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REALITY CHECK 101: What is Really Happening in the Rockland County Real Estate Market?
By Lynn Teger
Whenever someone asks me what I do for a living and I tell them I am a real estate broker, I receive a great amount of sympathy. “Oh – you must be having a hard time. The market is horrible!” I hear this time and time again. When I explain that the commercial market is great, people begin to stare at me in disbelief.
Yes, folks, I know. For the past two years all we seem to hear about, through every possible medium, is the sub-prime mortgage mess, foreclosures, companies closing or downsizing, people losing their jobs, and most recently and horrifyingly, (if that is a word!) about banks going under and the Fannie May & Freddie Mac crisis. How much worse can it get?? Everyone is totally justified in thinking that the world is falling apart beneath our feet.
However, it is not.
Let me begin, by talking about the area that has received more negative press than anywhere else in the County – North Rockland – an area plagued by poor road access and serious tax issues (I won’t even get into the reasons – I am sure you are sick of hearing it!). To sum it all up, in the past five years, taxes have approximately tripled. Any reasonably intelligent human being would have to logically conclude that this would negatively affect commercial real estate in the area.
However, it has not.
Remember Annie’s Shack? – a staple of the North Rockland community for over 30 years? That corner piece of real estate consisting of about 2 acres was recently sold for about $2 Million an acre and developed into a location for long term tenants, CVS and Provident Bank.
Did you ever hear of “The War of the Roses”? Well, in North Rockland they are having “The War of the Supermarkets”. Shoprite with two locations, closed their West Haverstraw location. Stop & Shop took Shoprite’s former site, while keeping Stop & Shop’s old site in Stony Point vacant, to keep another supermarket from getting in. However, Shoprite has found a way into Stony Point, by obtaining approvals for a previously zoned industrial site to be converted to retail on Kay Fries Drive. An exciting and interesting wave of events!
Meanwhile, in another part of North Rockland immediate approvals are being sought to build an additional 15,000 square feet of warehouse space where a long term lease has already been executed to bring a movable storage company into the area. An additional 89,500 square feet of warehouse to be built is already in the works!
Great success story: Recently, an approximately 200,000 square foot industrial property was put on the market in Haverstraw. It was a sad situation with newspaper reports of 60 employees being laid off. Within one month’s time, the property has received several competing bids and it won’t be long before a contract is signed. Maybe those employees will be able to find new jobs soon!
What about the rest of Rockland County? Rockland has several major corporate parks, all of which have very few vacancies. In addition, there continues to be a huge amount of development by some of Rockland’s most experienced, long-term property owners. What better indicator than this, of confidence in the market?
Let’s take, for instance, Clarkstown Executive Park, a huge corporate park development located in Valley Cottage in which a major expansion recently took place. Within a very short period of time, two brand new buildings were 100% leased, and the owners are going for approvals to build more.
Kohl Industries, out of Teaneck, New Jersey, recently purchased the former Interelectronics site located on Route 303 in Congers. Here, several acres of industrial property very quickly turned into 255,000 square feet of industrial space. The buildings’ 30 foot ceilings, highly insulated walls and the fact that it is in an Empire Zone, make it extremely attractive. Tenants have been pulled into Rockland County from New Jersey, Westchester and upstate New York. Tenants have also relocated from other Rockland locations to the building. Alan Litt, the company’s President, says he cannot believe the amount of calls he is receiving on a daily basis from companies looking for space. Although the building is not even finished, over 150,000 square feet – or approximately 65% of the space already has signed leases. In fact, 100,000 square feet of space was already signed before the first shovel even touched the ground!
According to Steven Porath, Director of Economic Development of the Rockland Economic Development Corporation (“REDC”), he has seen an upswing of activity in the past six months. “Companies are becoming smart shoppers. We get many inquiries about Rockland’s newly formed Empire Zones and companies are comparing benefits to determine the smartest location for their business. They are finding that Rockland County is a smart location!”
Some recent transactions the REDC helped to procure are Vision Sciences, a manufacturer of endoscopes, in which the company expanded to larger quarters to accommodate an additional 100 employees, some of which would be relocating from another state to the area. Schreiner MediPharm, a high-tech printer for the pharmaceutical and automotive industries, moved into 40,000 square feet at Bradley Corporate Park, with an option to take the balance of the building, and bringing about 80 manufacturing jobs to the area.
It was not too long ago – maybe five years or so - that Hillburn Industrial Park was mostly vacant. Once the property was given Empire Zone status, the complex filled quickly and upon a recent inquiry I made, was informed that there was no remaining space in the complex!
Spook Rock Industrial Park is one of Rockland’s little miracles. It was a mere 10-15 years ago that a man had the idea of buying this land and turning it into an industrial condo development. Units began at about $20.00 (Yes, I said $20.00) a square foot. These are now the most expensive units in the County – the last one selling at about $170.00 per square foot and renting for about $10.00 per square foot triple net. Can you imagine – warehouse space leasing for the same price some companies are renting low end office space and selling for as much as some of Rockland’s premier retail and office space! I have a waiting list of companies interested and desperate to find space in this complex and they are willing to pay the price!
Investment properties are still in great demand. Real estate continues to be a great place to put your money when you understand the market and the property you are buying. There are still many buyers of commercial property who have lots of money to spend due to 1031 exchanges. These are cash buyers, folks, who need to spend millions of dollars and need to spend it FAST!
Cap rates are usually a good indicator of the investment market. The cap rate is basically used to determine the value of a commercial property and fluctuates according to supply and demand. Low cap rates indicate large demand. About 15 years ago, in a buyer’s market, cap rates were between 10%-15% - indicating low demand. In the recent height of the market, before the “fall” cap rates were, unbelievably, at 5%-6%. At this rate, an investor would have to take money out of his pocket to pay the bills at the end of the month. In the current market, the cap rate has come up only slightly. Depending on the property, I am seeing anywhere in the range of 7%-9%. This low cap rate is an indicator of continued demand and strength in the commercial market.
I recently spoke to one banker involved in commercial properties and asked what she could report from her perspective. According to Sara Tucker from HSBC Bank, people are still looking to purchase. Regarding all the negative publicity constantly being reported that banks are not loaning money, Sara says this is not so. “Banks are lending money with the same criteria – you must be creditworthy, have ability to pay and the property must have a good cash flow. The only difference now is that banks are adhering more strictly to credit policies”.
With increasing costs of electricity, companies all over Rockland County are feeling the sting. “No problem”, says another banker friend of mine. “Going green is the answer.” More and more companies are doing this to help with costs, while helping the ecology of our planet at the same time.
So, ladies and gentlemen, in this time where there is much to be concerned about, there is still much for which we can be grateful. The reality of it all is not as horrible as you have been led to believe.
Maybe it’s time to begin focusing on some of the great developments taking place out there, and by doing so, maybe we can start a new trend! |
