HOULIHAN LAWRENCE COMMERCIAL GROUP

Transcription

1 HOULIHAN LAWRENCE COMMERCIAL GROUP TH QUARTER

2 EXECUTIVE SUMMARY FOURTH QUARTER Dear Clients, With behind us and the new year in full swing, we can now reflect, summarize and gain insight from the past 12 months in Westchester commercial real estate. Manhattan s influence on our market has always loomed large, and that trend continues. Locally, commercial real estate is participating in a broader economic recovery, with the occupier market trying to keep pace with the investment market. Lack of investment product and low capitalization rates frustrated buyers during, but that may change in 2017, with expectations that higher interest rates may encourage potential sellers to become more active. This could lead to a robust trading environment and value creation for sellers. The Multifamily segment is persistently booming, with developers continuing to bring additional units to market. Town zoning regulations have become more accommodating to Transit Oriented Development (TOD), catalyzing a flow of capital towards projects in close proximity to public transportation. The challenge for 2017 will be to maintain a balance between supply and demand. Demonstrating a more subdued recovery is the office segment. The workspace is being re-defined, as companies look to give their employees the competitive amenities. Businesses are moving to existing urban centers, and traditional office space is giving way to more open suites. Westchester is participating in these trends, but the path of transformation is slow may see accelerated change in office-occupier markets as young businesses gather enough confidence to expand. The healthcare industry is also contributing to the recovery, but here too, demands from patients are re-shaping the space configurations seen previously, necessitating fresh investment. Change is nowhere more palpable than in the retail markets, where consumers, ever short on time, are forgoing the brick-and-mortar experience in favor of online alternatives. Malls and shopping centers are increasingly being redefined as a new home for service and entertainment providers. Retail markets nevertheless ended with a renewed momentum that we expect will continue into The industrial markets have been very active, also re-shaping to better participate in changing supply chains and direct delivery of merchandise to consumers. This is leading to investment in larger, more efficient warehouses and the adaptive reuse of obsolete designs for new purposes. We expect these trends to remain in place during this year. Houlihan Lawrence Commercial Group expects a bright 2017, and we look forward to expanding our presence across commercial real estate markets. With the backing of HomeServices of America, we now have resources like never before to accelerate our growth trajectory. Whether you need a professional opinion, market research or transaction execution, connect with us today at any step of the process we re here to guide you throughout. THE COMMERCIAL MARKET REPORT IS PREPARED BY Teresa Marziano, Real Estate Salesperson Houlihan Lawrence Commercial Group 800 Westchester Ave., Suite 402-S Rye Brook, NY 10573

3 WESTCHESTER S REAL ESTATE MARKET SUPPORTED BY IMPROVED EMPLOYMENT WESTCHESTER COUNTY EMPLOYMENT STATISTICS NOT SEASONALLY ADJUSTED Westchester s unemployment is hovering around 4% and construction activity has rebounded, underscoring increased confidence in the County s economic backdrop and regional real estate markets. 10 UNEMPLOYMENT RATE IN WESTCHESTER COUNTY, NY 8 PERCENT YEAR ALL EMPLOYEES: CONSTRUCTION: SPECIALITY TRADE CONTRACTORS IN ORANGE-ROCKLAND-WESTCHESTER-NY 30 THOUSANDS OF PERSONS YEAR Sources: US. Bureau of Labor Statistics, Unemployment Rate in Westchester County, NY. All data retrieved from FRED, Federal Reserve Bank of St. Louis; January 2017 and COSTAR.

4 STRENGTH PERSISTS IN WESTCHESTER MULTIFAMILY Multifamily fundamentals in most of Westchester are healthy. The strongest markets- most coveted by households and investors- are those that offer easy access to urban amenities and transportation to NYC. Construction pipeline is at 3.7% of stock, the highest level over the last several years. This reflects developer confidence in the economy and a propensity of new households to rent. For the time being, a modest drop in occupancy does not appear to have affected Landlord s pricing power. EFFECTIVE RENTS MAINTAIN STRONG LEVELS Effective Rent Per Unit Occupancy Percentage $1, EFFECTIVE RENT PER UNIT $1,890 $1,830 $1,770 $1, OCCUPANCY PERCENTAGE $1, CONSTRUCTION PIPELINE REFLECTS DEVELOPER OPTIMISM Under Construction Buildings Under Construction % of Stock UNDER CONSTRUCTION BUILDINGS UNDER CONSTRUCTION % OF STOCK Sources: US Bureau of Labor Statistics, Data Reflects Fundamentals for Westchester County Area South of I-287 and COSTAR.

