Westchester's commercial real estate faces a slow summer

Westchester County leasing velocity was down about 11% in the first quarter, and it is anticipated that it will fall further behind last year’s pace in the second quarter.

The trends in our market are, by and large, in synchronization with the national statistics. Vacancy rates are rising, as are availability rates (which includes leased space that is on the market for sublease). The county’s repurposing of approximately 7 million square feet of office space into other uses (which includes adaptive reuse of existing office buildings for residential apartments or medical space as well as demolition of obsolete office buildings to build other types of product on their sites) has not and cannot keep up with the pace of slowing demand for office space due to remote and hybrid work.

“Without a doubt, the pandemic prompted seismic shifts in occupancy rates and the types of spaces tenants seek,” said Karolina Alexandre, research manager for global real estate brokerage Newmark. “Landlords are not only competing with the building across the street, but also with a lingering remote work model. As a result, the flight-to-quality trend has only intensified, as firms seek to modernize their offices with superior amenities and overall quality in an effort to retain their workforce.”

“Thus,” Alexandre added, “much of the commodity lower-quality space will continue to muddle along. But the drop in leasing velocity in Westchester is also in large part due to an ever-shrinking inventory base, following a vast number of building conversions.”

We are also at the front end of some economic issues in our market as well that will further slow the pace of transactions.

Two buildings in Tarrytown (560 and 580 White Plains Road.) have recently gone into receivership, which will very likely restrict their ability to transact new lease deals. The ownership of 303 S. Broadway in Tarrytown has been trying to get a zoning change to allow it to demolish the existing office building and construct rental apartments on that site. So, this building has essentially removed itself from the leasing market by choice.

In the East-287 submarket, a large office portfolio is being extremely cautious