Q1-2026
THIS REPORT IS
PREPARED BY Writer: Teresa Marziano, Real Estate Salesperson
Executive Summary
FIRST QUARTER 2026
Westchester Q1 Commercial Real Estate Report
Global stability and consumer confidence deteriorated sharply following strikes to Iran and widespread retaliation that has interrupted shipping across the strait of Hormuz. Oil and gas producing assets in the region have been damaged and some destroyed. The global markets for energy, petrochemicals and fertilizers are reflecting stress from production and shipping disruptions. At the time of writing this report, a temporary and fragile truce between the two conflicting sides has emerged. Negotiating positions are far apart making the road to peace difficult, yet the equity markets appear hopeful that the end of the conflict is near.
Collateral damage to infrastructure and the steep financial cost that US will bear from the conflict have dashed hopes for a near term taming of inflation and for stabilization of interest rates. Both these objectives appear to have been pushed into an uncertain future. Upward pressure on interest rates- from an even larger US budget deficit – and to inflation- from a disrupted energy complex- are likely to persist for the remainder of the year. The strongest factor to counteract inflation is productivity. The US has been enjoying rising productivity that could offset at least some of the war’s damage on inflation trends.
Despite headwinds created by the government shutdowns and the conflict in the Middle East, the U.S. economy has remained surprisingly resilient, supported by strong consumer spending and relatively stable employment trends. High gasoline prices have not yet impacted consumer actions in a meaningful way, although consumer sentiment has weakened considerably. Labor markets are no longer experiencing shortages and there are no meaningful layoffs. In a way, both employers and employees fear bold steps. There are exceptions, mainly in the technology sector, where AI utilization has changed labor dynamics. But there are still only a few examples of mass firings due to AI driven productivity and re-engineering.
Underneath the geopolitical noise, the US credit markets are increasingly concerned about private credit defaults and losses. On April 6th, Moody’s moved the outlook for the entire BDC sector (Business Development Companies) to negative. BDC’s are companies that engage in private credit issuance and are not regulated under bank charters. They fund themselves from wholesale credit lines, extended by banks or hedge funds. Such lines may dry, or become excessively expensive, when credit default fears rise. Concerns about the quality of private credit loans that were issued over the last five years are rising and Moody’s downgrade suggests that credit failures are taking place. The US Federal Reserve has voiced their awareness of private credit emerging problems and Fed members have a watchful eye over this segment of the debt markets. In the meantime, investors that have tried to redeem funds from large private credit funds have faced limitations fueling market concerns.
A negative credit cycle stemming from widespread defaults of private credit loans would impact funding liquidity across industries. Commercial real estate would be greatly impacted, as it relies on well-functioning credit markets for re-financing, development and improvement of properties. With $1T in CRE loans maturing this year and $1.5T through 2027, the funding liquidity and interest rate environment will directly shape refinancing and valuation outcomes. Many CRE expiring loans originated ~175-200 bps below today’s rates, creating valuation gaps that must be bridged with equity, restructurings, or losses.
Executive Summary
Despite credit concerns rooted in the opaque private segment, the CRE credit read from financial institutions reporting Q1 2026 results is overwhelmingly positive. Major US banks reported stable delinquency levels on commercial real estate loans despite inflation and geopolitical tensions, according to CoStar. As an example, Bank of America reported a 44% drop in nonperforming loans from a year ago, and other major banks reported relatively stable rates.
At the property level. Westchester CRE markets are generally healthy. The retail segment of the market is particularly interesting because it has had a continuous, uninterrupted recovery since the Pandemic. Westchester retail echoes national retail property trends. As reported by Trepp, Retail REITs, a useful indicator for better-quality real estate, reported robust re-leasing spreads throughout 2025 and expect re-leasing spreads to remain healthy in 2026. The National Retail Federation forecasts 4.4% retail sales growth this year—reaching $5.6 trillion, the strongest expansion since 2013 and well above the 10 year average of 3.6% (excluding 2020–2022). This growth is occurring amid limited new space supply, further supporting landlord leverage.
Many observers suggest the economy is driven by higher income consumers. However, the New York Fed found that spending trends across income cohorts have moved in relative alignment. Foot traffic trends highlight broad consumer engagement with theater/music venues and clothing stores experiencing best traffic patterns in recent months, A key catalyst has been larger tax refunds, with the IRS reporting an 11% increase by recent tax provisions. In Westchester, the Retail sector’s performance reflects resilient consumer demand, constrained supply, and strong leasing momentum— conditions that continue to support retail real estate stability and growth.
Multifamily Pricing Strong
Westchester’s multifamily deliveries have slowed significantly. Less supply and a persistent housing shortage in the general tristate area, support pricing gains. During the quarter, residential landlords exercised pricing power and rents increased. Asking rents increased 1.2% versus prior quarter and $1.6% versus the prior year. Westchester offers attractive options to renters as amenities and lifestyle in the County are highly coveted.
New construction pipeline in Southern Westchester has now shrunk significantly as labor shortages, high interest rates and elevated construction costs have pushed many projects to the sidelines. According to Costar data, only one small building was delivered during the quarter and the new construction multifamily pipeline shrunk to less than 2% of inventory.
