Real Estate Weekly
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Westchester market update

By Marion Jones, Managing Director, JLL’s Capital Markets group

Although there is quite a bit of uncertainty in the capital markets currently, three key themes are emerging for the Westchester market as we approach the second half of 2023.

1.      Resiliency in both volume and pricing

2022 wrapped up as the best year since pre-COVID days, seeing $2.75 billion in transaction volume compared to $3.31 billion in 2019. This recovery was particularly strong in the multi-housing sector where sales volume in 2022 reached $1.1 billion, a 41% increase from the pre-COVID 2019 multifamily volume.  Nearly half of that volume is attributable to two large transactions, including 500 Town Green Drive in Elmsford, NY for $306 million (or $496,000 per unit) and Halstead Station at 255 Huguenot Street in New Rochelle for $200 million (or $490,000 per unit).

Given the challenges in the lending environment, Q1 2023 overall transaction volume was down from Q1 2022 by 59%. The retail sector demonstrated the only uptick in Q1 transactional volume, an increase from $114 million over six transactions to $147 million across seven transactions when compared to Q1 of 2022.

Despite there being fewer transactions to gauge market pricing, recent Westchester deal pricing has remained relatively stable and resilient when compared to 2019 pre-COVID pricing per-square-foot. Industrial pricing in the first quarter of this year, averaging $138 per square foot, actually increased 42% from 97% for the same time period in 2019. Multi-housing pricing, averaging $374,000 per unit in Q1 2023 has been especially buoyed by strong demand, experiencing a 26% jump from the same period in 2019. This is due largely to the pre-Covid development trend of transit orient development, which remains buoyed post-pandemic by lasting tenant demand.

2.      Limited distress

Despite challenging macro-economic conditions nationally and globally, there are very few outward signs of distress presently in the Westchester market. According to Trepp, there are approximately 20 buildings or building complexes on the CMBS watch list, however there are zero non-performing loans. The majority of the underperformance is limited to the office sector as other sectors continue to post strong returns. Balance sheet lenders have been more flexible and thus there have only been a handful of buildings that have gone back to the lender and are limited to small loans of under $15 million.

3.      Higher velocity in medical demand

Over the last three years, the Westchester office market has been undergoing a transformation and capturing strong medical demand. From March 2020 to March 2023, leasing velocity from the healthcare sector encompassed roughly 23% of total volume in Westchester County. This trails only financial services, which sits at 34%. According to JLL’s 2023 Healthcare Investor Survey and Trends Outlook, healthcare fundamentals remain strong with resilient occupancy and steady rent and NOI growth, only fueling the demand within Westchester County further. A select number of hospital systems have requirements greater than 25,000 SF while there is also significant demand among users seeking +/- 5,000 SF.

Conclusion – While transactional volume was down in Q1 2023, the Westchester County market has shown an enviable resilience over time, as well as the ability to adapt to, and benefit from, evolving trends on the demand side – from transit oriented multifamily developments to burgeoning medical demand.

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