NORTHEAST SNAPSHOT, OCTOBER 2008
Westchester, New York Office Market
“Westchester has survived the slower real estate market better than most areas around the country, due to the diversity of industries, strong transportation infrastructure, and close proximity to New York City,” says Glenn Walsh, senior director of Cushman & Wakefield.
The lack of any new office construction in the last 20 years has also limited the availability of Class A product. Most of the office space that does exist has been traded in the past few years, which Walsh believes will keep rents stable. Office space in Westchester County currently ranges from $35 to $40 per square foot in downtown White Plains, and $26.50 to $30 per square foot in suburban submarkets.
The higher rates in the White Plains central business district (CBD) are partially attributed to the overall tightness of this submarket. There is still some available space, though, primarily at Westchester One, including the 300,000 square feet Argent Mortgage recently vacated; 250,000 square feet that was freed up with the expiration of IBM’s lease; and the relocation of Blue Sky Productions to Connecticut. But the large amounts of space coming to market shouldn’t be taken as a bad sign.
“This is the area that companies initially relocating to Westchester from New York City are most attracted to, due to proximity to the Metro-North Railroad,” says Howard Greenberg, president of White Plans-based Howard Properties, Ltd./CORFAC International.
“With an abundance of new retail and residential development, the city is experiencing a renaissance, which is in turn making it a much more favorable office environment. The new infrastructure has transformed downtown White Plains into a 24/7 city,” says Walsh.
There has also been significant activity recently in the suburban submarkets. Examples of this include Amalgamated Insurance Company’s recent announcement of the impending relocation of 400 employees from downtown Manhattan to 132,000 square feet at Cohen Bros. Realty’s 333 Westchester Avenue in White Plains. Other significant leases in the Eastern submarket include ITT’s 100,000-square-foot lease at 1133 Westchester Avenue, Bank of New York’s 78,000-square-foot lease at 440 Mamaroneck Avenue and Fordham University’s relocation from its former Tarrytown location to 65,000 square feet at 400 Westchester Avenue in White Plains. Vacancy rates for the Class A market are averaging 16.7 percent as of mid-year.
This influx of office tenants from out-of-town has resulted in many longtime Westchester office users rethinking their options.
“Some companies that have been in Westchester for a number of years are relocating to the suburban submarkets, in many cases because their employee base is now more local, and the higher CBD rents and parking costs result in a premium of as much as $10 to $12 per square foot over occupancy costs in the suburban office parks,” says Greenberg.
One look at the suburban markets surrounding White Plains, and it is clear that the hot spots for development are here after years of inactivity.
“Most of the new development is taking place in New Rochelle and Yonkers, primarily because of the easy access to the Metro North train, with a target toward young executives working in New York City but looking for affordable housing in Westchester,” says Walsh.
Cappelli Enterprises is currently seeking approvals for its LeCount Square mixed-use project in New Rochelle. Development will include 400,000 square feet of office space, as well as retail, entertainment, and residential components.
“[LeCount Square] will be the first significant new office development in New Rochelle in decades, and will test the market in this downtown area for office relocations from New York City,” Greenberg says.
LeCount Square, like a number of major projects contributing to the redevelopment of the New Rochelle downtown area, is attracted to the area’s proximity to the Metro-North Railroad — which links New Rochelle to Connecticut, as well as to New York City by way of the Bronx. The area also sits right in the heavily trafficked Interstate 95 corridor.
Another mixed-use project with a sizable office component is underway in the White Plains suburb of West Harrison. RPW Group is in the process of gaining approval for an additional office building and a hotel at its 1133 Westchester site. The construction of large-block office space in this established corporate corridor will add much-needed new product to the scarce market.
“This will add new space and amenities to what is already a successful conversion of a 600,000-square-foot former IBM office facility,” says Greenberg.
When it comes to the future of the Westchester office market, one should pay attention to what is going on in New York City.
“Amalgamated Insurance is the first major move-out from New York City in a while, Greenberg says. “Given the strength of the Manhattan office market (notwithstanding recent layoffs and shrinkages by the financial services sector), it will be interesting if a trend toward more relocations to Westchester finally gains some steam.”
— Coleman Wood
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