Westchester Retail Enjoys Robust Demand
Westchester retail real estate has enjoyed three consecutive quarters of constructive supply demand and resilient pricing. Retail demand is increasingly robust, supported by Westchester’s high income population. Little new construction keeps supply tight; some large format bankruptcies have returned space to LL’s but mostly in underperforming corridors. At a more granular level, shopping centers are enjoying very strong demand, but owners are selective, curating the mix of retailers to optimize the foot traffic and parking trends. Malls have become more flexible on tenancy terms and types of tenants they will consider. In-Town retail has very robust demand, but landlords are underwriting prospects very carefully as they want to ensure that tenants have robust financials and can withstand economic fluctuations.
Executive Summary
Office Market Showing Mixed Trends
Westchester mirrors the national trend of a bifurcated office market where Prime Class A (White Plains CBD, Harrison, Rye Brook) remain in high demand. Older suburban offices continue to struggle with vacancies and obsolescence, and high interest rates add to the already high cost of repositioning, slowing upgrades. The First Quarter of 2026 was not great for Westchester Office leasing but asking prices remained strong, supported by inflation and the need to provide costly TI’s to incoming tenants.
Industrial Strength Persists
Industrial remains very strong nationwide and in Westchester. Demand from logistics and last mile users continues to be robust despite tariffs and other disruptions to supply chains. Limited land supply keeps rents elevated. Owner-users of industrial space find it very difficult to identify options in Westchester as zoning changes have further reduced industrial areas in the county.
Westchester Investment Market
National CRE investment volume is projected to grow modestly but remains ~18% below pre pandemic averages. In Westchester, there has been a modest rebound in transaction volumes and median price per square foot has held at the top of the range for the last few years. Deals closing tend to involve all cash buyers. 1031 exchange buyers. owner users or institutional capital targeting high quality industrial or multifamily
About this Commercial Real Estate Report
This report was researched and written by Teresa Marziano. Please contact Teresa (914- 441-2254) or (TMarziano@HoulihanLawrence.com) for questions, comments or feedback about the contents of this report.
HOULIHAN LAWRENCE COMMERCIAL TEAM
Commercial real estate is facing a challenging period as low-interest rate loans olcome due. Interesting commercial real estate investment opportunities will likely become available. Investors must be prepared to evaluate and make decisions expediently as opportunities emerge. Given the consumer and market changes brought about by the intense period of change we have experienced due to structurally higher inflation, higher financing costs, and most recently, policy changes, it is very important to correctly assess market and economic risks that add to the complexities of acquiring commercial real estate. Understanding the ever-changing market forces that are shaping the fundamentals for each property requires a deep knowledge of the property, local and regional insights, and close contacts with the right financial partners. Our Team is highly skilled in all these areas.
Reach out to HOULIHAN LAWRENCE COMMERCIAL for a complementary assessment of your real estate, an evaluation of a purchase target, and to receive an in-depth perspective on the ever-changing Westchester commercial real estate market.
Unemployment Rate in Westchester –Remains at a Low Level
Unemployment rate in Westchester continues to reflect healthy labor markets and it is at the low end of the range observed over the last two years. The local economy is resilient. Medical services, logistics and transportation are among the fastest growing sectors.
Westchester County Unemployment Statistics - Not Seasonally Adjusted
Sources: COSTAR, Trepp, US. Bureau of Labor Statistics, Unemployment Westchester County (Not Seasonally Adjusted) , NY. Real Estate Employees Data is Seasonally Adjusted. All data retrieved from FRED, Federal Reserve Bank of St. Louis; April 2026
Multifamily Projects: Deliveries Drop to a Trickle and Rents Rise
WESTCHESTER, SOUTH OF I- 2 ��
Multifamily deliveries declined sharply, and the construction pipeline is at the lowest point in several years. Asking rents are now rising again. Shrinking new supply is supportive of pricing. $2,540
RENTAL PRICING RESUMES GROWTH
Sources: COSTAR, Trepp, US Bureau of Labor Statistics, Data Reflects Fundamentals for Westchester County Area South of I-287. Price Index for Westchester retrieved from FRED, Federal Reserve Bank of St. Louis; April 2026
Office and Retail are Looking for Stability
WESTCHESTER, SOUTH OF I- 2 ��
Office occupancy and pricing are relatively stable. Despite reports of employers demanding more time in the office, we have seen only small improvement in office fundamentals.
Retail rental prices are steady and occupancy is stabilizing. Focus on small and very productive spaces has increased.
Sources: COSTAR, Trepp, US Bureau of Labor Statistics, Data Reflects Fundamentals for Westchester County Area South of I-287. Price Index for Westchester retrieved from FRED, Federal Reserve Bank of St. Louis; April 2026
Industrial Properties –Some Headwinds but Still Constructive
SOUTH OF I- 2 ��
Industrial fundamentals continue to seek stability after tariff related disruptions. Price remains resilient. Higher quality space and smaller warehouses are seeing strong demand.
Sources: COSTAR, Trepp, US Bureau of Labor Statistics, Data Reflects Fundamentals for Westchester County Area South of I-287. Price Index for Westchester retrieved from FRED, Federal Reserve Bank of St. Louis; April 2026
Investment Activity Remains Weak as Uncertainty still Weighs on Investors
SOUTH OF I- 2 ��
Investment sale transactions rebounded and median pricing PSF held stable. This suggests that sellers are still on the driving end of transactions.
TRANSACTIONS VOLUME REBOUNDS
Sources: COSTAR, Trepp, US Bureau of Labor Statistics, Data Reflects Fundamentals for Westchester County Area South of I-287. Price Index for Westchester retrieved from FRED, Federal Reserve Bank of St. Louis; April 2026