It”™s a tough economy, no doubt. This was, indeed, a difficult year.
And, in tough economies businesses pay the price. Companies have fewer customers than they did just a few years ago. They are trying to pare expenses. They are delaying expansion. They are thinking and acting more strategically to survive.
Some have moved or are considering it. Others are having trouble paying their rent. Â And, some, even more sadly, have written their own obituary this year. These events continue to create more vacant office space in Westchester and landlords, as a result, have trouble paying mortgages on their properties.
Some businesses are forging a path through the woods; others have fallen in the thicket of problems this economy has handed us. On page 2, reporter Kelly Liyakasa tells of businesses that are taking advantage of long-vacant office building space and using it in unconventional ways. On page 3, reporter John Golden writes about the other side of the story ”“ the state of the commercial real estate industry.
One point we”™d like to explore here is the present-day snapshot of office building loans in Westchester County. An analysis from Investcap Advisors L.L.C. looked only at loans that were CMBS, or collateralized mortgage-backed securities. These loans are just a portion of the commercial mortgages that make up Westchester”™s office market but the statistics are telling. Investcap found that more than $50 million in loans is currently in default and more than $42 million in loans is 90-plus days delinquent. Simply put, many landlords are not paying the banks. The details are in a table that accompanies Golden”™s story. Take a look. Of the nearly $773 million in CMBS office loans in Westchester, roughly 12 percent of that amount is either in default or close to it.
More striking is that the percentage is 5.2 percent above the national average. That should be enough to set off the alarm.
With a new year, comes new opportunity as well as new challenges. Some businesses are creating their new opportunity. But, how will this county face the challenges of a growing number of office vacancies and resulting commercial loan defaults? More specifically, what will our government and business leaders do to help businesses survive and, eventually, thrive?
The growing office vacancy rates and resulting number of defaults in loans could be among Westchester”™s bigger problems of 2011 and it speaks to the county”™s underlying issues for business owners and the overall health of the county. In the coming year, the Business Journal will continue to be a steadfast mirror showing you the problems and issues related to businesses of this county. We will continue to examine the challenges that businesses expect to face in 2011. We will continue to build off our heritage that has been laid by Pulitzer-descendent David Moore, our founder, and the late John K. Smith.
