Everyone is seeing lots of construction these days.
The first (and continuing) wave of multifamily residential development has been focused on the major cities in Westchester County, including White Plains, Yonkers, New Rochelle and Mount Vernon. Many buildings have already been built and are occupied or in the leasing phase. Many more projects are in the approval process or pre-construction.
TOD (transit-oriented development) has been the most popular product type, offering tenants the ability to walk to Metro-North stations and restaurants, bars, retail and service establishments. There are two distinct target customers: millennials and empty nesters.
All, or substantially all, of the major sites in the cities are in some form of the approval or construction process. In White Plains, Lennar has completed demolition on its mixed-use site at Mamaroneck Avenue and East Post Road and is doing site work. It has also proposed significant revisions to the site plan approval it owns for its South Broadway site, where approximately 770 units of multifamily was scheduled to be built along with retail and office space. The new proposal downsizes the retail component, eliminates the office component (both wise moves, in my opinion) and proposed a two-phase project, rather than a single building.
Rose Associates is moving forward on its approvals for the former AT&T Building at 440
Hamilton Ave., and George Comfort and Sons is pursuing approvals for a mixed-use development on the former Good Counsel property on North Broadway. The White Plains Mall has received approvals for its four-tower, mixed-use project, and the tenants are slowly vacating preparatory to the demolition of this outdated mall in the center of White Plains. Many major projects in downtown Yonkers are well into the construction phase.
The second wave of multifamily development has moved to the suburbs. We are seeing a continuation of multifamily residential development in lower Westchester”™s corporate parks.
The 421-unit Toll Bros. development is coming out of the ground on Corporate Park Drive. Marcus Partners and Trammell Crow bought the empty 3 Westchester Park Drive office building and are pursuing approvals to demolish the building and build a two-building multifamily development.
RPW Group has proposed building residential on excess land on its office sites at 800 Westchester Ave. in Rye Brook and at 1133 Westchester Ave. in White Plains. These will provide a suburban alternative for those who are not keen on living in the downtowns.
The Con Edison gas moratorium went into effect on March 15. Any building that has not submitted an application for natural gas service and that can be completed and ready for that service to begin within 24 months of its application will not be able to obtain natural gas service unless it is “interruptible.” This means Con Edison must have the ability to take that building “off the natural gas grid” when there is a shortage of gas (i.e. on the coldest days), and the building would have to shift to an alternate source of fuel. This would increase costs for developers, who would have to include another fuel source for their buildings, which would likely be passed down to renters.
New York state and Con Edison have been trying to get users to convert to “non-pipeline” sources of energy. The Cuomo administration has rejected applications for new gas pipelines in recent years, and this is contributing to the inability to get natural gas into Westchester. Many politicians are fighting against this, but so far to no avail. It will be interesting to see how it affects large multifamily residential developments in multiple stages of the development pipeline. It could have a significant negative effect on the county”™s surging development activity.
A $250 million clean energy investment program was announced, which is designed to free up some natural gas capacity and allow development to continue in lower Westchester. So the powers that be have realized they must not impede the significant economic progress that has already been made and is continuing to be made.
On the commercial side, there have been major investment sales in the last few months. Real Time Logistics bought Mack-Cali”™s Elmsford Distribution Center, a large warehouse park off Route 9A. Office owner GHP has been on a buying spree recently, acquiring 115 and 117 Stevens Ave. in Valhalla, 660 White Plains Road in Tarrytown, and 555 and 565 Taxter Road in Elmsford, among other properties.
The Robert Martin Co. is under contract to acquire the last of the Mack-Cali holdings in
Westchester County, consisting of 3.1 million square feet of primarily flex (office/warehouse/light assembly) buildings in Yonkers, Elmsford and Hawthorne. This is a blockbuster purchase for $487.5 million. It keeps almost all of the flex product in the county in local hands (Robert Martin was the original developer of these properties) and moves them from public (REIT) ownership to private ownership.
The transaction is slated to close during the first half of 2019. This marks the end of an era for Westchester, as one of the major owners of commercial real estate in the office, flex and industrial sector has sold off all of its properties.
In September 2018 a proposal was made to the town of Somers for the entire former IBM campus (723 acres and 1.2 million square feet of office space) to be leased for a STEM (science, technology, engineering and mathematics) boarding high school for up to 1,800 students.
If this project comes to fruition, it would take the largest vacant office campus in Westchester off the statistics. This could lower the county”™s office vacancy rate to somewhere around 15 percent from approximately 21 percent. It would also lower the 37 percent vacancy rate in the northern submarket significantly.
This is a use that would be perfect for the former IBM campus. As there are literally no prospects for any office tenant leasing this much space (particularly in the far northern sector), it would take this campus off the statistics in one fell swoop.
If it does occur, the optics of our market would be much more attractive, at a mid-teens rate, versus the current low 20s rate. And the new math would much more accurately reflect the significant positive momentum in our office market.
All development in Westchester that you see is multifamily residential. There are no new office buildings being built and it is highly unlikely that any will be built in the foreseeable future. The good news is that all of the repurposing and demolition of functionally obsolete office buildings is accomplishing the desired goals: less vacant space and a more balanced market, with rents moving upward and owners making investments in their properties.
Howard E. Greenberg is the president of White Plains-based Howard Properties Ltd.
