Panel: Office market strong
By JOHN GOLDEN

Despite a capital markets crisis brought on by the subprime mortgage fiasco and an uncertain economic outlook, the county’s real estate market shows more strengths than weaknesses going into 2008, in the view of most panelists at the RealShare Westchester County Conference last week in White Plains.

Presented by Real Estate Media, the third annual conference brought together brokers, developers, building owners and managers, and investors to assess the state of the county market in a series of panel discussions. Keynote speaker James Houlihan, partner in Houlihan-Parnes/iCap Realty Advisors L.L.C., who traced the impact on commercial real estate of the “crisis of confidence” that sprang from the “excesses” of subprime mortgage lending “based on nothing,” offered this advice to market colleagues: “Remember, greed is not always good.”

Yet Houlihan and other real estate professionals described a Westchester office market in which occupancy rates and tenant demand are strong and rents have risen, especially for improved class-A buildings with easy access to Metro-North trains, though Westchester rents remain a “discount” compared to Manhattan lease rates.

Jeff Warner, vice president for leasing at Mack-Cali Realty Corp., which owns 5 million square feet of office and mixed-use space in the county, said his company’s properties had a 96.7 percent occupancy rate at the end of the third quarter. “We see the demand continuing” in the fourth quarter, though perhaps not as strongly as in the first half of the year before the credit crisis peaked, he said.

Joseph Caruso, senior vice president at RexCorp Realty, said the company this quarter will lease about 120,000 square feet in its Platinum Mile portfolio on the I-287 corridor. About 40 percent of those signed or pending leases are new deals, and Manhattan companies make up from 5 percent to 10 percent of those new tenants. Many renewing tenants are expanding their office space, Caruso said.

Several panelists agreed with Caruso that downtown White Plains “is driving the numbers” on rent growth. While rent increases are in the 3 percent to 4 percent range on Westchester Avenue, rent hikes in downtown office buildings range from 10 percent to 13 percent, he said. That disparity has some downtown tenants looking to move to suburban White Plains, Caruso said.

Joseph Simone, president of Simone Development Co. L.L.C., said transportation is one weakness in what is otherwise a “great” county market that benefits from its proximity to Manhattan and the city’s thriving economy and culture. “That’s what I think people worry about,” he said. “Transportation is important, which is why downtown White Plains is so hot right now.”

For commercial tenants, “I think the needs have changed,” Simone said. An aging population is creating a need for more medical office space. Tenants’ concern for amenities has made older office parks less desirable, he said. And a new breed of “boutique” companies requires less office space than the large corporations that rented large blocks of Westchester buildings in the past, he said.

“We’re fulfilling a need,’ he reminded market colleagues. “We’re not trying to change the need. Let’s just understand the need.”

Despite the credit squeeze, Simone said, “Right now there has been an enormous amount of money chasing real estate” in Westchester. “I think that’s going to calm down a little bit.” Yet, “There’s so much money out there. People are really looking to buy things.”

Foreign investment in commercial real estate likely will continue to decline in the current economic climate, experts agreed, despite the strength of the euro against the dollar.

“European money has gotten vey jumpy about the States” and is looking instead to investments in China, Singapore and Indonesia, said Frank Kenny, CEO of Willett Cos. L.L.C.

Investors worry about a possible recession, the nation’s trade imbalance and the Bush administration, said the native of Ireland.

“There’s definitely a sense that America currently doesn’t really have its act together both in a competitive sense and an economic sense, that it’s kind of wandering,” Kenny said.

 

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