The Ridge Hill mega-shopping center will cast a long shadow over Westchester”™s retail landlords in 2012 and the adaptation of the county”™s aged and obsolete office properties for diverse new uses will continue this year, according to commercial brokers here.
They made their forecasts at a December panel discussion hosted by the Commercial Investment Division of the Westchester Putnam Association of Realtors.
William Hesse, president of Aries Deitch and Endelson Inc., said 2011 brought a small resurgence of “moms and pops” in the county”™s retail leasing market. “The moms and pops had totally disappeared,” he said.
In 2012, though, Westchester”™s Ridge Hill, the 1.25-million-square-foot retail and entertainment complex developed by Forest City Ratner Cos., will be the giant that dominates the retail market here, Hesse said.
At the end of 2011, the not yet fully opened complex was 75 percent to 80 percent leased. National retailers formerly drawn to Central Avenue, the county”™s long-time retail artery, are opting to lease instead at Ridge Hill, Hesse said.
“It”™s going to be a game-changer and it”™s going to wake up a lot of landlords who are going to have to compete with it,” he said.
“Ridge Hill is a phenomenon that definitely has an effect on all of Westchester County.”
Hesse predicted retail rental rates will stabilize in 2012 after plummeting in recent years, though he does not expect them to rise.
A push to repurpose properties
In the county”™s underperforming office market, “repurposing” is a rallying cry and cause for hope among brokers who agree the office stock is obsolete or near-obsolete and unattractive to businesses looking to expand or relocate and attract young professionals.
Glenn Walsh, senior director at Cushman & Wakefield Inc., said he doesn”™t expect to see youth-led technology companies such as Facebook and Google enter the county. “Young people don”™t want to live here,” he said. “You can”™t make us something we”™re not.”
In 2012, “I think you”™re going to see a lot (of) what you just saw in 2011, which was a lot better than what we saw in 2010,” said Walsh. “Basically what we”™re doing is shuffling deck chairs around” with office tenants moving within the county. “It”™s been tough.” Westchester has had four years of negative absorption of available office space, he noted.
Repurposing properties is “the only way” to get rid of Westchester”™s aging office inventory, said Paul Adler, executive vice president at Rand Commercial Services.
Adler in 2011 was co-broker on a $3.9-million deal for a vacant 80,000-square-foot office-warehouse in Ardsley whose new owners plan to redevelop the building as a sports center. That deal follows the purchase of the 22-acre 1 Gannett Drive property in Harrison by Life Time Fitness Inc., which plans to raze the 232,000-square-foot Journal News plant and replace it with a 209,000-square-foot family recreational and fitness center in an approximately $45-million project.
“Now we”™re looking at inventories, repurposed ones, that are going to dramatically change the market,” Adler said.
”˜A more attractive market”™
William V. Cuddy Jr., executive vice president at CB Richard Ellis Inc., said the amount of square footage leased in Westchester in 2011 was about one-half of the leasing velocity in a healthy market here before 2000. If the repurposing of class-A properties continues and if “B-grade” and “C-grade” office buildings are removed from the market, “I wouldn”™t be surprised if we”™re looking at a much healthier statistic at this time next year,” he said.
With office-space conversions to medical, recreational, retail and residential uses, “The net result is a healthier office market and a more attractive market” that will help draw corporate tenants from Manhattan, Cuddy said.
Cuddy in a separate recent interview with the Business Journal said 2012 will bring “some decent activity” for medium-sized office spaces of 25,000 to 30,000 square feet. Ten to 12 companies in that range are exploring the Westchester market, he said.
“We used to measure everything in square footage,” Cuddy said. “That”™s an important metric, but I think we really should be focusing on this diversity within our commercial stock.”
The market for multifamily buildings
John Barrett, head of the investment sales division at Admiral Real Estate Services Corp., said multifamily buildings near train stations “will do well” in the investment sales market in 2012. With continued low interest rates, good properties will be purchased at capitalization rates of 6 percent to 7 percent, he said.
Barrett said he expects to see more deals for bank-held multifamily buildings as loans made in 2007 and 2008 mature in 2012 and borrowers are unable to refinance. Already, “On a month-by-month basis, we see more properties coming on the market from banks,” he said.
