While the summer months typically see a decrease in Westchester commercial leasing activity, the investment sales market continues full steam ahead. Over the past month, Northeast PCG has been hired exclusively to market five multifamily and mixed use properties in New Rochelle, Mount Vernon and Yonkers. The properties range from nine units to 39 units, and investor interest has been strong despite the steamy temperatures.
Lower Westchester mixed-use and multifamily is typically trading at pricing of 7x gross rent multiple and/or 7% cap rate on current Net Operating Income. That said, we’ve seen larger multifamily properties (i.e. 50+ units) in better locations pushing 6% cap pricing over the past few months as buyers from Manhattan and the Boroughs are priced out of the more competitive New York City submarkets.
While investment sales brokers work through the summer holidays, leasing agents are more often phoning it in from the beach. According to several recent articles in the Westchester County Business Journal, leasing velocity is down and absorption is slow. That said, there have been a number of developments over the past few months that are causing us to take a more optimistic viewpoint as we look ahead to the fall season and the end of the year.
The brightest spot is the number of new hospital affiliations that are developing because practically every local hospital is aligning itself with a major New York City hospital. This will increase the number of medical offices and will also spur growth in the office and retail markets.
Regarding the office market, Westchester has seen some major tenant moves, but with few new companies coming into the county growth is stagnant. Looking more closely, the western part of the county nearer to the Hudson River has been more active, particularly the Tarrytown/Route 119 corridor, with new tenants in the 15,000-20,000 square foot range.
The biggest recent news was the five building, 600,000 square foot sale by Mack-Cali — a major Westchester County building owner for decades — to Pennsylvania-based Keystone Property Trust. It will be interesting to see how their first investment in Westchester plays out in terms of capital improvements and lease terms.
At the same time, county office space has once again been affected by existing tenants moving from one building to another within the county. For example, the county’s largest law firm vacated more than 75% of its space at 3 Westchester Park Drive and moved to 1133 Westchester Avenue a year ago. With all of these lateral moves, real estate owners are accessing the necessity to spend time and resources to make any of their newly vacated spaces attractive to other potential tenants.
Looking at the eastern side of the county, the vast redevelopment of the Echo Bay waterfront in New Rochelle has been recently resurrected with the choice of a new developer. The new plan focuses on two city-owned properties in a project that could encompass 930,000 square feet of residential space and 130,000 square feet of retail space on a site that could be as large as 26 acres. Redevelopment of this area has faced great neighborhood resistance so stay tuned for the development timeline.
With offices in New York, Connecticut, Massachusetts and Rhode Island, our investment sales teams are well positioned to support commercial real estate investors looking at opportunities in Westchester and across the region. If you’re a property owner or an investor in the mid-market segment and want to discuss this blog or your investment goals and how we can help you achieve them, please give us a call.