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 White Plains, NY - Cushman & Wakefield has released a report on the Westchester County multi-family apartment market, with indicators showing that the region’s apartment market continued to remain strong with rising rental rates in a supply constrained market.
Multifamily rental rates in Westchester County grew by 2.0% during the first half of 2008. Rent growth for the year is anticipated to be on par with 2007 (4.0%) but not expected to reach 2006 levels (8.5%), due to the economic downturn.
Although vacancy rates increased by 1.0% since year-end 2007, the County’s apartment market remained strong as rental rates continued to increase and supply remained tight. Of the estimated 342,532 households living in the county, 40% rent. After applying that ratio to the projected 2.1% increase in the number of households over the next five years, there will be significant demand for additional apartments units.
At mid-year, the vacancy rate registered 3.7%, still well below the northeast (4.1%) and the nation (6.0%). Development activity is focused on new apartment projects and less on condominium developments due to the ongoing housing slump and tightening credit standards which are increasing demand in the multifamily rental market.
“In a market where there is moderate new supply being delivered and continued demand from investors for well-located projects, we are confident that multi-family housing investments will continue to perform solidly in the foreseeable future,” said Jose Cruz, executive director of Cushman & Wakefield’s Metropolitan Area Capital Markets Group. “Westchester County continues to register low apartment vacancies and sustainable rent growth.”
The Westchester County apartment market consists of more than 38,700 units with an average monthly rental rate of $1,844 across all apartment unit types. Over the last eight years, the average monthly rent has increased by $329 (60% of which has occurred in the last two years alone). Monthly rental rates in institutional quality properties range between $1,700 and $2,200 for 1-bedroom units, $2,300-$2,900 for 2-bedroom units and north of $3,000 for 3-bedroom units. Westchester County is able to support these rates and the upward trend in rents as it has the eighth highest per capita income in the U.S., currently at $40,784.
Since 2001 there have been roughly 2,800 units completed countywide. Currently there are nearly 1,000 apartment units under construction, mostly within downtown White Plains and along the Hudson River waterfront. An additional 4,661 units are in the pipeline for future development. The only significant new development completed in 2008 was Cappelli Enterprises’ Renaissance Square in White Plains.
Significant projects (100+ units) that are under construction include Avalon Bay White Plains that will consist of 417 rental apartments; and Forest City Ratner Companies’ (FCRC), Ridge Hill Village in Yonkers, a mixed-use project featuring 1.3 million sq. ft. of retail space, 160,000 sq. ft. of office and research facilities, and a hotel and conference center. Ridge Hill’s residential component will comprise up to 1,000 apartments, of which 200 will be for over-55 active adults and 135 will be affordable.
Condo projects worth a total of about $1 billion have slowed across White Plains. Current developments on hold include The Pinnacle on Main Street, North Street Communities on North Street, The Metropolitan on DeKalb Avenue, 10 Windsor Terrace on Windsor Terrace, The Hamilton on Church Street and Hale Terraces on Hale Avenue, while the demand for rentals remains strong.
The Westchester County apartment market experienced a significant decrease in sales volume during the first half of 2008, down approximately 70% from the same period last year while cap rates increased 120 bps. The uncertainty in the national economy combined with rising cap rates will be prevalent through the remainder of 2008 and into 2009. As of mid-year, no significant trades occurred over $10 million within Westchester County; however, eight properties traded totaling $36.9 million at an average price per unit of $120,000.
The region has benefited from its proximity to New York City, the engine of growth for the region. But the residential real estate market was hit hard particularly in the first half of 2008 as prices fell and sales slowed. This slowed consumer spending in the region and further constrained growth. Overall, Westchester is expected to remain well-positioned in 2008/2009 until the national and regional economy stabilizes.
Cushman & Wakefield is the world's largest privately held commercial real estate services firm. Founded in 1917, it has 221 offices in 58 countries and more than 15,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 500 companies. It offers a complete range of services within four primary disciplines: Transaction Services, including tenant and landlord representation in office, industrial and retail real estate; Capital Markets, including property sales, investment management, valuation services, investment banking, debt and equity financing; Client Solutions, including integrated real estate strategies for large corporations and property owners, and Consulting Services, including business and real estate consulting. A recognized leader in global real estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Center at www.cushmanwakefield.com.
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