BY KEN HARBOUR
In the investment community, the brightest stars are not those who follow the pack to the latest hot commodity or market that is crowned that week’s “Darling of Wall Street.” Instead it is those who seek out and identify the niche markets that most others simply are not aware of or choose to ignore.
In the Westchester County real estate market, one niche sector that is showing signs of strength is the office condominium sector. This is a small, segmented component of the overall commercial market in Westchester. Cold hard facts on the office condominium sector are hard to come by. None of the major regional office firms release statistics on the sector, likely due to little or no vacancies to speak of. Over the past 20 to 30 years, a few office condominium properties have been built or converted, but there is very limited supply.
While a small component of the market, these units are highly popular, particularly with the health care and medical community as well as family-owned enterprises. The properties usually go unnoticed by many businesses searching for space because business owners know little of the advantages to owning an office condo or are not alerted to the availabilities by their commercial brokers.
What caught my eye was the recent sale of three office condominium units at 150 Purchase St. in Rye for an impressive sale price of more than $400 per square foot. The three had different buyers: One was sold to a medical practitioner, the second to a general office user/buyer and the third to an investor with an existing dental practice.
In what continues to be a lackluster conventional office leasing market in the county, condominium units in another well-known office building are now available. My firm is exclusively marketing three condo units totaling approximately 7,500 square feet at 245 Saw Mill River Road in Hawthorne, a 60,000-square-foot, three-story office condominium building in a campus office setting, developed by Ginsburg Development Cos. in the early 1980s. I don’t believe there has been a condominium unit available for sale at the property in more than a decade.
The key advantage to owning an office condo is control of your own space and destiny. The business is not subject to the potential harsh terms of lease renewals when a building owner takes liberties based on a company’s reluctance to incur office relocation costs.
Other key benefits to owning an office condo are tax advantages on mortgage interest, real estate, depreciation and property improvements, particularly for medical companies that invest heavily in equipment, for example. A charity or other not-for-profit entity can often eliminate real estate taxes, a significant component of occupancy or rent costs.
The ownership of an office condominium unit also can provide a business possible favorable capital gains tax treatment, collateral for future business growth, a tangible and lucrative asset in the sale of the company, or a vehicle in retirement planning as a source of income in either a sale or lease of the unit.
The office condo market seems to be coming into its own. For businesses that experience dramatic and rapid swings in space requirements, and for many companies that are publicly owned, the office condo is probably not a suitable or appropriate avenue. Historically, there have been relatively few developments and conversions. This is due primarily to a lack of familiarity and understanding of the many benefits available to the purchaser and on the part of office users, brokers and investors.
Before deciding on whether an office condominium is the right choice for you, discuss the option with your accountant or financial adviser.
Ken Harbour is president of Harbour Commercial Real Estate Inc. at 80 Business Park Drive in Armonk. He specializes in sales and leasing of commercial properties in Westchester and surrounding counties. He can be reached at [email protected] or 914- 273-1442.