By John Jordan
WHITE PLAINS—At a broker roundtable discussion of the Hudson Gateway Association of Realtors’ Commercial Investment Division, Rand Commercial’s John Lavelle shared that Orange County’s industrial real estate market was strong in 2023 and is expected to remain that way this year.
“Quite frankly, business has been good the past few years. We have done very well, thankfully. Clearly far and away, the most active sector of the Orange County commercial real estate market is the industrial market.”
He continued, “In 2023 alone we had 3 million square feet of warehouse buildings under construction. That’s a really good year for us.”
Lavelle noted that of the 3 million square feet being built, a total of 2.4 million square feet are already leased or spoken for. While nationwide, approximately 25% of industrial space in development is pre-leased, Orange County’s rate is approximately 60%.
He said that industrial rents have “skyrocketed” in Orange County. Until recently, industrial rents in the county were stable at about $8 triple-net, per-square-foot. “We are now seeing very commonly rents in the $12 to $13 range and in 2023 I know of two warehouse transactions where the rent was $14-a-square-foot,” Lavelle said. “Our rents are appreciating, although we are not as expensive as the rest of the (regional) market, so there is still opportunity.”
Another sector of the industrial market that is experiencing price appreciation is the value of land. Lavelle informed the HGAR CID gathering that developable industrial land parcels were selling for some time at $10 a buildable foot. The last couple of years, land values rose to $20 a buildable foot and in some cases more than $30 a buildable foot. He related that two industrial land deals in Orange County last year netted $40 a buildable foot.
He noted that while in many markets of the country there is little industrial land available and intense competition for the available properties, Orange County is bucking that trend.
“In Orange County, New York right now there are over 14 million square feet of new industrial sites being engineered and approved,” Lavelle revealed. He added that the significant industrial pipeline in Orange County represents “the fact that there aren’t any other sites left. That is every piece of dirt we got.” He said that 14 million square feet of industrial space in the pipeline represents approximately 20 years of approved sites (based on the normal 500,000 square feet of annual absorption) in the county.
In his predictions for 2024, Lavelle related that the Orange County industrial market “will continue to crank.” He said he was aware of at least 2 million square feet of new deals that have not closed as yet that are in the pipeline in 2024, in addition to the new development under construction.
With the 14 million square feet of potential new product in the pipeline, Lavelle wonders whether some of the national industrial real estate investment firms and property flippers that own product or land in the county will have the “staying power to carry those sites until they are sold. And if they don’t there will be some really cheap opportunities in the market,” he related.
Lavelle concluded his remarks by saying he expects industrial rents to continue to rise and he hopes that land values will begin to stabilize in 2024 in Orange County.
HGAR’s Regional Power Broker 2024 CRE Market Forecast held on Jan. 24 at HGAR’s offices in White Plains was moderated by Bridget Gibbons, director of the Westchester County Office of Economic Development. In addition to Rand Commercial’s Lavelle, the panel included: Amit Doshi, Senior Executive Managing Director of Meridian Investment Sales; Sarah Jones Maturo, President of RM Friedland; Tom LaPerch, Associate Broker of Houlihan Lawrence Commercial; Shallini Mehra, Managing Director of Meridian Investment Sales; Adam O'Gorman, Owner of Nova North Commercial and Steven Salomone, Associate Broker with Houlihan Lawrence Commercial.
The various panelists agreed that the office market remains troubled although there is a movement to have workers return to the office more frequently and therefore reduce at-home policies. While still strong, many expect multifamily development to slow down as a significant amount of new product comes online in major metro markets.
