The second quarter of 2024 was not a very active quarter of leasing for commercial properties in Westchester. The largest office deals were renewals, including Savin Group in Pleasantville (20,750 square feet), Precision Switchboard in Hawthorne (19,787 square feet) and the law firm Lowey Dannenberg (17,539 square feet) at 44 South Broadway in White Plains.
Another large deal was in the White Plains CBD when the law firm of DelBello, Donnellan, Weingarten, Wise & Wiederkehr signed a lease for about 17,000 square feet at 360 Hamilton Ave. after a long tenancy at 1 No. Lexington.
The lender is moving toward the end of the sale process for the 700 series of buildings (701, 707, 709, 711, and 777 Westchester Ave. in the East 287 submarket) and it will be interesting to see who buys this large site. These late 1970’s and early 1980s office buildings are well past their useful life and are virtually empty at this point. It will likely take 10 years or so to rezone this property and repurpose it for its next use. It is a sad ending for this once-attractive office park and will leave a big void in the East Side submarket.
According to the quarterly CBRE report, overall leasing activity in Q2 was about 184,000 square feet, some 18% below Q1’s leasing and 12% below the five year quarterly average. The year-to-date leasing total of 409,000 square feet is on par with 2023’s first half. This is a market whose normal leasing years were in the 2 million square foot range pre-pandemic.
Renewal activity skyrocketed, up 171% from the prior quarter, at 213,000 square feet. This is some good news in that it shows that companies are doing lease transactions. However, there is no breakdown as to how many renewals were for the same amount of space vs. those for reduced amounts of space. Lately, a number of tenants who renew may give back 15-25% of their space in an effort to “right size” their space for the number of people who are in the office each day.
It is also good news for building owners, who do not want to see tenants leave their buildings and suffer from the downtime, long leasing cycle and high costs to do new leases and build out new spaces.
Net absorption for the first half was negative 89,000 square feet. This is really the report card that tells us whether the market is moving forward (more space occupied) or backward. The combination of remote and hybrid work continues to push us backward. Remember that businesses really did not miss a beat when offices were shut down in early 2020. Technology and connectivity (coupled with employees who found it attractive to work remotely and not spend time commuting) meant that working from home generally did not negatively affect productivity.
Downtown White Plains is a tale of two cities. There are many, many large blocks of space available, in a market where small tenants dominate. The small tenants who have leased space in the CBD have indicated their preference for amenity-rich buildings, including Ginsburg Development’s City Square and Reckson’s 360 Hamilton Ave.
These are companies that now want to be downtown to attract employees who enjoy being near restaurants, bars, services, and the Metro-North Station. Other tenants are relocating from downtown to the suburban office parks for easier vehicular access for their employees and visitors and relief from monthly parking charges. Once the District Galleria project gets approved, the downtown area will be impacted by the noise, dirt, and truck traffic of the demolition of the old mall and the construction of the 3,200 housing units, retail, restaurants, and underground parking, putting further pressure on this submarket.
Government, medical and not for profit tenants are active. There are some sizable requirements currently in the market. The booming economy is putting economic pressure on the lower and middle classes, which is causing the social services agencies that serve them to expand to accommodate the additional needs. Medical space continues to be in high demand by the large medical groups and hospitals.
Summer generally means slower velocity for the office market. But there are many tenants whose leases expire in 2025 and later that are well into their space searches. As renewing tenants downsize or go remote, the space inventory is in a constant state of flux, and astute tenants and brokers are monitoring the shifting availabilities closely to find the best matches for them.
Howard E. Greenberg is president of Howard Properties Ltd. in Valhalla, New York. He has been a prominent commercial real estate broker for over 35 years and founded his own firm in 1998. He specializes in tenant representation and corporate services for clients in Westchester and throughout the United States. He can be reached at (914) 997-0300 or at howard@howprop.com.
