With the holidays, the real estate market forecast season is upon us.
The Hudson Gateway Association of Realtors recently kicked off the annual exercise in looking back at the past year”™s deals and looking forward to the market”™s prospects in the new year at its Commercial Investment Division”™s holiday luncheon in White Plains, where a panel of four Hudson Valley brokers offered both bullish and less optimistic views about the region”™s commercial office market in 2015.
Paul Adler, vice president at Rand Commercial Services in Rockland County, reminded his audience that brokers last year predicted 2014 would be “a stabilizing year. I think that”™s what we saw. I don”™t think there were any great gains in the market but by the same token, there were no big losses.”
Glenn Walsh, executive managing director at Newmark Grubb Knight Frank, said office leasing activity in Westchester totaled 1.3 million square feet of space in 2014, including renewals, compared with 2.5 million square feet in a usual year in the county. The market north of Interstate 287 “took a beating,” he said.
William V. Cuddy Jr., executive vice president at CBRE Group Inc., said differences in rent pricing levels for Westchester”™s inventory of Class A, B and C office buildings were more clearly established this year. Average asking rents at Class A buildings are just over $30 per square foot. “That”™s a milestone,” he said. The average asking rent for Class B property is $24 per square foot, while rents at Class C buildings are in the sub-$20 range, Cuddy said.
John J. Lease, owner of John J. Lease Realtors in Newburgh, said the office market benefited most in 2014 from “the calming of the lending market” for commercial borrowers.
Looking ahead to 2015, Lease added, “I think the recovery is very tenuous.” Financing for speculative real estate deals still is not available. Even with free land, a developer cannot build new office space “and make it work” financially, he said.
Both Cuddy and Walsh said a Westchester market dominated again this year by established tenants relocating within the county could see changes in 2015 that bode well for landlords.
With large blocks of office space scarce in the county, “We”™re not too far away from a 40,000-square-foot tenant coming out to Westchester County and not having choices,” Walsh said.
“When that happens,” said Cuddy, “the pendulum swings very dramatically in the direction of the landlords. I wouldn”™t be surprised if we saw fairly significant rent growth in 2015.”
Asked about the prospect of companies relocating from New York City to less expensive office space in Westchester, Walsh said, “The time”™s coming. ”¦ We”™re seeing some trickledown from New York. For the first time, people are saying maybe we ought to look at an office in Westchester County.”
Adler predicted, “2015 is going to be a considerable improvement on 2014, when I think we found our sea legs. I”™m very bullish on 2015.”
Walsh predicted, “It”™s not going to happen” early in 2015, “but at the end of the year, I see it going from a tenant market to a landlord”™s market.”
“I”™m very bullish on 2015 and looking forward to it,” Walsh said.
