2011 has been one of the less memorable years in Westchester County”™s office market. To date, there have been no office leases of significant size and the market continues to see negative absorption of space. The large majority of activity has been lease renewals, a good number of which involved downsizings by large companies, which are generally taking a conservative approach to expenses.
Growth is taking place, primarily by the county”™s medical groups, privately held companies and law firms. Medical group Westmed is continuing to expand and the Dorf Law Firm L.L.P. recently leased 16,000 square feet at 555 Theodore Fremd Ave. in Rye.
As is normal in soft markets, tenants are taking advantage of their ability to upgrade to better-quality buildings with little or no increases in rent. We continue to see a large proportion of intra-county deals that involve relocating from one building to another for the same amount of square footage ”“ I call this “rearranging the deck chairs.” There is a dearth of relocations into the county at just 3.5 percent of all square footage leased. Startup companies are a negligible part of Westchester”™s leasing activity.
Some of the good news involved adaptive reuse of existing inventory. Lifetime Fitness will demolish the 1 Gannett Drive building ”“ which houses The Journal News ”“ and replace it with a 200,000-square-foot fitness and sports center. The editorial staff of Gannett will then relocate to a nearby building, absorbing about 40,000 square feet. Memorial Sloan-Kettering has just received approvals to reposition 400 Westchester Ave. as a cancer treatment facility. And biotech company Histogenics is buying 104 Corporate Park Drive, which was taken back by its lender after full-building tenant Malcolm Pirnie Inc. moved to the White Plains central business district.
Biomed Realty Trust will transform the outdated Ardsley Park complex into a much more modern laboratory and office facility. It has already attracted a 71,000-square-foot lease commitment from Accorda Therapeutics (expanding from 55,000 square feet it currently occupies in Hawthorne). However, even if the much-touted, New York state-endorsed “biotech cluster” continues to grow in Westchester, it will likely be limited to the Biomed facilities (which also include the Landmark at Eastview in addition to Ardsley Park) and iPark in Yonkers. High-tech laboratory space is a very capital-intensive product that requires a specialist landlord who understands this industry and its high-risk/high-reward finances.
Building owners are working harder on every deal in order to maintain the tenants they have and no one sees any significant changes in this scenario on the horizon. Rents per square foot are basically stable, but concession packages and construction allowances are rising. We either have to shrink our office inventory or make the county an attractive place for new businesses to relocate to, in order to make Westchester County a healthier office market. The answers are as simple, and as complex, as that.
Howard E. Greenberg, SIOR is President of Howard Properties, Ltd. His firm, located in White Plains, specializes in tenant representation and corporate real estate services.
