Being priced out of NYC means being priced in to Westchester and Fairfield. Panelists at yesterday’s Bisnow Future of Westchester and Fairfield Counties event said expect slow-and-steady growth over the next few years and a continued influx of investors and developers to the areas north of the city.
While the New York Times has reported that the area is losing its Millennials to NYC, AvalonBay SVP of development Matthew Whalen is confident they’ll also return, he told the crowd of over 200 at the Stamford Marriott Hotel. (The fact that Teenage Mutant Ninja Turtles is a movie again proves that demographic has trouble letting go.)
“While they’re going to the city and staying longer, they’ll be priced out and will move back,” he said, kicking off our multifamily panel. The firm’s newly opened apartment community in Ossining has exceeded expectations and is filling fast, he says. AvalonBay is looking less at the distance to Manhattan and more toward what an area has to offer its residents—in this case, scenic Hudson River views and a strong amenity base.
Investors are taking notice, according to HFF senior managing director Jose Cruz. There’s a deep pool of both public and private money, including life insurance companies, pension funds, REITs, and foreigners, he says, citing the interest in Avalon on the Sound East New Rochelle, which The DSF Group snapped up for $210M in November. HFF marketed the community, which went for $357k/unit. Compare that to an apartment building in Manhattan going for $1.1M/unit, he says. But lack of available properties is a challenge.
There aren’t many opportunities to build rentals in Manhattan since it’s so expensive, reports LCOR SVP (and microphone southpaw) Jim Driscoll. That makes Westchester and Fairfield attractive. LCOR will be developing a $250M mixed-use residential project with approximately 550 units in White Plains, “only a 30-minute commute to NYC,” he says. (Not long enough for a True Detective episode. Those people should consider moving farther out.) He hopes the area becomes a success story like Stamford, and it’s already taking steps in reinventing itself.
Stamford is the first choice for many investors looking for apartments on this side of the Hudson, says CBRE vice chairman Jeff Dunne. Its 24/7 environment is capturing new development, and most of the residents are coming from outside of the area. Another opportunity for multifamily developers is Westchester’s older, underutilized office parks. “Repurposing them is the wave of the future and an easier path to approval,” he says. (Old filing cabinets can become a chest of bedroom drawers with very little imagination.)
Fairfield’s office market is at 20% vacant, reports CBRE EVP Tom Pajolek, who kicked off our office and retail panel. But it’s reducing dependency on the financial sector to make itself healthier, luring media and tech tenants. (As you know, its largest deal year-to-date is tech firm Datto’s 100k SF lease at Merritt 7 in Norwalk.) In Westchester, Tom’s colleagues William Cuddy Jr. and Budd Wiesenberg announced today that it sold two buildings totaling 410k SF and 97 acres at the Thornwood Conference Center on behalf of Legion of Christ to EF Academy International Boarding Schools, which is expanding from its main campus in Tarrytown.
Small biz leases of 5,000 SF to 10k SF are still driving most of the activity, reports Spinnaker Real Estate Partners chairman Clay Fowler. “And it’s a lot more lively than last year,” he says.
If you can enhance your asset, offer a better rent, create amenities, and harness sustainability, you can attract tenants—who in many instances are playing musical chairs in the market, says Caspi Development principal Joshua Caspi. That’s his firm’s focus at 120 Bloomingdale Rd in White Plains. (The building is Nestle’s former HQ, so we’d like to add Wonka-style chocolate hunt to the list of possible amenities.)
On the retail side, rents in Fairchester’s top markets are at the 2007 watermark, reports DLC Management Corp CEO Adam Ifshin, which means they can support new development. Despite the number of national names who’ve made a home here, “the area is still grossly under-stored,” he says. (You’re nobody unless you’ve got a Michael’s and a Michael Kors.)
While it’s hard to find potential acquisitions here, there’s an opportunity for operators like Regency Centers to partner with legacy owners and revive older assets, says the firm’s senior manager of Northeast acquisitions and dispositions Joanna Rotonde. Upgrades are needed to attract the new, exciting lifestyle retail coming into the area.
McGladrey Northeast construction and real estate leader Steve Kirn moderated both panels. He tells us sponsor McGladrey is the largest CPA firm in the US serving the middle market; he and other real estate pros are educating clients on implementing new IRS regulations related to property and equipment, as well as helping a public company convert to a REIT.