By Elisabeth Mansfield
One of the most widely-read reports by Orange County real estate professionals is the annual analyses of the industrial and commercial office markets by veteran commercial real estate broker Elisabeth Mansfield, owner of Mansfield Commercial Real Estate in Goshen.
Mansfield recently released her 2019 report entitled “Overview of the Commercial Real Estate Market in Orange County, NY at Year-End 2019” that provided an extensive recap of market activity last year and her views of prevailing trends as the markets entered 2020.
Although written prior to the onset of COVID-19, the report is even more valuable to the industry now as we prepare to emerge from isolation and enter into an uncertain economy.
Due to the considerable research contained in the report, we will publish the Mansfield report in two parts.
In this publication, Mansfield offers the latest information and insights on the Orange County industrial market:
The Industrial Market in 2019
The total inventory of prime industrial space in Orange County, NY, as of year-end 2019, stood at 23.1 million square feet, with approximately 370,000 square feet of new construction being added over the year. And since the bulk of this new space was built-to-suit, the county’s severe shortage of industrial product continued. Although there was another ±320,000 square feet of speculative industrial space approved, those projects were delayed and so the vacancy rate for prime industrial space at year-end 2019 stood at 2.0%. But over the next three years, there is more industrial product planned than what was constructed over the last 20 years; however, with several towns contemplating moratoriums, there is an increasing element of uncertainty regarding some of this development.
Twelve new industrial buildings were constructed in 2019 and three other facilities underwent expansions. Nearly 94% of this new construction was built-to-suit. Mondelez, one of the largest snack companies in the world, constructed a ±100,000 square foot distribution center on Leonards Drive in the Town of Montgomery; a ±90,000 square foot building on Bracken Road, also in Montgomery, was completed and acquired by the principal of Port Priority Corp; Dana Distributors expanded their beverage warehouse by ±46,500 square feet and also constructed a ±12,000 square foot recycling facility on their campus in Westgate Goshen Business Park in the Village of Goshen; Orange County Iron Works added ±45,000 square feet to their building, and also constructed another ±7,000 square foot facility for their Gabriel Steel Erectors affiliate on Maybrook Road in the Town of Montgomery; Aurochemicals added a second building of ±25,000 square feet to their headquarters site in Washingtonville; Monroe Zafir completed an ±8,400 square foot building for his plastic bag company on Dunn Road in the Village of Montgomery; Olympic Electric finished their new ±8,000 square foot building on Route 17K in the Town of Montgomery; Ironworkers Local 417 added a ±4,800 square foot addition to their facility on Route 32 in the Town of Newburgh; and developer Ray Yannone completed three spec buildings on Bill Larkin Drive in New Windsor: a ±4,650 square foot facility, now occupied by airplane parts distributor CTG, plus a ±1,950 square foot building and a ±1,360 square foot building, both now occupied. Two other small buildings were constructed on spec: an ±8,200 square foot warehouse on Hempstead Road in New Windsor, and a ±7,000 square foot warehouse on Lower Road in the Town of Goshen; both buildings have users lined up and are expected to be occupied in early 2020.
With the industrial market so tight, and with the need for e-commerce warehouses increasing, developers are scrambling to accommodate demand. There was approximately 8.5 million square feet of industrial space planned or approved in Orange County, NY as of year-end 2019. Over 60% of this will be built-to-suit, and the balance—approximately 3 million square feet—is spec development that will make its way through the approval process to become shovel-ready. Some of these developers say they will start construction without an end-user, while others will wait to commence construction until all or a significant portion of the space is spoken for.
Over 560,000 square feet was under construction as of year-end 2019, including a ±369,000 square foot organic vegetarian meal manufacturing facility in the Town of Goshen for Amy’s Kitchen, planning to open in 2021, and an ±81,000 square foot facility for Aluprof USA to manufacture and assemble window components on Hawkins Drive in the Town of Montgomery. Citiva is continuing work on its ±40,000 square foot medical marijuana production facility in the Town of Warwick, and a ±60,000 square foot spec warehouse building was nearing completion in the Town of Goshen.
Of the planned build-to-suit facilities, the two largest are in the Town of Montgomery. Medline, the largest privately-held manufacturer and distributor of medical supplies, is planning a ±1.3 million square foot distribution facility, having outgrown its current ±500,000 square foot warehouse in the Town of Wawayanda. Medline has already purchased the land, which was zoned for its planned use, and has withdrawn its request for over $17 million in property tax breaks in an effort to move the project forward. Another ±1 million square foot distribution center, reportedly for Amazon, received planning board approval in late 2019. Local opposition to these and other projects continues in the Town, and it appears that Montgomery will impose a building moratorium while it revamps its master plan in response to ongoing opposition.
Absorption of industrial space in 2019 was below average with a total of ±785,000 square feet taken, of which approximately two-thirds was prime space. Most of this is space absorbed by companies which constructed or expanded their facilities in 2019, but other transactions include the purchase of a ±32,000 square foot building on Crystal Run Road in the Town of Wallkill by Freund Brothers Fish to produce Kosher sushi for their flagship store in Brooklyn; and the sale of a ±10,500 square foot building on Stone Castle Road in the Town of Montgomery to a concrete pumping business. Approximately one-quarter of the prime space absorbed in 2019 was through leasing transactions. Some of the notable rentals include the lease of ±31,000 square feet by ABC Supply, the sheetrock division of L&W Supply, on Bracken Road in the Town of Montgomery; the lease of ±20,000 square feet by Monroe Online Sales, and the lease of ±10,000 square feet by LEGOLAND New York Resort, both in the spec building constructed in 2018 on Cannon Hill Drive in the Town of Goshen; and the lease of ±17,000 square feet on Industrial Drive in the Town of Wallkill to AEX Group that provides “last mile” deliveries for healthcare industry suppliers.
As of year-end 2019, the total inventory of industrial space in the county, including older, less functional buildings, was 30.4 million square feet, with a vacancy rate of 3.7%. With companies having such difficulty finding suitable space, consideration is increasingly given to repurposing and renovating older facilities. Absorption in non-prime buildings totaled approximately 260,000 square feet, with about 65% of this activity through purchase transactions. CoPart of Connecticut, a salvage car auction company, acquired a ±36,000 square foot former auto auction site on Route 17K in the Town of Newburgh; Prosperity Stairs and Rails purchased a ±30,000 square foot building in the hamlet of Johnson; Hemp Farms of NY acquired the ±24,000 square foot former Continental Organics facility in New Windsor for its growing and processing operations; and A&R Asta Fireplaces purchased a former coal, feed and lumber facility in the Village of Unionville for storage.
The beverage sector continues to grow in Orange County with popular brands expanding and newcomers entering the market. Equilibrium Brewery repurposed a ±27,000 square foot former bank office building on South Street in the City of Middletown to expand their brewing capacity and add an indoor beer garden and eatery. Tin Barn Brewing acquired the ±12,000 square foot former Jenack Auction facility in the Hamlet of Sugar Loaf with plans to open in early 2020.
The industrial sector will continue to grow nationwide with the need for properties to service e-commerce demand, and Orange County’s proximity to one of the world’s largest markets makes it a logical location for this expanding segment. Prioritizing and proceeding with the widening of Route 17/Interstate 86 will enable the county’s transportation infrastructure to accommodate this growth. So as some municipalities throughout the county commence the update of their comprehensive plans, they would be well advised to keep in mind where the bulk of the new tax revenues are coming from.”
Elisabeth Mansfield is president of Mansfield Commercial Real Estate based in Goshen, NY.
Copyright © 2020 Mansfield Commercial Real Estate, Inc.
All rights reserved. Reprinted with permission.
