Two executives at the Rye Brook office of real estate services firm Newmark have expressed optimism about the office market at least as far as Westchester and Fairfield are concerned.
Glenn Walsh, executive managing director for Newmark in Rye Brook and Lawrence Ruggieri, senior managing director at the Rye Brook office, told the Business Journal that they’re seeing a strong office leasing market with more than 40 transactions completed since January. Walsh and Ruggieri worked with Newmark’s Gregory Frisoli and Anthony Nusbaum on the transactions.
Included among the leases were 42,993 square feet of space in White Plains, 50,216 square feet in Tarrytown and 77,299 square feet in Rye Brook.
“People are coming back to work, whether it be three days a week or four days a week,” Ruggieri said. “Traffic has definitely picked up. Cafeterias in these building have picked up and people are definitely coming back to work.”
“We’re definitely seeing an uptick in companies taking space, committing longer term, in Westchester specifically,” Walsh said. “Connecticut definitely has been robust. Stamford and Greenwich markets have tightened up considerably in the last few years especially by the train stations.”
Ruggieri said that the Hudson Valley outside of Westchester is not that big of a market for their team at Newmark but there were some Hudson Valley renewal deals that they have done.
“A lot of the inventory over the last several years has gone away in Westchester, being repurposed,” Walsh said. “When you get down to it there are fewer buildings and fewer blocks of space to look at than ever before in Westchester. That to me is contributing to what would be somewhat enhanced willingness for tenants to commit to space. There’s a slight uptick in people willing to do a flight to quality to get to better buildings. Landlords that have upgraded their buildings the most have seen the biggest uptick in occupancy.”
The optimism of Ruggieri and Walsh stood in sharp contrast to some of what New York City Comptroller Brad Lander said in a recent report on the New York City office market. Lander noted that the health and vitality of New York City’s commercial real estate market over the next several years both depend on several uncertainties.
“These include the durability of widespread hybrid work arrangements and their influence on future office demand; the extent to which new businesses are interested in entering the NYC market; the adaptability of the building stock to accommodate non-office uses; the efficacy of government programs and policies to promote adaptive reuse; and, critically, building owners”™ ability to lease space at sustainable rents without jeopardizing the viability of their properties,” Lander said.
Higher vacancy rates and lower rental income could, Lander predicted, lead a drop in the value of New York City commercial buildings. That would impact city property tax collections, possibly by as much as $322.7 million in Fiscal Year 2025, growing to a shortfall of $1.12 billion in Fiscal Year 2027.
“Now with people coming back to work you’re seeing, especially with the major corporations, the bigger companies, a flight to quality and long-term leasing,” Ruggieri said about the Westchester and Fairfield markets.
Walsh said that when tenants shop for office space there is a demand for more outdoor and communal areas, nicer lobbies, upgraded lighting and an overall atmosphere that will invite people back to the office. He said there’s been a slight uptick in rental asking prices but at the same time landlords are offering incentives to get leases signed.
“Construction is way up so what we used to be able to build for is probably $20 a square foot more than it was,” Walsh said. “Landlords can’t drop rental rates because of the increased costs of putting tenants into space and I’ve seen less pushback on costs from tenants. They’re understanding that the construction costs are astronomical these days and if you want a nice building and you want all of these amenities that costs money too.”
“According to national averages we have one of the highest vacancy rates in the country,” Walsh said. “We have to play a little catch up but we’re bullish on Westchester because we think the vacancy rate is going to continue to go downward. Tenants are starting to grow again. They’re coming into the area and committing and there’s less inventory to pick from.”
Ruggieri said that people who currently have short-term leases are going to have to make decisions now for the longer-term. He also pointed out that the comparatively easy commute between Westchester and Manhattan has encouraged reverse commuting, which enhances the demand for offices to house the reverse commuters.
“There’s going to be activity throughout the market creating the velocity that Westchester County is used to,” Ruggieri said. “There will be tenants coming into the market for the first time and taking new space. With all the residential coming in, for example to White Plains, what usually follows is the retail and that is going to give people the incentive to go to White Plains and the offices follow. It’s pretty much the same cycle we saw in Stamford. That’s what’s been happening in New Rochelle.”
