One of the most widely-read reports by Orange County real estate professionals is the annual analyses of the industrial and commercial office markets by veteran commercial real estate broker Elisabeth Mansfield, owner of Mansfield Commercial Real Estate in Goshen.
Ms. Mansfield recently released her 2019 report entitled “Overview of the Commercial Real Estate Market in Orange County, NY at Year-End 2019” that provided an extensive recap of market activity last year and her views of prevailing trends as the markets entered 2020.
Although written prior to the onset of COVID-19, the report is very valuable to the industry now and once the economy is re-started by state, county and municipal leaders.
In this publication, Ms. Mansfield offers the latest information and insights on the Orange County office market.
In 2019, just one new office building was constructed in Orange County, NY, slightly increasing the inventory of Class A office space at year-end to 4.8 million square feet. It is the largest office building to be constructed on spec in over a dozen years. Known as Professional Square, this four-story 34,000-square-foot Class A office building is situated on Route 208 in the Town of Monroe, overlooking Route 17/Interstate 86. Catering to the burgeoning community of Kiryas Joel, the building is already 97% occupied with more than 30 local businesses.
The vacancy rate for Class A office space rose from 9.4% last year to 10.3% by year-end 2019. Even with this high vacancy, some tenants still had limited options. Since most of the tenants in the county occupy under 5,000 square feet, the majority of the available space is smaller in size. But, for the larger users seeking 25,000 square feet and up, only four buildings in the county could accommodate them. Seeking to rectify that, Simone Development Companies, a privately-held full service development firm that is active in the Tri-state area, has acquired the New York International Plaza campus in New Windsor, adjacent to the re-branded New York Stewart International Airport. In the late 1990s, Albany-based First Columbia was chosen by the Town of New Windsor to develop this property, and had good success with several buildings. However, in 2012, after the difficult economy of the last recession, the firm walked away.
In 2019, Simone announced plans for Class A office, medical office, retail, restaurants, hotels, conference center, and more. Two Class A office buildings are initially proposed, a 40,000-square-foot three-story and a 60,000 square foot three-story medical office building. Simone has a large roster of tenants in the 7 million square feet of commercial properties the company presently owns in the New York metropolitan region, and luring some of those up to the Hudson Valley is a likely part of its target audience.
In 2019, approximately 145,000 square feet of office space was absorbed in Orange County, the lowest level in the last five years. Nearly 90% of this was through leasing transactions, and more than 80% of the total activity was in Class A buildings. With little to no rent growth over the years, tenants are able to lease Class A space at very reasonable rates. There was, however, one notable purchase transaction: in New Windsor, Premier Medical Group, an all-specialty medical practice with offices in Dutchess, Ulster and Orange counties, purchased a 12,000-square-foot office building on Little Britain Road / Route 207.
On the leasing side, KC Engineering & Land Surveying signed a lease for 17,600 square feet on Governor Drive in the Town of Newburgh; Orange Regional Medical Center leased 14,000 square feet at 75 Crystal Run Road in the Town of Wallkill and National Tax & Finance Services leased 6,700 square feet on Temple Hill Road in New Windsor. In the Village of Goshen, Maser Consulting, an engineering and consulting design firm, leased 4,600 square feet on Hatfield Lane, and Legal Services of the Hudson Valley leased 4,500 square feet on Erie Street and Mundi Financial leased 4,400 on Crystal Run Road in the Town of Wallkill.
The total inventory of both Class A and non-Class A office space remained unchanged at 6.2 million square feet, and the total vacancy rate increased slightly to 10.0%. Older, less functional facilities in the county’s cities and villages, once touted as potential office spaces, continue to be redeveloped into residential apartments, eating and drinking establishments and other retail shops that reinforce ongoing revitalization efforts.
The medical office sector continues to generate the most office activity. After their 2018 merger with Bronx-based Montefiore Health System, the St. Luke’s Cornwall Hospital was renamed Montefiore St. Luke’s Cornwall. The hospital broke ground on the remodeling of the Newburgh campus’ emergency department, and recently opened both a kidney care center and a rehabilitation/chronic care facility on its Cornwall campus. Cornerstone Family Healthcare, which took over operations of the Middletown Community Health Center in 2017, announced its plans in 2019 to overhaul its Port Jervis offices on Hammond Street, and to renovate and expand its Benton Avenue clinic in the City of Middletown.
As the nature of office work continues to evolve, the softness in the market for office facilities, in general, will likely persist in Orange County, as is the case in other suburban areas.
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