Houlihan Lawrence has issued its commercial market report for Westchester County real estate in the second quarter of 2019 and it finds that “Westchester continues to be a draw for commercial investor and tenant demand.”
So much so, that Tom LaPerch, director of the commercial group for Houlihan Lawrence, said that the tax benefits offered to investors under Section 1031 of the federal tax code for putting money into Opportunity Zone projects have benefited the real estate market.
“We have a lot of 1031 money people looking to come and buy product and we have, unfortunately, a shortage of good income-producing properties,” he said. “A lot of investors are looking to put their money into mixed-use properties.”
LaPerch told the Business Journal that redevelopment and soaring prices in the Bronx are pushing people to look for industrial space in lower Westchester.
“All of a sudden, with the revitalization of the Yonkers market into a transit-oriented market, similarly in New Rochelle, all those old industrial buildings are being repurposed and any of them that are available for sale are kind of dated and not meeting today’s needs of commerce. The Bronx has been found and the pricing is getting kind of crazy down there,” LaPerch said.
When asked whether he has seen the same sort of interest in industrial properties in Mount Vernon, LaPerch said, “The functional obsolescence of some of those buildings is going to hurt them. I think there’s more of a potential for redevelopment for multifamily.”
Teresa Marziano, who wrote the report, told the Business Journal that she found the market is generally stable. “The listing market is improving in some areas, notably in the office market area. Office fundamentals have strengthened,” she said. The report said that in the second quarter office supply and demand were healthy.
Marziano said that the multifamily residential market continues to be very strong while on the commercial side the market for retail space is facing some “headwinds.” She said that consumers and retailers alike still are trying to figure out what the future will be for retailing.
The report itself said, “Retail properties in Westchester had a more challenging quarter as store closures exceeded newly leased space. Overall occupancy took a step back from the prior quarter. However, landlords held the line on pricing on their most valuable spaces.” The report said that even the most affluent Westchester communities have vacant retail spaces.
“Industrial asset lease and sale pricing continues to break historical records. Westchester is benefiting from an influx of businesses relocating from the Bronx, Queens, and other areas that are experiencing intense gentrification, making it increasingly difficult to conduct businesses in these areas,” the report stated.
Transit-oriented developments and multifamily buildings rich with amenities continue to fuel a strong apartment sector, according to the report. It notes that the Westchester apartment demand has met or exceeded supply over the past five years, resulting in continuous increases in rents.
“Some of the increase reflects compensation for new amenities provided by developers in newly delivered inventory. These amenities include the addition of fitness centers, pools, common areas, mail and package storage and party facilities, among others,” the report stated. LaPerch said while there are a lot of rental apartments available, there aren’t enough for-sale units to meet demand in the condo and co-op sectors.
As for the future, “The crystal ball, with the election coming up, is starting to look fuzzy,” LaPerch said. “Money is still very cheap and we’re looking for product. We need product.”