New York once again moderated the Building Owners and Managers Association’s (BOMA) “State of the Market” panel discussion on January 14 at the Holiday Inn Crowne Plaza Hotel.
This is BOMA’s highest-attended meeting during each year, where building owners, managers and brokers come to hear what has transpired in the office space market during the previous year.
Mr. Greenberg reported that 2010 was a very interesting year in the Westchester County office space market. There were more office lease transactions done than in 2009, and overall leasing velocity was about 6% higher than in 2009 in terms of square footage leased.
However, a fourth-quarter renewal and expansion of 540,000 SF by Pepsi Bottling Group in Somers, New York made up almost 30% of the overall leasing. While this transaction had been in negotiation for more than 3 ½ years, its execution in 2010 masked what would have otherwise been a significant drop in leasing over the previous year.
Negative absorption (space added back to the market) totaled between 114,000 and 700,000 SF, depending upon which brokerage firm was reporting the statistics. Westchester had its typical high proportion (77%) of leases under 5,000 SF, with an increase in the number of leases in the 5,001-50,000 SF range. However, there were only 3 leases over 50,000 SF executed in 2010.
The trend in 2010 was for large public companies such as Heineken, Verizon and MCI to renew their leases while undergoing significant downsizing. Any expansions were typically done by the medical groups, law firms, and small businesses. The largest new lease in the county was for 31,000 SF for Sabra Dipping, a joint venture partner of Pepsico.
While our market availability (at 17.68% according to CB Richard Ellis) is just about at the national average, that means that approximately 5.5 million SF of office space is currently available for lease. Starwood Hotels will put 324,000 SF back into the inventory when it relocates from White Plains to Stamford in early 2012. And Reader’s Digest added about 400,000 SF to the availability as it vacated its former headquarters in Chappaqua at the end of 2010. With so few large tenants in the market, these large blocks of space will be difficult to fill.
With negative absorption and very few large leases, the key for the Westchester County office market will be to find new ways to attract office tenants to the county. We should also be thinking outside the box about ways to repurpose some older office buildings to reduce the vacant inventory, said Mr. Greenberg. These two initiatives would result in a healthier market in the future for both landlords and tenants.
Howard Properties, Ltd., headquartered in White Plains, NY, specializes in tenant representation and real estate consulting. Founded by veteran commercial broker Howard Greenberg in 1998, the firm has completed space acquisitions, dispositions, lease renegotiations and consulting assignments in 20 states. It is an affiliate member of CORFAC International, an association of independent real estate brokerage firms represented in more than 150 markets in the Americas and internationally. For more information, contact firstname.lastname@example.org or visit http://www.howprop.com/.