Jones Lang LaSalle
Tight NYC market is opportunity for suburban owners
Court firms with cheaper offices, amenities
By Tina Traster
Published on May 15, 2006
Torn between keeping up with rising rents and rewarding his staff, Joseph Morrow decided he had finally had enough. Last December, after a 35-year stint in midtown, the chief executive of Morrow & Co. moved the proxy solicitation and corporate governance consulting firm to the downtown business district of Stamford, Conn.
"The relocation has lifted a financial burden," says Mr. Morrow, whose rent dropped to $22 a square foot from $70 a square foot on Park Avenue and East 57th Street. "Now I've got money to pay my people raises and bonuses.
Manhattan rental prices are going through the roof, and suburban landlords are looking to woo Manhattan firms to their cheaper pastures. They are networking closely with corporate heads and regional brokerage teams to market properties that offer a raft of on-site amenities, including restaurants, luxurious gyms, concierges and shuttle buses to transportation hubs, as well as refuge from the effects of a terrorist attack.
In the past two years, UBS, Citibank, Bank of Ireland and Royal Bank of Scotland, other financial services companies, and law firms have been moving more operations to Westchester and Connecticut, where rents in Class A, full-service buildings near public transportation average about $30 a square foot.
The change makes particular sense for back offices and satellite locations, and for firms looking to downsize in Manhattan. And because many executives want to work closer to their homes, the sell is getting easier.
The migration is bound to continue. The vacancy rate for Class A office space in Manhattan averages less than 9% and is expected to tighten further. Average asking rents for high-end space could rise to more than $70 a square foot this year, according to market research from Grubb & Ellis.
In contrast, vacancy rates for similar space are 15% in Westchester and Connecticut; average rents are $28 a square foot.
Financial services a target
"Every week, New York City tenants are looking for space in Westchester and Fairfield counties," says Steven Baker, senior director at Cushman & Wakefield Inc. in Stamford. "Buildings on High Ridge Road and Merritt Parkway are being extensively renovated and repositioned to be marketed to city tenants."
Taking a page from mall developers--like the Simon Group--which seal exclusive deals with big-box retailers, office developers are working more closely with their New York clients, particularly in the financial services sector, to decentralize and relocate some operations to suburbia. They are focusing on custom build-outs, risk assessments and studies on suburban labor pools.
"The way business is being done is changing," says Scott Rechler, president and CEO of Reckson Associates Realty Corp. "Tenants and brokerage houses are looking for developers that can offer regional solutions to real estate issues like growth and co-locations."
To market the newly renovated Reader's Digest complex in Chappaqua, N.Y., Summit Development and Greenfield Partners--both in Norwalk, Conn.--rolled out what amounts to an emerald city. Features of the 114-acre campus, which has 200,000 square feet of Class A space built out and 500,000 more to come, include a 13,000-square-foot gym, complete with trainers and classes; a restaurant, travel agent, banking facility, dry cleaner and beauty salon; an automotive repair station; a conferencing center; shuttle service to public transportation and a heliport; and walking trails.
Branding is key
"We're targeting New York companies that want large blocs of space, an unsurpassed amenities package and quality of life," says Felix T. Charney, Summit's managing director. Developers known both in and outside of the city have an advantage.
"Branding is key," says Jeffrey Newman, executive vice president of W&M Properties, which leases out 2 million square feet of Class A space in Westchester and Fairfield counties. "Brokers and tenants make a connection with a W&M property in the suburbs because they know our buildings in the city. That creates a comfort zone," he says.
W&M nurtures its relationship with Manhattan tenants by holding semiannual town hall-style meetings to address their concerns and maintain a dialogue. The company also wines and dines brokers regularly.
"You have to market and mingle constantly to keep people in Manhattan aware of the suburban properties and to reinforce that Stamford is not the hinterlands--it's 30 minutes from Grand Central," Mr. Newman says.
