Healthcare: Medical office space booming in Orange

Healthcare: Medical office space booming in Orange
By Michael Levensoh for Times Herald-Record

GOSHEN — Medical office space has been a linchpin of Orange County’s commercial real-estate market for the past decade, and 2009 was no exception.

Despite the development-dampening recession, more than 275,000 square feet of office space was added in the county last year, led by Crystal Run Healthcare’s second massive edifice in the Town of Wallkill, according to Mansfield Commercial Real Estate’s year-end overview of the market.

“The medical market is the fastest-growing segment of the economy, so it stands to reason, the (medical) real-estate market would follow,” said Elisabeth Mansfield, author of the report.

Focus on medical space

Since 2000, nearly half of the 1.3 million square feet of Class A office space built in the county has been medical space, and close to a third of that has been occupied by Crystal Run Healthcare.

Several smaller medical buildings sprang up around the county last year, including the 27,000-square-foot Roberta Glinton Medical Office Building in Port Jervis and the 10,000-square-foot Hudson Valley Ophthalmology building in New Windsor.

Vacancies up

Despite the medical boom, the recession has taken a toll on the local office market. Orange County’s Class A office vacancy rate at the end of 2009 was 12 percent, with about 490,000 square feet of space available. That’s the highest rate in more than a decade, but still lower than the national average of 16.4 percent for suburban office markets, according to an Integra Realty Resources report cited by Mansfield.

Rents are down about $2 per square foot, with new construction leasing for around $16 to $18 a square foot, despite incentives such as a period of free rent in order to keep buildings full.

A few landlords with high vacancy rates are doing deals at more than 30 percent below market, making it difficult for new buildings to compete, Mansfield said. Savvy tenants, meanwhile, have been playing one landlord against another, using the prospect of better deals elsewhere to extract concessions.

“People are doing what they have to do to get someone in. They don’t want to sit with empty buildings,” she said.

Projects stalled

On the industrial front, several large projects are on hold until the economy turns around. Orange County did add about 625,000 square feet of inventory last year, but 80 percent of it came in one building — the 500,000-square-foot warehouse that Panattoni Development built in Wawayanda for Medline Industries.

There’s still 150,000 square feet of space available in the Medline building, making it one of roughly a dozen buildings in the county with vacancies of 100,000 square feet or more.

At year-end, the county’s vacancy rate for prime industrial space was 15 percent, which is higher than the national rate of 10.2 percent. But the largest vacant building, the former Wakefern warehouse in the Town of Wallkill, has just been sold to a new user, President Container.

In addition to the Medline warehouse, about 725,000 square feet of industrial space was absorbed last year.

Major additions included Amazing Savings’ lease of 90,000 square feet in Chester, Corsicana Bedding’s lease of 85,000 square feet in the Town of Wallkill and the 60,000-square-foot F.W. Webb building constructed in the Town of Newburgh.

This time a year ago, the commercial market was paralyzed and credit was frozen, but Mansfield suspects the worst of the recession is over, at least in local commercial real-estate circles.

“There seems to be light at the end of the tunnel,” she said. “Hopefully, it’s not an oncoming train.”

To view the full report, go to


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