News story made available courtesy of Hudson Valley Business

Hudson Valley rich in promise, challenges, brokers say

Week of January 15th, 2007

BY ALEX PHILIPPIDIS
Brokers in counties north and west of Westchester hope this is the year several long-vacant office-industrial sites finally find new tenant businesses, while the region's stronger distribution and retail markets continue to show the strength of recent years.

One of the Hudson Valley's biggest challenges remains filling up hundreds of thousands of square feet once occupied by Armonk-based IBM Corp., especially in Ulster County, says Robert Scherreik, principal in McBride Corporate Real Estate in Central Valley.

"My perception is there's been pretty, pretty weak activity there: Some smaller local professional firms, the normal churn up there. The problem is, the market numbers are dominated by these large blocks of ex-IBM space," Scherreik said.

Among them, says the Hudson Valley Economic Development Corp.:

• Hudson Valley Business Center in Kingston, where some 390,000 square feet is available for lease.
• Tech City in Kingston, where eight buildings totaling more than 1.2 million square feet can be leased. They include Buildings 1N and 1S, twin buildings of 141,691 square feet, featuring 40-foot-by-50-foot column spacing and 16-foot ceilings.
• 169 Myers Corners Road (Dutchess Corporate Center) in Wappingers Falls, an 226,000 square feet are being marketed for lease. The site has 80,000 square feet of raised flooring.

Scherreik said several smaller blocks of non-IBM space are also seeking tenants: 20,000 square feet vacated by Orange County at 30 Matthew St. in Goshen, and 30,200 square feet to be vacated by Bank of New York at 90 Crystal Run Road in Middletown. More space will come to market, he said, as Orange Regional Medical Center and St. Luke's Cornwall Hospital complete medical buildings for their affiliated doctors, who till now have leased their own space.

A brighter spot for the region is the warehouse-distribution submarket clustered around Orange County, say Scherreik and Frank Tomasulo, a senior vice president with CB Richard Ellis.

Tomasulo said the county is an excellent hub for distribution space given the presence of interstates 84 and 87 plus Route 17. The new I-84 interchange under construction at Drury Lane will offer not just direct access to Stewart International Airport but a new commercial corridor.

CB Richard Ellis represents Panattoni Development Co., a top national developer of distribution space that is seeking tenants for 260 and 290 Ballard Road in Middletown, two vacant buildings totaling 695,588 square feet. Over the next couple of years, Panattoni will control more than 2 million square feet of space in Orange County.

"The Hudson Valley is starting to become a very interesting destination for companies and investor developers on the distribution side," Tomasulo said.

David Livshin, president of The Dagar Group Ltd., a Fishkill brokerage with office and retail listings, says the office market should heat up this year as more Westchester residents move north, and as companies based in Westchester look for cheaper rent and find it in the Hudson Valley.

Office rents range in the $20s per square foot, as do retail rents for smaller stores in well-anchored shopping centers; larger stores of more than 8,000 square feet lease in the teens per square foot, with $3.50 to $5.50 tacked onto triple-net rents, Livshin said.

"Both in retail and office, after Labor Day, from our standpoint it got a little bit quieter. But we're optimistic about '07 being a little bit more aggressive than it was in the latter part of'06," Livshin said.