Office brokers, tenants and owners are getting a “re-education” in the “new normal” in commercial real estate, members of the Westchester chapter of the Building Owners and Managers Association recently heard from BOMA”™s annual market forecast panel.
Westchester County in 2011 again had slow leasing activity and an increasing amount of available office space added to a market with aged and obsolete buildings and no new office construction in more than two decades. The Westchester market in 2011 recorded its eighth consecutive year of negative absorption of vacant space, with approximately 600,000 square feet added to the market by the end of the year, said panel moderator Howard E. Greenberg, president of Howard Properties Ltd. in White Plains.
By contrast, office vacancy rates are dropping in Manhattan, where rents last year averaged $57 per square foot.
“We”™re here,” said Greenberg. “We”™re half the price or less (in rents) but tenants aren”™t coming.”
The new year should bring “more of the same” as in 2011, with tenants downsizing, smaller lease deals and short-term renewals and extensions, said Paul M. Jacobs, executive vice president at CB Richard Ellis in Stamford, Conn.
Though leasing is down 25 percent to 30 percent in the county, “There are deals out there,” Jacobs said. “It”™s just a case of being smarter than the rest. ”¦ The landlords that get it are going to do the deals.”
One such deal in 2012 could keep Fujifilm Holdings America Corp. in Westchester. The company is looking to lease 85,000 to 90,000 square feet of space, Greenberg said, downsizing from 168,000 square feet of space at its current U.S headquarters in the Reckson Summit office park in Valhalla.
Panelist Mark Ellman, president and principal of Celestial Capital Group L.L.C., a buyer of distressed properties, said his company in the last month signed two leases with tenants at 222 Bloomingdale Road, a 150,000-square-foot White Plains office building that Celestial Capital in early 2011 acquired in a short sale from a securitized lender. He expected to sign a third lease this month and a fourth “right behind it.”
“To be successful in Westchester, you”™ve got to keep your tenants, you”™ve got to have niche buildings and you”™ve got to work your operating expenses,” he said.
“I think we”™re starting to see more activity” in the market, Ellman said. “The deals are harder to do. They take longer.”
Ellman and brokers on the panel said they see no rent growth in 2012, but no decline either. “We”™re going to keep plodding along,” Jacobs said.
In a plodding market, “I”™m busier now than I”™ve ever been in my career,” said Jacobs, who represents large corporations. “There”™s a new norm that we”™re now living.”
That new norm increasingly includes lenders and receivers for the county”™s distressed properties in lease negotiations with tenants and landlords.
“It”™s a new world, so just deal with it,” Jacobs said.
