Westchester’s Commercial Real Estate Market Still Recovering

WESTCHESTER COUNTY, NY — Much of Westchester's commercial real estate market showed strength for the first time in nearly a year, with the exception of the retail market segment, which continues to struggle, according to the Houlihan Lawrence Second Quarter Commercial Market Report.

In particular, industrial and flex properties are in high demand. Migration to e-commerce and consumer preference for short delivery times drove the market, the report said. Plus there's a new phenomenon:

"In addition to e-commerce, industrial buildings are now becoming popular locations for 'ghost kitchens' which are commercial kitchens optimized for food delivery. Each kitchen is located in areas with a high concentration of delivery demand. The kitchens themselves don't have a storefront and the staff prepares dishes off their menus that are only available for delivery."

Meanwhile, the retail sector continued to struggle with weak leasing activity.

"The restaurant industry, which is extremely important for retail occupancy, has not yet recovered, and other service industries, historically important for retail occupancy such as fitness related businesses, are still struggling," the report said. "However, the restaurant business is beginning to adapt to the COVID-19 environment. Especially with the dramatic growth in takeout service. As a result, we are seeing 'second generation' restaurants that can do more business with a smaller footprint especially if there is an outdoor area."

After three consecutive quarters of losing tenants, there has been a reversal in the office market led by a large deal in sub-let space, the report said. Lease pricing rebounded slightly.

Also, a notable step-up in asking rents highlighted the fundamental strength of the multi-family housing segment of the market, the report said. Pricing and occupancy remained strong and on the upswing.

"This underscores the attractiveness of Westchester County for newly formed households and those seeking lower-density environments with great access to infrastructure and services," the report said.