About halfway through last year, the New York City real estate market’s rocket ship-like trajectory started to tail off, and nearly halfway into 2017, it continues to look as if the market is coming back to earth. The same cannot be said about its suburbs to the north.
“Historically, every time we see a boom in NYC, when that boom starts to slow down, Westchester takes off, and that’s what we see now,” said RPW Group CEO Robert Weisz, who has developed more than 3M SF of commercial space in the county over the last few decades. “Westchester is in the midst of a resurgence. The office market in the last 18 months has been much more dynamic.”
With more than 5,000 new residential units in the pipeline or under construction in Westchester, it is becoming a place that is far more appealing for young professionals, and companies are willing to move to try to recruit them. But the multifamily market is far from millennial-driven.
Westchester’s property taxes are luring more baby boomers into the urban renting trend. And in a county that has long been criticized for being segregated, the trend of more mixed-use developments near transit has planners cheering for more.
“Most of the large rentals being built in this area do double duty as places for young folks and places for over 49,” Spinnaker Real Estate Partners CEO Clay Fowler said. “The urge to live in urban-style places is very strong … it’s something that’s going continue for a long, long time.”
While rents in Manhattan are coming down, and concessions are going up, to try to keep cost-conscious tenants in luxury city buildings, the city still cannot compete with the suburbs’ value proposition.
And while Penn Station might be a catastrophe this summer and beyond, making the commutes from New Jersey and Long Island painful for millions of workers, the Metro-North system into Grand Central that services the city’s northern suburbs is not nearly as plagued with problems.
“Westchester is probably the lowest-cost alternative, per square foot, of any other region in the Tri-State, and has probably the best transportation system outside of New York City,” Weisz said.
Manhattan investment sales were down 51% year-over-year in the first quarter of 2017, HFF Senior Managing Director Jose Cruz said, but the New York Tri-State as a region is up 42% year-over-year so far. Landlords in the city are stuck waiting for demand to absorb supply, but the suburbs are doing the opposite.
“I didn’t see this coming, we expected the multifamily market to slow down in 2017,” Cruz said. “Our thought for ’17 was a slight slowdown, and that has not happened. All I see is it’s getting maybe more crowded.”
While Fowler said the market could be “running on fumes,” he also said he is confident that developers picking the right locations to build multifamily should feel comfortable that demand will be there, even if construction lending is not at the moment.
“The high-end commuter towns, anything you put up is going to work,” he said. “Norwalk’s on fire. New Haven has its own little cluster of development. I really believe New Haven is the next place.”