A panel of commercial office brokers voiced general optimism about the 2011 leasing market in Westchester County but said more financial incentives and public-private collaboration are needed to bring in new companies, keep current tenants and find new uses for vacant office space.
“You see extraordinary office product out there that is languishing,” said William V. Cuddy Jr., executive vice president in the Stamford, Conn., office of CB Richard Ellis Group Inc. In the current economy, “Now the crisis is so great that we put down our competitive gear to work more collaboratively,” he said. Cuddy serves on the recently formed Westchester County Association task force on economic development.
Joining him on the panel at the annual market outlook luncheon of the Westchester chapter of the Building Owners and Managers Association (BOMA) were John J. Barnes, senior vice president of the Reckson division of SL Green Realty Corp.; Brian Carcaterra, principal in the Greenwich, Conn., office of Newmark Knight Frank; Jeffrey H. Newman, executive vice president of Malkin Properties L.L.C., and Glenn Walsh, senior director in the Rye Brook office of Cushman & Wakefield Inc.
“You can”™t be the highest-taxed county in the country and expect to attract new business,” said Reckson”™s Barnes, when moderator Howard Greenberg asked panelists how new companies could be attracted to Westchester to absorb a surfeit of available office space. Newmark Knight Frank reported a 24.1 percent availability rate in the county”™s office market in the fourth quarter of 2010. CB Richard Ellis reported an end-of-year availability rate of nearly 17.7 percent, or approximately 5.5 million square feet, with about 220,000 square feet of space added to the market in the course of leasing activity last year.
A collaborative effort
Barnes said the administration of Westchester County Executive Robert P. Astorino is taking steps in the right direction by offering incentive packages to companies, as Connecticut has done successfully. “You need to have a public-private collaborative project here in order to get the word out” that Westchester is open to business, he said.
Cuddy noted the county”™s office-building ownership profile has changed from individual developers such as Lowell Schulman and Robert Weinberg to real estate investment trusts and corporate institutions such as SL Green Realty. “We need to reach out to the SL Greens,” he said. “We need to reach out to the Mack-Calis (Mack-Cali Realty Corp.). We need to bring them to the table.”
Division within the business community”™s ranks impedes the county”™s recovery opportunities, Cuddy suggested. Noting the county”™s other leading business membership group, The Business Council of Westchester, also recently formed its own business development coalition, he asked, “How dysfunctional are we that the Westchester County Association and the Business Council need to run separate economic development initiatives?”
Call for municipal support
Walsh said Cushman & Wakefield in 2010 “went to a prevent defense” in the stagnant office market and economy, focusing on tenant retention with blend-and-extend and reduced-space deals. “We didn”™t want to lose anybody,” he said.
But New York state might not be as able at retaining companies, said Walsh. “The problem the state has, we don”™t have the money to keep these companies in many situations,” he said. “We”™re fighting with our hands behind our back when Connecticut is offering $90 million and New York is offering $4 million.”
He was referring to a financial incentives package offered by Connecticut in the 2009 deal, brokered by Walsh and Cushman & Wakefield, that will send Starwood Hotels & Resorts Inc. and approximately 800 jobs from White Plains to new corporate headquarters in Stamford, Conn., in 2012.
Walsh said the market needs residential or mixed-use developers to take over some office properties in the county. Decisions must be made as to “which buildings are good and which are not. Keep the ones that are good and get rid of the ones that are not,” he said.
Cuddy said municipalities must share in the collaborative effort to develop new uses for surplus office properties. “In some respects, that”™s almost the biggest hurdle for us to get over, the support of the municipalities,” he said.
Optimistic about the market
Carcaterra, who leads the Newmark Knight Frank team leasing space at The Exchange office-park portfolio of Normandy Real Estate Partners, said he sees “some real growth for 2011” in leasing activity. At the Normandy properties in White Plains and Harrison, two-thirds of the approximately 180,000 square feet of leasing in 2010 “were new deals, which is encouraging to the portfolio and the market,” Carcaterra said.
Newman said about half of the 15 deals done by Malkin Properties at its two Westchester office buildings were new leases. “We”™re very bullish on what we saw in 2010,” he said. “It augurs very well in 2011.”
“I”™m not bullish” on the Westchester market, said Barnes, who expects the county to trail Stamford in recovery. “I”™m getting more optimistic as we go.”
Reckson”™s 450,000 square feet of leasing in 36 deals at its Westchester properties in 2010 added very little to its occupancy, Barnes said, as renewing companies such as Heineken USA Inc., the major tenant at 360 Hamilton Ave. in White Plains, also downsized their space. Yet Reckson did see “a fair amount of growth” among medium and small companies, he said.
“I think 2011 is going to be a great year,” said Cushman & Wakefield”™s Walsh. “All indications that we”™re hearing is that people know it”™s time to make a decision, otherwise you”™re going to miss the boat” on lower rents and tenant concessions.