5 WESTCHESTER OFFICE MARKETS STRENGTH EBBS IN Q Office markets in Southern Westchester are healthier but the pace of improvement is modest. enjoyed positive net absorption however was weaker than in leasing activity. showed softer apparent demand, but rents remained stable. Two of the main Class A markets in the County showed a markedly different behavior, underscoring regional differences: the East I-287 Corridor experienced positive absorption while the White Plains CBD lost occupancy. WESTCHESTER OFFICES Occupancy Percentage Office Base Rent Direct 90.0 $27.5 OCCUPANCY PERCENTAGE $26.7 $25.9 $25.1 $24.3 OFFICE BASE RENT DIRECT 84.0 $23.5 NET ABSORPTION OF SF TOTAL 350,000 Net Absorption SF Total NET ABSORPTION SF TOTAL 300, , , , ,000 50, , , , ,000 Sources: COSTAR, US Bureau of Labor Statistics, Data Reflects Fundamentals for Westchester County Area South of I-287

6 WESTCHESTER INDUSTRIAL ASSETS Positive net absorption for five consecutive quarters and better rental rates are evidence that the industrial segment continues to participate in the overall real estate recovery. Deliveries of newly constructed space, North and South of I-287 have contributed to roughly a 1% decline is occupancy from. For the year, most meaningful new construction delivery South of I-287 was the FEDEX Distribution Center in Yonkers, now 100% occupied. STABLE OCCUPANCY AND BETTER PRICING AS MARKET ABSORPTION IMPROVES Occupancy Percentage All Service Type Rent Overall OCCUPANCY PERCENTAGE $13.0 $12.2 $11.4 $10.6 $9.8 ALL SERVICE TYPE RENT OVERALL 92.5 $9.0 MULTIPLE QUARTERS OF POSITIVE NET ABSORPTION 150,000 Net Absorption SF Total NET ABSORPTION SF TOTAL 100,000 50, , , , , ,000 Sources: COSTAR, US Bureau of Labor Statistics, Data Reflects Fundamentals for Westchester County Area South of I-287

7 STRENGTH BUILDS FOR WESTCHESTER RETAIL ASSETS Retail properties ended with strong performance. In fact, after negative absorption during three consecutive quarters, a rebound of leasing resulted in higher occupancy by year-end. Going forward, absorption of new retail space, some of which is coming on the ground floor of multifamily developments, will require fresh concepts that can attract customers and support higher rental rates. LANDLORDS SOUGHT TO FILL VACANCIES AND ACCEPTED SLIGHTLY LOWER RENTS IN Q Occupancy Percentage All Service Type Rent Overall OCCUPANCY PERCENTAGE $30 $29 $28 $27 $26 ALL SERVICE TYPE RENT OVERALL 93.8 $25 SECOND HALF OF SHOWED STRONG LEASING ACTIVITY NET ABSORPTION SF TOTAL 150, ,000 90,000 60,000 30, ,000-60,000-90,000 Net Absorption SF Total Leasing Activity Deals Total LEASING ACTIVITY DEALS TOTAL Sources: COSTAR, US Bureau of Labor Statistics, Data Reflects Fundamentals for Westchester County Area South of I-287

8 HEALTHIER INVESTMENT SALES ACTIVITY DURING Q Investment sales closing in,, exceeded the US$ 1.5 Billion mark, a level last attained in the first quarter of the year. Median price per square foot continues to be over $150/foot, reflecting scarcity of investment product, better prospects for rental income across asset classes and higher replacement costs. INVESTMENT SALES TRANSACTIONS RECOVER Dollar Volume (in millions) Median Price Per Building SF DOLLAR VOLUME (IN MILLIONS) $3,000 $2,500 $2,000 $1,500 $1,000 $500 $180 $162 $144 $126 $108 $90 $72 $54 $36 $18 MEDIAN PRICE PER BUILDING SF Sources: COSTAR, US Bureau of Labor Statistics, Data Reflects Fundamentals for Westchester County Area South of I-287