By: Howard E. Greenberg, SIOR
Normal market leasing velocity has not yet returned to the Westchester County office market, notwithstanding the general optimism shown when I moderated the BOMA “State of the Market” panel in January of this year. The leasing market still remains a “zero sum game” where tenants will relocate from one building to another, leasing virtually the same amount of square footage, with no net absorption.
The 287 East submarket will have 325,000 SF of vacancy added to it when Starwood leaves its spaces at 1111 and 1133 Westchester Ave. in Q1 of 2012 to relocate to Stamford. Even though these spaces are in two very attractive and relatively modern buildings, they will take a significant amount of time to re-tenant in a market that sees very few deals over 50,000 SF each year.
Downtown White Plains has had some significant leasing activity of late. The 36,000 SF former Trigen Energy lease at 3 Barker Ave. is coming to an end shortly, and owner Mack-Cali has already obtained new direct leases for more than 30,000 SF from Trigen’s existing subtenants, including the law firm Milber Makris, Park Avenue Health Care, and SMTPE. Next door at 1 Barker Ave., they have already back filled 13,000 SF left vacant a few months ago by a major accounting firm with the law firm of Leason Ellis, who is undergoing a significant expansion. And at 50 Main St., 14,000 SF of the penthouse floor once occupied by the law firm of Thacher Proffitt and Wood was leased to a unit of International Management Group that is relocating from New York City.
Building sale activity has picked up considerably in 2011. LifeTime Fitness is in contract to purchase 1 Gannett Drive, and should receive approvals from Harrison shortly to raze the building and build a 200,000 SF fitness and recreation facility including tennis courts and indoor and outdoor pools. Nearby, the biotech firm of Histogenics is in contract to purchase the 118,000 SF vacant 104 Corporate Park Drive from its lender for a relocation and expansion of its Westchester operations. Memorial Sloan-Kettering wants to put a cancer treatment center in the 400 Westchester Ave. building formerly occupied by Verizon. All of these events will help to lower the vacancy rate in the 287 East Submarket by taking (mostly older) space off the office inventory. And Gannett is reportedly in the market looking for office space to occupy once the sale of its building is finalized. It has been announced that Nokia will be vacating its entire 100,000 SF building at 101 Corporate Park Drive due to a full-company downsizing. This building was re-built from the ground up a few years ago, and its modern look and European influence could be very attractive for a company looking to purchase a headquarters building. This was re-designed as a single-user building, and it is doubtful that an investor would buy it and spend the amount of money that would be necessary to convert it to a multi-tenant property.
Robert Weisz’s RPW Group has purchased 450 Mamaroneck Ave. in Harrison, which had been left vacant by the departure of full-building tenant Citigroup, and BioMed Realty Trust has purchased the Ardsley Park lab/office campus that was briefly to be the home of OSI Pharmaceuticals before they were acquired by another company and those plans were cancelled. Accorda Therapeutics will relocate from Skyline Drive to Ardsley Park, growing from 46,000 to 138,000 SF. This expansion, along with Histogenics expansion, will create a number of high-paying jobs and continue to build Westchester County’s reputation as a center for biotech companies.
In summary, while leasing velocity continues its slow pace, the conversion of some older office product to other uses will help to keep the overall vacancy rate fairly stable in the near term. However, the big-block vacancies caused by the departure of Starwood and Nokia could weigh on the market for years, as the size of the average lease in the county is approximately 6,000 SF. On the other hand, they provide opportunities for new large tenants to relocate to headquarters-quality buildings in the heart of Westchester’s corporate corridor. The Manhattan leasing market is extremely active, and midtown rents are climbing rapidly. It will be interesting to see if the combination of these two factors will work in Westchester’s favor.
Howard E. Greenberg, SIOR, is President of Howard Properties, Ltd. His firm, located in White Plains, New York specializes in tenant representation and real estate consulting.