By Howard E. Greenberg, SIOR
Howard Properties, Ltd.
White Plains, NY – (February 10, 2012): I recently moderated the annual “State of the Market” panel for the Building Managers and Owners Association, which I have done for most of the past decade. Following is a quick summary of where the county’s real estate market ended up in 2011.
Office leasing velocity continues to be very low, and Westchester had about 600,000 SF of negative absorption (space put back on the market) during 2011. We leased about 1.6 million SF of space vs. 1.8 million in 2010, which was also not a stellar leasing year.
With fewer new prospects walking in the door, building owners were aggressively working their buildings. They were approaching tenants for early renewals (sometimes years before their leases expired) in an effort to reduce rollover risk and to shore up their rent rolls and income streams. When a building has vacant space, there is no certainty of when it will be leased, and significant upfront costs to the building owner are involved when it does. A large amount of that 1.6 million SF of leases was renewals, including about half of the top 10 deals of the year.
In the largest lease transaction of 2011, my firm represented the law firm of Wilson, Elser, Moskowitz, Edelman & Dicker, LLP in a 125,000 SF lease at 1133 Westchester Avenue. They will relocate in mid-2013, backfilling space that Starwood Hotels has vacated after its move to Stamford, Connecticut. This was a typical “flight to quality” by a tenant who was able to upgrade its space at little or no additional rental cost in a soft market.
Buyers are definitely out in the market. A number of buildings have been sold recently, primarily to users. Even though rents are attractively low, there are also bargains in the purchase market. Older properties are also being repurposed for different uses, which is helpful to the market in that it reduces the amount of vacant and outdated office inventory. Some examples of this trend include LifeTime Fitness purchasing 1 Gannett Drive (former headquarters and printing plant of the Gannett newspapers) to build a 200,000 SF fitness center with tennis courts and indoor and outdoor pools. Memorial-Sloan Kettering is refitting a former Verizon office building at 500 Westchester Avenue to become a cancer treatment facility. The biotech firm Histogenics has bought 104 Corporate Park Drive from its lender and will create an office and laboratory facility. And the former Stewart Stamping plant in Yonkers was purchased by a company that will manufacture kitchen cabinets in that facility.
New York State is aggressively working on economic development. On the low-tech side, the state is proposing a number of infrastructure projects in the county, including a long-awaited replacement of the Tappan Zee Bridge. On the high-tech side, it has given a significant grant for a biotech incubator. The biotech sector is growing in the county, with its needs for well-educated employees (which Westchester has) and its relatively high salaries (which county residents need). It will be interesting to watch how this sector develops, and if its benefits spill over into the broader market beyond the incubator and a limited number of multi-tenant laboratory buildings.
Howard Properties, Ltd. is the official Westchester County NY affiliate of CORFAC International and specializes in representing tenants and buyers. Formed in 1998 by veteran real estate broker Howard Greenberg, SIOR, the firm has completed space acquisitions, dispositions, lease renegotiations and consulting assignments in 20 states.