Comments? cnyb@crain.com
Tight NYC market is opportunity for suburban owners
Court firms with cheaper offices, amenities
By Tina Traster
Published on May 15, 2006
Torn between keeping up with rising rents and rewarding his staff, Joseph Morrow decided he had finally had enough. Last December, after a 35-year stint in midtown, the chief executive of Morrow & Co. moved the proxy solicitation and corporate governance consulting firm to the downtown business district of Stamford, Conn.
"The relocation has lifted a financial burden," says Mr. Morrow, whose rent dropped to $22 a square foot from $70 a square foot on Park Avenue and East 57th Street. "Now I've got money to pay my people raises and bonuses.
Manhattan rental prices are going through the roof, and suburban landlords are looking to woo Manhattan firms to their cheaper pastures. They are networking closely with corporate heads and regional brokerage teams to market properties that offer a raft of on-site amenities, including restaurants, luxurious gyms, concierges and shuttle buses to transportation hubs, as well as refuge from the effects of a terrorist attack.
In the past two years, UBS, Citibank, Bank of Ireland and Royal Bank of Scotland, other financial services companies, and law firms have been moving more operations to Westchester and Connecticut, where rents in Class A, full-service buildings near public transportation average about $30 a square foot.
The change makes particular sense for back offices and satellite locations, and for firms looking to downsize in Manhattan. And because many executives want to work closer to their homes, the sell is getting easier.
The migration is bound to continue. The vacancy rate for Class A office space in Manhattan averages less than 9% and is expected to tighten further. Average asking rents for high-end space could rise to more than $70 a square foot this year, according to market research from Grubb & Ellis.
In contrast, vacancy rates for similar space are 15% in Westchester and Connecticut; average rents are $28 a square foot.
Financial services a target
"Every week, New York City tenants are looking for space in Westchester and Fairfield counties," says Steven Baker, senior director at Cushman & Wakefield Inc. in Stamford. "Buildings on High Ridge Road and Merritt Parkway are being extensively renovated and repositioned to be marketed to city tenants."
Taking a page from mall developers--like the Simon Group--which seal exclusive deals with big-box retailers, office developers are working more closely with their New York clients, particularly in the financial services sector, to decentralize and relocate some operations to suburbia. They are focusing on custom build-outs, risk assessments and studies on suburban labor pools.
"The way business is being done is changing," says Scott Rechler, president and CEO of Reckson Associates Realty Corp. "Tenants and brokerage houses are looking for developers that can offer regional solutions to real estate issues like growth and co-locations."
To market the newly renovated Reader's Digest complex in Chappaqua, N.Y., Summit Development and Greenfield Partners--both in Norwalk, Conn.--rolled out what amounts to an emerald city. Features of the 114-acre campus, which has 200,000 square feet of Class A space built out and 500,000 more to come, include a 13,000-square-foot gym, complete with trainers and classes; a restaurant, travel agent, banking facility, dry cleaner and beauty salon; an automotive repair station; a conferencing center; shuttle service to public transportation and a heliport; and walking trails.
Branding is key
"We're targeting New York companies that want large blocs of space, an unsurpassed amenities package and quality of life," says Felix T. Charney, Summit's managing director. Developers known both in and outside of the city have an advantage.
"Branding is key," says Jeffrey Newman, executive vice president of W&M Properties, which leases out 2 million square feet of Class A space in Westchester and Fairfield counties. "Brokers and tenants make a connection with a W&M property in the suburbs because they know our buildings in the city. That creates a comfort zone," he says.
W&M nurtures its relationship with Manhattan tenants by holding semiannual town hall-style meetings to address their concerns and maintain a dialogue. The company also wines and dines brokers regularly.
"You have to market and mingle constantly to keep people in Manhattan aware of the suburban properties and to reinforce that Stamford is not the hinterlands--it's 30 minutes from Grand Central," Mr. Newman says.
Comments? cnyb@crain.com
posted by Jones Lang LaSalle NJ News Blog at 10:30 AM
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