Steady recovery good news for suburban markets

Real Estate Weekly, May 12, 2004 by Mitchell Rechler

Westchester's economy is benefiting from the steady recovery taking shape across the nation during the first quarter of this year. An accelerating rate of job creation in the New York metropolitan area and good news in the commercial real estate market are combining to make 2004 one of the best in recent memory for Westchester County retailers and property owners.

Among private-sector job categories that grew the most in recent months are construction and retail, both reflecting redevelopment projects in White Plains and other Westchester cities. Also upbeat about Westchester in 2004 are observers of the rice market, who are predicting that vacancy rates should continue a slow and steady decline.

An expected rise in interest rates later this year may hurt residential pricing, however that market continues to be strong after benefiting from an extended period of historically low mortgage rates.

An increase in investments in new office and retail development projects is a definite sign that things are getting better. And as the economy improves, you're going to see more deals take shape in Westchester County, with several major corporate relocations on the horizon.

The banking industry in particular has been in an expansion mode throughout Westchester, and all that bank expansion activity has been good for owners of shopping centers and other retail properties, as new bank branches and other retailers are stoking demand for new retail space enough for retail rents to begin to rise, stimulating even more construction of additional retail space.

R Squared LLC's has been experiencing encouraging retail sales numbers and leasing interest at The Source at White Plains, our new 260,000 square-foot, $96 million retail development located at Maple Avenue and Bloomingdale Road. Our company is currently searching for the final tenant for what has become the most successful retail development in Westchester County over the past several years.

A prime 11,000 square-foot block of space is all that remains on the first level of the four level retail center, which is anchored by a new 180,000 Fortunoff, the upscale jewelry, gift and home furnishings retailer that opened at The Source at White Plains in September, along with a 12,000 square-foot Cheesecake Factory.

We recently celebrated the opening of a 36,000 square-foot Whitewoods Market and a 9,000 square-foot Morton's steakhouse at The Source at White Plains, and are currently searching for a single tenant for the 11,000 square-foot space located between The Cheesecake Factory and the Morton's Steakhouse on the lower level. Furniture retailers, upscale clothing stores and even a day spa have been the initial targets of R Squared's tenant search.

We are extremely pleased at the enthusiastic response we have received from both retailers and shoppers at The Source at White Plains. Combined with the recent opening of several new luxury rental buildings and the improvement in the office market, the swift lease-up of The Source is great news for the future of downtown White Plains and a good indication of the rebounding retail market throughout Westchester County.

R Squared LLC is currently investing in retail, residential, storage, commercial loft, hotel and industrial properties located throughout the New York Metropolitan area, and currently have over seven million square feet under management, including one million square feet of development and redevelopment projects underway. R Squared LLC is a Managing Member of Rechler Equity Partners, which owns and operates six million square feet of industrial properties on Long Island.

In addition to The Source at White Plains, R Squared LLC is involved in a new 360,000-square-foot retail development on Long Island and the revitalization of Deegan Gateway in The Bronx, a 432,000-square-foot commercial loft building currently undergoing a complete interior and exterior makeover.

We are extremely bullish on the future of New York's suburban markets, as these investments attest, and are actively seeking new investment opportunities as we return to our roots and focus on new business and development opportunities throughout the New York metropolitan area.

MITCHELL RECHLER

PARTNER, R-SQUARED, LLC