On the Ground in Westchester and Fairfield with John Barnes
The Commercial Observer: Fill me in on how the market is doing in Westchester:
John Barnes, Reckson senior vice-president: Well, we’re starting to see some movement in the Westchester market in a positive direction. One of the indicators for Westchester County is the White Plains CBD; and we’re starting to see the occupancy numbers tighten up a little bit. I believe it’s down about a point in vacancy-third quarter last year was at about 17.5 percent, and now it’s down to about 16.5 percent.
So as the White Plains CBD starts to tighten up, that’s a good indicator for us that you’re going to start to see some movement in the rest of the market. So we’re starting to feel good about the signs.
Has it been a slow recovery compared to New York or the rest of the country?
I wouldn’t compare it to what’s happening in the rest of New York. What I would say is that we typically lag New York. And under normal circumstances it’s anywhere from 12 to 18 months behind New York City. But we are seeing some good activity. In our downtown White Plains portfolio we’ve seen very good activity-particularly at our flagship at 360 Hamilton Avenue.
When did you first begin to see leasing tighten up?
It’s beginning to tighten up. It’s still not where it needs to be. But our first indication was at 360 Hamilton Avenue, and that would have been midway through last year, or toward the end of last year, during the third and fourth quarters of last year.
What are the average rents in Westchester?
The average rent for the end of last year is somewhere around $29. I mean, it’s the mid- to high-20s. But there’s a lot of factors that go into that.
Describe the tenants who are looking for space in Westchester right now?
We’ve not seen a lot of new introductions to the Westchester County market yet, although there was some good news in that we did see [the hummus company] Sabra take some space here in Westchester County. That was a new introduction.
But those are few and far between. We do see a little more activity, which means tenants are actually making some of those decisions, but you’re still seeing some of the average sizes in the 6,000- to 7,000- square-foot range, and they’re moving around within the county.
In better times do you see more new introductions, or is it always the same players?
We’ll know that there are better times when we start to see some of those new introductions. That’s a real good indicator to watch for us.
What are you hearing from tenants right now? What are their concerns, and why are they returning to the market right now?
Well, strength of ownership is definitely a concern, from what they’ve seen over the last three or four years in regard to what has happened to some very prominent landlords in and around the area. So strength of ownership is a concern of theirs.
Their own business uncertainty is a big concern of theirs, which means they want some flexibility in any new deal that they cut.
And up until now, a lot of them over the last two years-the ones that were able to make longer-term decisions-were taking advantage of the market. It was clearly a tenants’ market at that time.
Are people leaving Westchester?
There’s obviously one very prominent tenant that’s leaving Westchester County, and that’s Starwood Capital. That’s obviously a big hit to the county. They weren’t my client so I prefer not to comment on their move.
You also cover Fairfield County? Is the situation in Connecticut similar to what you’re seeing happening in Westchester County? Are they spitting images?
I wouldn’t say it’s a spitting image. It’s an interesting market in Fairfield. What I would speak to is more of the Stamford CBD, because that’s where our product is; I don’t have product outside of the Stamford CBD.
But the Fairfield market appears to have a little bit more activity, and it’s at a little bit better rate. It does have some interesting dynamics because if you look at the vacancy rate it’s a little bit higher than Westchester County. I think it’s north of 22 percent in that market for Class A buildings, but that’s also skewed a little bit by the old Lehman building-the old headquarters building-will be coming back on line pretty soon. And that’s now completely vacant, and that’s more than half a million square feet of empty product being thrown into that mix.
So that number is skewed a little bit. But the activity level there seems to be getting stronger.
With regard to concessions that landlords are offering, have you seen them dissipate or are they still as widespread as they seem to be in New York City?
We’re starting to see that tighten up. Through the end of last year, we started seeing some of the concession packages tighten up.
Finally, how do you market these two areas, especially right now?
Well, I think that, honestly, the strong suits for these two markets are the intellectual capital-the workforce here is a highly educated workforce. The roadway and infrastructure for both locations is tremendous. And to get in and out of the areas-and in White Plains, in particular-is just a 30-minute train ride into midtown Manhattan. And, of course, the roadway system here is very strong. But the intellectual capital here is really second to none. That’s how I would sell it.