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than $25 in many places. The market is finding it difficult to generate higher rents, however. “A lot of people who were locked into $35 to $40 [per square foot] space from before the recession are planning to move to space in the mid-$20s,” according to Paul Adler Esq, regional manager for Rand Commercial, who is located in the broker’s White Plains office. “The go-go days are over.”
Corporate trends that favor smaller workforces sup- ported by digital technology work against large buildings designed originally as headquarters for single tenants. “We have very few prospects looking for a 100,000-square- foot building,” Rakow points out.
The most successful office complexes in the county are those that have been reconfigured from single-tenant to multi-tenant buildings, to accommodate the new normal. Robert P. Weisz, CEO of RPW Group in Rye Brook, one of the county’s largest developers, followed up the conver- sion of 800 Westchester Avenue with another makeover at 1133 Westchester Avenue, setting the pattern for the I-287 corridor. Stamford developer Steven Wise is working on a similar project at the former MBIA headquarters, at 113 King Street in Armonk, which he purchased in 2015.
Also contributing to a brightening of the picture is the repurposing trend. “Some of the properties that are ripe for repurposing are on Corporate Park Drive off Westchester
Medical
p
though. As LaPerch points out, “The consolidation, cost-cutting, and
new medical center buildings leave behind a trail of small abandoned medical offices that don’t often
lend themselves to other uses. I just received a listing in Mahopac, where a small practice was gobbled up by one of the bigger ones, leaving behind a chopped-up 2,500-square-foot medical space.” He adds that when those small spaces are repurposed for regular offices, they rent for at least 20 percent less than they did when they were medical offices.
As exciting as it is, the medical space segment accounts for less than 3.5 million square feet in Westchester.
Simone Healthcare Development plans to build one final building at The Purchase Professional Park in 2016.
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Developers like Robert Weisz of RPW Group are converting spaces for multi-tenant use.
HOT METER: 7
The most active sector in Westchester commercial real estate over the last several years has been medical space, with sweeping changes in the industry driving demand for both new construction and repurposing of existing office space. The prospects for 2016
are generally good, according to Guy Leibler, president of Simone Healthcare Development, a developer headquartered in the Bronx, although the demand may come from different directions as the wave of consolidation of county hospitals into NY metro institutions runs its course.
“I don’t see a lot of big medical office building projects in the near future, but I see a lot of small to midsize ambulatory projects in
the 10,000 to 50,000 square-foot range,” Leibler explains. “Now it’s time to develop ambulatory care throughout the county. It’s been rather dormant the last few years because there wasn’t a real strategy, and there wasn’t capital to execute.” Liebler points to projects like White Plains Hospital’s new ambulatory center in Armonk, and forthcoming initiatives by Mount Kisco Medical Group [now CareMount Medical], WESTMED, and Crystal Run Healthcare. Plus, the Hospital for Special Surgery recently leased 50,000 square feet in White Plains for an outpatient center. “It’s going to be an exciting year,” Leibler says.
Hoping to capitalize on the continuing trend, Simone recently
filed with the town of Harrison to build one final building at Purchase Professional Park, where WESTMED opened last year, at 3030 Westchester Avenue. “We hope to gain approval for 3040 Westchester Avenue, a 46,000-square-foot medical office building with a parking structure,” Leibler says. Simone does not have a tenant for the new building at this point. “The approval process takes about five months, then we will go to market,” Leibler explains.
The growth in the medical sector can be a mixed blessing,
MARKET SECTOR SNAPSHOT
Avenue, for example,” says Rakow. If you come back in a few years, you’ll see housing, retail, some senior assisted living. There are going to be very different uses for those properties.” The town of Harrison is considering creation of a mixed-use zone in that area that would encourage redevelopment of the all-but-abandoned buildings. It’s an option under consideration in other towns, too, often falling under the “mixed-use” rubric.
While office rents are lagging, the building investment market is heating up, according to Adler. “It was a solid market in 2015. People went from off of the sidelines to back in the game,” he says. “The single most important factor was that buyers and sellers have reached equilibrium after having a
buyers’ market for the last six or seven years.”
In response, several major properties on the market are drawing strong interest. According to CBRE VP Mike McCall, these include the 700 series on Westchester Ave, 44 South Broadway in White Plains, and 100 Manhattanville Road in Purchase. “When new owners come into the market, that generally means rents are going to increase because the investors bought the buildings looking for
growth,” he says.
Tom LaPerch, director and associate broker at Houlihan
Lawrence Commercial in Rye Brook, believes this bodes well for the coming year. “I am optimistic that the market is coming back. There is a pent-up demand for new product.”
MARKET SECTOR SNAPSHOT
Category
Medical
Total Square Feet
3,488,834
Vacancy Rate (%)
12.0
Category
Office - Class A Office - Class B
Total Square Feet
22,916,015 15,571,411
Vacancy Rate (%)
18.7 14.4
Market Sector Snapshots Source: 2015 CoStar data supplied by Houlihan Lawrence Commercial Real Estate Group
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