NORTHEAST SNAPSHOT, SEPTEMBER 2005
In New York, the Hudson Valley commercial real estate market is in full swing. Development is underway in nearly every sector and the region is garnering a lot of interest from local and national developers. Dutchess, Ulster and Orange counties are getting most of the new development in retail and multifamily. Albany is seeing significant interest in the industrial sector.
“The overall market remains very strong with a lot of new construction and rising prices,” says Steve Perfit, president of Kingston, New York-based Upstate Commercial Group. “Growth in population and tourism is driving the retail and multifamily sectors. The outsourcing of jobs from New York City has pushed primary and secondary home ownership further up the Hudson Valley to Orange, Ulster, Putnam and Dutchess counties.” The vacancy rate for retail space ranges from 5 to 10 percent. Demand for multifamily is extremely strong with vacancies as low as 1 percent in some sections of the Hudson Valley. The overall vacancy rate is approximately 5 percent in the multifamily market.
The retail sector is mirroring the national trends, with both new construction and absorption of existing vacancies occurring. In the past few years, a host of national retailers have entered the area, including Lowe’s Home Improvement Warehouse, The Home Depot, Wal-Mart, Sam’s Club, Target, Kohl’s, Best Buy, Barnes & Noble, The Sports Authority, Bed Bath & Beyond, and Dick’s Sporting Goods.
In the multifamily market, “demand far exceeds supply for large complexes, and developers are breaking ground and purchasing product with zoning and infrastructure in place,” Perfit says.
According to Perfit, the retail growth is having a trickle-down effect on retail distribution, with retailers seeking to locate logistics centers in the Hudson Valley. However, the primary catalyst for activity in the industrial sector is the emerging nanotechnology industry developing in and around Albany. It is the third largest nanotechnology center in the nation, and larger industrial properties are being developed for the high-tech sector. Presently, a high-tech chip manufacturing facility is underway in the town of Fishkill.
New construction for warehouses and distribution centers is located primarily near Interstates 84 and 87 near Stewart Airport. “Small industrial spaces are experiencing solid positive absorption in both the rental and sales markets,” Perfit says. “Existing large industrial space greater than 100,000 square feet is lagging as most of the product is functionally obsolete.” The vacancy rate for industrial product in the Hudson Valley is currently 30 percent.
The office sector continues to struggle due to little absorption and high vacancies. Currently 40 percent vacant, existing office product is being acquired by investors at reduced prices in anticipation of future demand from high-tech tenants. The possibility that the Hudson Valley may soon become “Tech Valley,” Perfit notes, has created some cautious optimism regarding the recovering office market.
For the future, Perfit believes that the New York State Thruway corridor from Orange County to Albany is poised for growth. There is a significant amount of industrially zoned land around the thruway, most of which has water, sewer and high-speed fiber optic Internet access in place.
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