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Westchester's new landlords changing market.

Banks, insurance companies, pension fund advisors and other financial institutions have always played vital role in the Westchester office market. It's just that where they were once silent, essential, yet invisible, partners, these institutions have stepped to the front and center of the real estate stage as active, hands-on landlords. The impact of this change is being felt throughout the market.

First and foremost, the "institutionalization" of real estate ownership has brought a heightened level of professionalism to the market.

Though foreign to the Westchester real estate market, the county's new landlords are far from unsophisticated. Rather, these institutions, which include such stellar names as The Prudential, The Travelers Insurance Company and Aldrich Eastman & Waltch, are made up of superior business people who bring an advanced level of analysis and business acumen to the commercial real estate industry.

As these institutions worked into the role of landlord, they have taken the time to learn about the market, to analyze their assets, and to figure how these two elements fit together. Rather than taking the novice's approach to real estate leasing and management-that all space is created equal -- these sophisticated business people are trying to learn how to differentiate their individual properties and market them successfully in this competitive environ

In some cases, these owners have invested tremendous capital to make their properties marketable, upgrading physical plants, adding services, providing creative incentives to appeal to both tenants and the brokerage community. In other instances, some of the same institutional owners have decided to hold off on aggressively marketing or investing in their properties, having come to realize that certain buildings will not be able to compete until the market itself undergoes a transformation.

Aside from the infrequent below-market sale of an asset, longterm ownership and a commitment to the Westchester community seems to be the unifying theme for these new landlords-which can only have a positive impact on the market.

In becoming a part of the Westchester County commercial real estate industry, these institutional landlords are investing a tremendous amount of time and effort to learn about their new environment.

In order to compile market data and accurately assess the market, most institutions are calling on professional real estate brokers to help them wade through the tricky, sensitive waters of property management, tenant retention and the solicitation of new tenants. As exclusive leasing agent for the 2.2 million-square- foot EastRidge portfolio, and having recently been appointed exclusive leasing and managing agent for more than 500,000 square feet of prime office space by Travelers Realty Investment Corp, ESG has had many dealings with institutional owners. These experiences have proven to be educational and challenging, requiring a tremendous amount of reporting, a superior level of professionalism and a wealth of creative ideas.

Based on ESG's recent experiences, I would submit that Westchester's new landlords have upgraded the professionalism and strengthened the disciplines of the real estate brokerage community in the county. These institutions have forced brokers to be better. Where it was once okay to post a "vacant space available" sign, brokers must now approach this business as a sophisticated analyst and marketer, armed with an indepth understanding of the property, the business environment and the nuts and bolts of financing and deal structuring.

Brokers are not the only ones to change under the tutelage of the new institutional landlords. Long-time Westchester county owners are also changing the way they have done business for the last 20 years to meet new tenant expectations and the rigors of institutional reporting requirements.

The old "Let's Make A Deal" mentality of independent landlords has died out over the last feW years. While personal relationships are still a key to successful tenant retention programs, new standards of service and financial analysis are now all important. Since Westchester's traditional developers and landlords are a smart breed -- and since so many of them are now working in partnership with their institutional/financial partners -- they have adapted to these new standards swiftly and with great success.

Tenants also benefit from the influx of institutional property ownership. First, they can be assured that their new landlords can and will deliver everything they promise. In uncertain economic times, the financial clout of a Travelers or a Prudential is a welcome security blanket.

Second, the market's newest landlords come to lease negotiations armed with an in-depth understanding of the market, including realistic expectations for the economics of a deal. Further, these institutions invested quite a lot of time learning about the market so they would be able to respond to tenant questions promptly and accurately.

Finally, these institutions -- while huge in size -- are sensitive to the needs of even smallest tenants. Given their longterm approach to real estate and their commitment to the Westchester market, they approach deals with a refreshing perspective: They don't convey the impression that they "have" to make a deal; rather, they make it clear that they "want" to make deals. This subtle difference is a welcome change, eliminating any hint of desperation to allow for professional and earnest negotiation.

Clearly, Westchester county's new breed of landlords has already made an impression on the market and effected positive changes throughout the commercial real estate industry. Over time, new procedures and heightened professionalism will become welcome, familiar and routine -- as will dealing with institutional landlords.
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Title Annotation:Mid-Year Review & Forecast, Section IV; Westchester, New York office leasing market
Author:Siegel, Michael H.
Publication:Real Estate Weekly
Article Type:Column
Date:Jun 23, 1993
Previous Article:How to turn around commercial real estate.
Next Article:Residential market needs more good news.

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