Westchester’s 2016 office market
The real estate news for the first half of 2016 is generally good. As has been the case for a few years now, multifamily residential is the hot product, but office activity has been solid and medical and medicalrelated ases are surging again after a brief quiet period.
"Though the final numbers are not yet in, the second quarter of the year seems to be continuing the positive trend seen in Ql," says
MULTIFAMILY MANIA CONTINUES
Multifamily continues to be the superstar product in development.
The nearby Esplanade, a former senior residence, has received approvals to be converted to market-rate apartments - an interesting repurposing of a very old building.
In addition,
And SUNY Purchase is moving forward with a plan to add 385 units of housing for people 62 and older on 40 acres of its campus. This will include multiple formats, including apartments, single-family duplex and triplex homes, and beds for assisted living and memory care. Apparently, this has been a trend around the country, as the number of people over 65 continue to increase each year, and many of them are auditing college courses to stimulate their minds and involve themselves in the arts.
Given the bifurcated target markets (empty nesters and millennials) for the thousands of units of multifamily housing approved and under construction, it looks like there will be a lot of intergenerational communication in the future!
Obvioasly, there is a big repurposing component in multifamily as well as in office. An obsolete shopping mall, a former automobile factory and two office building sites are morphing to residential uses.
OFFICE IS IMPROVING
Leasing activity in Ql outpaced Ql of 2015 by 36.7 percent. Deals of more than 10,OCX) square feet accounted for 72 percent of the leasing total. Smaller deals accounted for only 28 percent. Not that many years ago, some 85 percent of all lease transactions were for spaces of under 5,000 square feet. Increasing deal size is a good sign for the county, as it shows not only are existing tenants are growing but we are attracting more basinesses that have attained a reasonable size. A 10,000-square-foot office tenant in today's densely packed world employs 50 or more people. We are moving in the right direction.
However, construction costs for office interiors are increasing, in part because general contractors and subcontractors are seeing a good flow of work. And tenants today want more expensive installations, with glass office walls and upgraded open kitchens.
My expression for quite a while has been "seven is the new five," meaning that the new standard lease term is lengthening to seven years rather than the old standard of five years. This helps building owners have enough time to amortize their construction costs and free rent and still make a profit.
Renewals continue to dominate, with a significant number of them being renewalexpansions, including
There is not a lot to report on the eastern or western submarkets as of this writing. Things are fairly quiet on the west side, but the law firm of
Also in the eastern submarket, substantially all of the 230,000 square feet of space is available or coming available during the next year at
IT'S COLD UP NORTH
The northern submarket is awash in vacant former headquarters space. The 550,000-square-foot
Short of some massive economic incentives that would entice major companies to relocate to these buildings from outside the
This being said,
WHILE THE CBD IS HEATING UP
Vital Decisions, headquartered in
In addition,
It is also almost a new day at Mack-
The study on the White Plains MetroNorth station continues. It seems like there are a lot of opinions by citizens about pedestrian, bicycle and vehicular access and parking. 1 fowever, I am not reading much about any significant dining or retail being included. Given the large amount of office space in this area, as well as more than 1,(XX) residential units nearby that are in place or under development. I think these amenities and services are desperately needed in this section of the CBD.
Since
SALES ARE TAKING PLACE
For comparison, two other sales in
In
MEDICAL SURGES AGAIN AFTER A PAUSE
After taking a brief hiatus, the pace of medical deals has increased again.
Visiting Nurse Association of Hudson Valley also renewed its lease at
HARRISON AT THE FOREFRONT OF NECESSARY CHANGE
Harrison has been a leader in approving well-thought-out repurposing of obsolete buildings. The portion of the Platinum Mile in that town contained some of the oldest office buildings in
The
The Westchester County Association Ls working hard to bring
A couple of months ago, the WCA also held a seminar featuring the mayor of
I always call out examples of good marketing where I find them, and 1 have found them at
Some blocks of 20,000 to 42,000 square feet space in their
The spaces look more attractive and have already attracted interest from new prospective tenants. Being marketed by the owner, this also avoids the complicated, multi-stage process of a tenant having to make a sublease deal with the existing tenant, then negotiating with the owner to extend it, etc. The owner is being proactive. And whether a deal happens or not, the existing tenants are still paying the rent. If a new tenant is attracted, it will lease the space for many more years than are left on the existing term. KSRT is investing money and effort now that will pay off in the future. And the tenants who have just a few short years on their leases will benefit as well.
The concept is that when the next tenant vacates, new paint and carpet will once again make these spaces new and attractive. It takes a capital investment but shortens the leasing cycle, and is really "heads up" marketing.
FLEX IS FLEXING ITS MUSCLES
Mack-
They are taking it to the next level now by building a new high-end warehouse building on the site of a demolished office building. It will have a 24-foot clearance, with 10 percent office space , and they are asking a big rent number. But my prediction is it will be rented before it is fully built. It will be the first new spec flex product built in more than 25 years.
Mack-
PROGRESS IS SLOW ON THE NORTH 60
FINAL WORDS
In summary, leasing velocity in the office market is looking pretty good. Deal size is growing, and renewing tenants are often growing. I think most of the downsizing by the big corporations is past us. We are seeing some companies actually move into
I will be very interested to watch residential leasing activity as the thousands of new multifamily units in the pipeline come to market over the next few years. I am sure the developers have done their analyses of demand in our market, but I see three things that need to happen. Empty nesters need to sell their homes and decide the rental apartment lifestyle is for them. Millennials have to move to or remain in
All of these will be good for
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