NORTHEAST SNAPSHOT, MARCH 2006
Westchester and Rockland Counties, New York, Multifamily Market
With high occupancy levels and strong rental rates, the rental apartment market is flourishing throughout Westchester and Rockland counties, New York. Nearly all significant new apartment and condominium projects, however, are concentrated in Westchester County, where demand is stronger due to a high number of Fortune 500 employers, top residential communities and a closer proximity to Manhattan. Currently, rental rates in these counties range from $1.50 per square foot to $2.50 per square foot, with the lower end of this range achieved in Rockland County while the upper end is in more urban areas of Westchester County for the reasons mentioned above.
Despite strong rental demand in the area, demonstrated by vacancy rates in the 5 percent to 10 percent range, activity remains focused on condominium projects, and there are no new significant rental projects under development. This is, in large part, a product of higher land values per unit being paid by condominium developers versus apartment developers. Further, the conversion of apartments to condominiums has brought new opportunities to investors and developers, resulting in a reduction in the supply of rental units. Examples of recent condominium conversions indicative of the current trend include JPI's apartment development in White Plains, Louis Cappelli's (in conjunction with Donald Trump) planned second apartment tower in downtown White Plains (which he changed to condominiums “mid-stream”), and the pending conversion of several Yonkers properties. The upside of this condominium development and conversion trend will be higher rental rates for apartment dwellers. To capture higher rental rates, there appears to be a trend toward owners redeveloping and upgrading older, well-located multifamily properties. This is evidenced by a recent sale in February 2006 of two apartment properties in Dobbs Ferry and Hastings-on-Hudson (198 units in total) to Houlihan Parnes, who plans to make significant capital upgrades to the units.
The cities of White Plains, New Rochelle and Yonkers, New York, offer the best opportunities for multifamily development in Westchester County, and over the next few years will be areas to watch for additional activity. These urban areas are leading the development of multifamily projects because they both proactively seek new development opportunities and tend to be more “developer friendly.” Several new players recently attracted to Westchester County include JPI in White Plains, Collins/Simpson Housing in Yonkers and Roseland in Tarrytown, New York, which is developing the former GM Plant into waterfront apartments. Additionally, Louis Cappelli is developing another condominium project (400± units) at the 221 Main Street site in White Plains, as well as 181 units in New Rochelle and 208 units in Yorktown. The Yorktown project will be an active adult community targeting residents age 55 and older.
Another reason for this continued condominium demand and development is that the high-end, high rise condominiums in White Plains sell at a 50 percent to 75 percent discount to comparable residential units in Manhattan. Such a significant difference in cost is a major factor in attracting buyers.
The multifamily market was extremely active in 2005 and should continue well into 2006 and beyond. While the rental rates have been relatively flat, 2006 should see improvement due to the reduction in supply of apartment housing. Continued growth in the condominium market is expected, as well as an eventual return to investments in the multifamily rental market once condominium sales begin to dissipate.
— Jeffrey Dunne is a Vice Chairman and head of the New York Tri-State Investment Team with CB Richard Ellis, Inc.
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