An insider’s take on office market trends
As 2011 winds to a close, Westchester”™s office market has been fairly quiet. At press time, though, several significant deals were in the works (see page one). The Business Journal caught up with broker Howard Greenberg, president of Howard Properties Ltd. in White Plains, to get a handle on overall market conditions and a jump on what to expect in 2012.
How are you gauging the market for 2011?
“The great majority of office deals have been renewals and relocations within the same portfolio. As far as the larger public companies, the trend has been to renew their leases and downsize at the same time. All of which is somewhere between stable, in terms of square footage, and negative absorption in terms of the downsizings.”
Good deals out there?
“Very good. If anything, the concessions ”“ free rent, work letters and construction allowances ”“ have increased in 2011. The dearth of deals has just made each one that much dearer.”
What are you hearing about Nokia? Are they out of Corporate Park Drive?
“I don”™t know if they”™re physically out, but certainly this multinational, companywide downsizing is going to happen. I haven”™t heard anything yet about the marketing of that building.
“If you remember, that building was taken down, I think even to the slab. ”¦ (it”™s) really a brand-new building. It”™s configured for a single tenant. I don”™t know what their attitude is going to be when they market it. If they”™re looking to recapture all of the costs ”¦ it may be very difficult. ”¦ I doubt very much whether an investor will buy it and break it up into multitenant because it”™s going to be extremely expensive to (do). In this market where space is really commoditized, they”™re not going to get a real premium, even though the building is new and well located.”
Will the “zero-sum game” you refer to continue into 2012?
“I”™m not seeing anything that”™s going to change that trend. The biggest problem we”™ve had in Westchester in the 25 years I”™ve been in business as a commercial broker is that we really do not have a lot of inbound business coming in from other markets. “We”™re not like a Dallas or an Atlanta where a lot of companies come from another area and either relocate there or open up a new office.
“The corporate headquarters that all opened up in the ”™70s and ”™80s, that trend is over. We have not really seen any new absorption by someone from another market coming in and leasing 100,000 square feet. That”™s the biggest thing we”™re missing.”
Top things people need to know for 2012?
“OK, in no particular order. Absent (class-A) buildings, what I tell my clients is just pick where you want to be. There”™s not going to be a (significant) discrepancy in rents ”¦ between one building and any other. The market has really commoditized.
“Also, the trend of tenants hunkering down and keeping their options open in terms of (space) commitments is going to continue into 2012 … I don”™t see the market in general, or the economy in general, perking up to the point where companies are going to begin to make large expansion commitments. (Tenants) that are stable and/or growing ”¦ will be willing to take the long-term deals, expansion space and so on. But they”™re more the exception than the norm.”
Wish list for the market?
“Two things: One, we need to bring in fresh, inbound business, whether from New York City or elsewhere, to begin to (lower the) vacancy rate.
“Two, there are older, functionally obsolescent office buildings that should really be taken out of the inventory. We”™re making some strides ”“ Sloan Kettering”™s (proposed cancer center at a former Verizon building in Harrison) and Lifetime Fitness that”™s going to take the old Gannett building. If these buildings were vacant today and being marketed as multitenant they would just be laying there.
“Rent is a function of the market, period. Where you”™ve got high vacancy rates your rent is going to remain low and concessions are going to have to remain high. That”™s the only way to fill space.
”¦ I must admit I”™m really expecting 2012 to somewhat be a mirror of 2011.”
That”™s not good.
“Believe me, I wish I saw it differently, but standing here as I do today, that”™s what I see.”