Businesses have focused on returning workers to office spaces and refilling cubicles over the last year. However, with more than a quarter of office space in Westchester still vacant, the commercial real estate market is in a tough spot.
Still reeling from the pandemicʼs aftereffects, many of the regionʼs largest office and business spaces have yet to find tenants.
“Things are trickling back to normal, but theyʼre nowhere near where they need to be for these office spaces to be viable,” says Garry Klein, the director of Commercial Real State and associate broker at Houlihan Lawrence — a Westchester-based firm — of the current economy.
Office spaces are becoming less and less popular, and some developers are pivoting and changing their focus from traditional workspaces to options with easier upkeep, like storage space.
Klein says residential properties are becoming increasingly popular.
“In our region, weʼre terribly underhoused. We just donʼt have enough product[s] for the demand,” he says. “After COVID, many wanted to move into the suburbs and couldnʼt afford to purchase, but did have the means to rent.”
Some multifamily properties that are proceeding with development despite the higher interest rates are betting on the continued interest in settling down in the suburbs of Westchester and migrating away from New York City.
“In our region, we’re terribly underhoused. We just don’t have enough product[s] for the demand.”
— Garry Klein, Houlihan Lawrence
John Barrett, the senior vice president and managing director of investment sales at RM Friedland, a commercial real estate agency in Harrison, says that thereʼs a huge boom coming in residential development.
“In the last two years, weʼve seen the completion of 6,500 multifamily housing units,” says Barrett, whose firm tracks the development and proposals of new buildings in Westchester.
“Right now, weʼre tracking another 11,000 units [for the next two years] — and roughly 17,100 more units are being proposed for Westchester County — in various stages, from making the announcement to approval and shovel-in-the-ground.”
The demand for this type of development comes from New York City transplants, younger families and workers moving out from their parentsʼ homes, and even people looking to downsize from their four-bedroom homes to find more “walkable” lifestyles in their retirement.
Barrett added that the need for the new development of “A” spaces, or office space better located and equipped with amenities, could be a key reason for the current vacancies.
“An ʼAʼ location is somewhere where the workers can go out and have choices at lunch instead of the office cafeteria; itʼs located in a place where they can do shopping so that they donʼt have to make an extra stop on the way home from work,” he says.
“There hasnʼt been any new office product built in [Westchester] in the last 30 years. The buildings built in the ʼ70s and ʼ80s were built because either the companyʼs CFO or CEO wanted their office building to be close to where they lived.”
“Now, weʼre not building for the CFO or CEO. Weʼre building for the employees,” Barrett adds. “Businesses are having difficulty getting them back — some landlords are redoing their lobbies; you might have a unisex haircutting spot, and one building Iʼm aware of has a golf simulator built in.”
These niche amenities could be a start for getting people more enthused about working in the office. However, should office vacancies remain, the options for pivoting and converting spaces are limited.
Office buildings arenʼt easily converted to apartments or warehouses for many reasons beyond plumbing and electrical wiring. Cubicles canʼt easily be sectioned off into apartments because of the lack of natural light in office buildings, which means empty office spaces may face demolition in the face of a multifamily boom in the market.
Barrett says one 100,000-sq-ft space in White Plains is successfully converting its rectangular building — formerly a mix of office space and ground-floor restaurants — into apartments after cutting out a section in the middle and forming more of a “U” shape.
This type of conversion isnʼt typically the norm, given that office buildings for companies and large corporations tend to be built as squares. The typical square-shaped office building canʼt easily be cut into the middle to allow for natural light to come in.
“If youʼve got a rectangular property or properties shaped in ʼwings,ʼ” Barrett says, “these shapes usually lend themselves to conversions. If they donʼt lend themselves to conversion, they will either be repurposed or knocked down.”
The future of Westchesterʼs currently vacated office space is still being determined. Much of Westchesterʼs outdated office spaces are “B” and “C” properties — lacking the amenities and proper location — landlords may soon be faced with repurposing or knocking them down entirely.
About 1,250 miles south of Westchester, in West Palm Beach, the realty behemoth Related is building out what some might consider “luxury office spaces,” equipped with courtyards, terraces, rooftop decks, breweries, and other extravagant amenities that might make office life more appealing.
“An ‘A’ location is somewhere where the workers can go out and have choices at lunch instead of the office cafeteria; it’s located in a place where they can do shopping so that they don’t have to make an extra stop on the way home from work.”
— John Barrett, RM Friedland
Klein notes that this style of innovation could get people back into the office but still thinks that the development scene in Westchester — both in downtown White Plains and suburbia — may still be hesitant to innovate because of vacancies.
“Even some of the bigger landlords might not gut-renovate their office buildings [right away],” Klein says, “but in the next three to five years, we may start to see some of that reinvention of the office building.”
Right now, the stop-gap measures for most office building renovations are limited to rebuilding cafeterias and lobbies and adding atriums. Even if the current market isnʼt ripe for brand-new office properties, developers like Barrett see eliminating lower-tier office spaces opening up more opportunities.
“In five to 10 years, there will be no ʼBʼ or ʼCʼ properties anywhere in Westchester,” he said.
Regardless of how often workers in Westchester are in the office, anyone residing in the area can expect a plethora of new living spaces and a higher-quality work life in the near future.
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