Commercial market heats up
Bill Fallon | Jan 14, 2011
Dave Livshin is 56 years old. With his weather-eye sharpened by a commercial real estate career that began when he was 22 – and acknowledging January and February are the doldrums in his line of work – he said the battering of the markets that appeared in 2008 is fading. "I'm cautiously optimistic as we go ahead for 2011," he said. "We're not going back."
Now president and CEO of Fishkill-based The Dagar Group Ltd., Livshin leases and manages commercial centers totaling 1.5 million square feet in Westchester, Putnam, Dutchess, Orange and Ulster counties in New York and in Fairfield County, Conn. Spaces range from mom-and-pop shops to large anchor tenants: "Medical offices, mixed-use, retail."
The commercial landscape, however, has changed and Livshin has adapted. "Now, you need to think a little differently," he said. "It's a question of the tenant mix." He cited as an example the hair salon complementing the nail parlor: "They used to be together. Now nails and hair are split. They can support their own spaces. People are doing things in the market, but they're doing different and unique things. Instead of a pizzeria – it seems like there's a pizzeria on every corner – we just did a hibachi restaurant in Wappingers Falls."
Of late, Livshin has been noting activity at the smaller-retail end of the spectrum. "The big space – 3,000 square feet and above – can sit on the market. But the 1,000-square-foot space, we can rent that all day."
Livshin has noted a push by newly minted entrepreneurs who may be early retirees or who may have been laid off for good. "We walk them through the process – hold their hands, if you will – if that's what it takes. We had a doctor recently with a 60- to 70-page lease. Much of it was boilerplate, but he had never seen a lease like that and it was scary for him. And if they've brought the family lawyer, who's unfamiliar with commercial leases, we walk them through the process and show them what it takes. If you're not familiar with the process, little things like finding carpeting and garbage collection can be big."
Livshin cites rents beginning at about $16 per square foot for a store in a small strip without a big anchor store up to the low $30s per square foot for an anchor-centric store with "triple net" (services and taxes included to varying degrees, which can add $4.80 to the square-foot price for "total triple net" in some of his markets and $8 for just the taxes in others).
Steve Perfit has been in commercial real estate for 20 years, now as managing director and principal broker for Cushman & Wakefield/Pyramid Brokerage, with 10 offices and 150 employees between Westchester and Buffalo. The alliance with Cushman & Wakefield is 3 years old; Pyramid is 40 years old.
Perfit cited the summer of 2008 as the time "things started to get shaky." And at the height of the recession: "Very little activity: Deals evaporated; financing was impossible to get. Everybody cut back and held back to see where the economy was going."
He sees his company's specialties – retail, office, resort and investment properties and industrial – doing "very well" in 2011, a turnaround at least partly ascribed to attitude. "There are unrealistic sellers and landlords, but there has been a shift toward reasonability," he said. "The market is very attractive now for the $3 million to $15 million loan range, but now there are very strict underwriting standards, which is good."
Perfit cited retail as the domino that is getting the market moving, leading to more manufacturing to fill the shelves, leading to a better economy, leading to improved housing markets. The tripwire appears to be a re-energized Wall Street, he said, restlessly seeking commercial bargains irrespective of a Manhattan address.
According to Michael Rao, president of New York Commercial Realty Group in Harrison, "There are still owners that do not understand what is going on and refuse to reduce their price point. It all comes down to supply and demand. Medical and industrial (good quality): not enough. Retail: soon to be not enough. Office: way too much.
"Five years ago, a typical deal would take two to five months," he said in written response to questions. "Today it takes four to eight months to complete from start to finish. Five years back, tenants/buyers would not shop the market like they do today. Tenants and buyers are expecting a very aggressive deal in order to relocate, such as free rent and 20 percent to 30 percent less than the price five years ago. Westchester County lacks medical space, which puts a premium on what's out there. There is plenty of office space; in order to be successful and make a customer pleased you need to determine the ideal location for their business.
"Retail is on the up," Rao continued. "A few large blocks have been taken in the past six months. This year will be about the realistic owners that understand the market; they will get ahead and make deals.
"Regarding sales, we have been working with 90-percent, all-cash buyers between the range of $1 million and $5 million. Dealing with banks in today's market is not an easy task. Sellers holding paper has become much more common and makes the transaction smoother to accomplish."
The firm closed on 300,000 square feet of commercial space last year.
David Livshin, President/CEO of Dagar answers questions about a new project during a press conference at Fishkill Town Hall.
photo Spencer Ainsley, Poughkeepsie Journal
Reprinted with Permission