With the year 2020 just around the corner, Tim Jones, the CEO of Elmsford-based Robert Martin Company LLC, doesn’t have to rely on 20/20 hindsight to get a sense of what’s been happening and might happen next year in the real estate marketplace.
He can just look at the leases crossing his desk.
“My guess is we’ll beat our first-year projections both in terms of the amount of square feet leased and maybe even the rental rates,” he told the Business Journal.
Jones sees a bright future for the flex/industrial space that comprises a major portion of the company’s 6-million-square-foot portfolio.
“If we had another 500,000 feet of this space that we could lease in the right configuration and size, we could lease it out in a short period of time. The flex market is very strong,” he said.
Jones reported that Robert Martin has signed new and renewal leases with tenants for more than 300,000 square feet since buying a portfolio of 56 buildings in Westchester totaling 3.6 million square feet from Mack-Cali earlier this year.
“The parks were pretty well leased when we purchased them and a lot of the leasing we’ve done is renewals. We’ve had several tenants expand and we’ve had several new leases as well,” Jones said.
The $487.5 million deal was the largest commercial real estate transaction in Westchester history. Approximately 95% of the properties were in the package back in 1997 when Cali Realty Corp. acquired them from Robert Martin in a $450 million transaction.
Key flex/industrial properties now owned by Robert Martin include: the Cross Westchester Executive Park in Elmsford; the Mid-Westchester Executive Park in Hawthorne; the South Westchester Executive Park in Yonkers; and the Stamford Executive Park in Fairfield County.
“We have some office space also intermingled in the parks,” Jones said. “Not as strong as the flex or industrial, but pretty solid.”
The company has been upgrading the properties, which were originally developed from the 1970s through the 1990s. Projects have included painting, roof replacement and parking lot repaving. Renewable energy projects and other green initiatives are planned. Rental rates depend, in part, on the level of improvements and type of space, according to Jones.
“If we have some laboratory space it would lease at a much higher rent. If we have a lot of warehouse space it would lease at a somewhat lower rent,” he said. “I’d say around $20 would be a good sum,” he replied when asked for the average rent per square foot across Robert Martin’s flex/industrial properties.
Jones said the increased consumer fascination with internet shopping is spilling over into the flex/industrial real estate market as retailers and distributors invent new ways to handle so-called last-mile delivery, quickly getting merchandise purchased online into the hands of customers. He made note of the 435,000-square-foot sorting and distribution center recently opened by United Parcel Service (UPS) on Tuckahoe Road in Yonkers.
“I know there are a couple of other large requirements floating around that just can’t be satisfied around here,” he said.
Jones forecast that demand for large space similar to what’s being used by UPS might be broken up into several smaller units.
“We’ve had some smaller businesses that we’ve satisfied this year but we also had a lot of what I would call our traditional businesses that are companies that have a combination of warehouse and office requirements,” he said. “We’re also seeing some technical businesses that want our warehouse space for some research and development or for some light manufacturing.”
Without revealing specifics, Jones suggested that in addition to continued demand for flex/industrial space, he sees strength in the Westchester office market for 2020.
“I think there are a couple of bigger deals that are on the way right now that could continue to reduce the vacant inventory,” he said, citing what he termed as the enormous potential of life sciences and health care and technology.
“One of our biggest problems in Westchester, and actually throughout the country, is having enough good employees. We have to continue to work on figuring out how to provide housing and a cost of living to attract employees to fill jobs,” Jones said.
As an example of the demand for housing, Jones pointed to Robert Martin’s apartment development The Elm at 35 Valley Road in Elmsford.
“I don’t have a single vacant unit. When I do get a vacancy coming up, I have it rented. It’s roughly 100 units. No vacancies,” he said.
Jones said a suggestion revived in Westchester County’s newly released Housing Needs Assessment study for repurposing some office parks for housing is worthwhile.
“Mixed-use works very well where you can have a parking lot that can accommodate office space during the day and apartments at night and have the same parking space used twice,” Jones said. “You also possibly reduce vehicle trips because if people live and work in the same location they don’t drive.”
Against the background of Lionsgate moving ahead with plans to build a movie studio in Yonkers, Jones foresees a growing interest in Westchester commercial real estate by the entertainment industry, adding that “one of the big studios” approached Robert Martin about leasing some space.
“We have actually had conversations with others. There’s real interest in that,” he said.