W E S TC H E S T E R CO U N T Y
Commercial Market Report
Q3-2026
THIS REPORT IS PREPARED BY
Executive Summary
Researched and Written By: Teresa Marziano Houlihan Lawrence Commercial Rye Brook, New York
THIRD QUARTER 2026
Westchester Commercial Real Estate CRE has held up well despite macroeconomic headwinds. However, high borrowing costs and tightening regional bank liquidity have compressed transaction volumes, creating a challenging environment for leveraged buyers relying on floating rate debt or facing upcoming maturities. In general. Westchester County commercial real estate (CRE) is navigating a bifurcation of outcomes that is highly dependent on specific asset characteristics: property type, location, ease of access, and structure functionality. Stronger assets, typically supported by robust functionality and a visible, accessible location, enjoy high occupancy and growing cash flow. Weaker assets, where underinvestment has led to a obsolescence, have declining cash flows and face an eventual discounted sale. Treasury yields are in a strong upward trend, hitting multi year highs. An explosive mix of inflation and clustered funding needs—driven by Hyperscalers and the U.S. Government—suggest a growing wave of long term bond issuance that may persist for years. Underlying economic growth remains strong, and unemployment is at low levels. This is a remarkable economic backdrop, particularly given new tariffs, rising oil prices, and inflation. Artificial Intelligence (AI) investment needs are underpinning this unique landscape, and as a result, the world is grappling with escalating demand for investment capital that commands a higher compensation for risk. The current technology and infrastructure investment cycle is likely to be the largest in economic history. Despite a resilient economy, consumer confidence has plummeted to all time lows. The increase in energy costs that began after hostilities in Iran has contributed to inflation. The protracted nature of the conflict has affected long term inflation expectations. As fears of oil and refined product scarcity escalate, inflation has gained traction globally. Investors and consumers are increasingly concerned that global forces driving inflation have a greater impact on price changes than national factors, and that the Fed’s actions may be less effective in controlling U.S. inflation than in the past. Anchoring investor concerns is the idea that the AI investment cycle is also contributing significantly to inflation, and that forthcoming interest rate increases will not slow technology investments or their inflationary effects but may put broad segments of the economy—and jobs—at risk. Real estate investment and development are among the industries most negatively impacted. Technology related investments and associated funding needs are now global, creating interest rate tensions across countries similar to those in the U.S. According to Trepp. Hyperscalers have raised $48 billion in bonds in European currencies this year—more than triple the entire amount issued in 2025—and now account for 3% of euro Investment Grade (IG) issuance, 10% of sterling IG issuance, and 22% of Swiss franc IG issuance. As most OECD economies experience rising inflation, central banks are responding similarly: raising rates in hopes of controlling inflation. This is certainly a blunt instrument attempting to address a highly complex issue. The global tightening cycle is a strong headwind for capital intensive and intrinsically mid growth industries such as real estate, where investors now face higher borrowing costs and tougher credit conditions. Investment due diligence teams evaluating real estate transactions are applying higher hurdle rates consistent with financing costs. Acquisitions, improvements, and refinancing face greater scrutiny as downside risks become more pronounced, and cash flow is the focus of investor underwriting. We expect many owners will choose to sell their properties rather than invest fresh capital when refinancing. This is likely to create opportunities for investors seeking motivated sellers and attractive valuations. Multiple sources report that CRE pricing across most property types had been stabilizing prior to the third quarter macroeconomic events. Trepp’s second quarter 2026 Property Price Index (latest data released) shows smaller and mid sized
H O U L I H A N L AW R E N C E CO M M E R C I A L | 8 0 0 W E S TC H E S T E R AV E . , S U I T E 5 1 7 N , RY E B R O O K , N Y 1 0 5 7 3
Executive Summary
THIRD QUARTER 2026
assets maintaining value, while higher dollar transactions continued to decline in volume and price. Retail was the only sector to gain in pricing and transaction volume. CRE prices were approaching a floor, but larger properties were still losing ground, likely due to more difficult financing trends and operating costs. However, interest rate increases since June 2026 have negatively impacted transaction volume, creating renewed headwinds as buyers and sellers renegotiate deals or fail to agree on pricing for new transactions. According to Trepp estimates, income producing CRE debt stands at $5.12 trillion through Q2 2026 (latest reported), and lender participation composition has remained stable. Bank balance sheets hold the bulk of balances—estimated at $1.92 trillion, or 37.5%—and another $1.17 trillion in construction ($454.2 billion) and owner occupied ($712.0 billion) loans. Government sponsored enterprises (22.8%), insurance companies (15.9%), and securitized lenders (15.1%) follow. Banks and GSEs added the most dollars in Q2 2026. In Westchester, regional banks—typically very active—are scaling back their CRE exposures as they remain overexposed to office, a segment that continues to struggle. The local financing landscape has adapted: smaller transactions are now predominantly driven by all cash buyers, SBA lending, and seller financing. At the national level, near term CRE maturities primarily reside with banks and securitized lenders. Trepp estimates that banks have $239.7 billion of income producing loans due in 2026 (roughly 12.5% of balances), and securitized lenders have about $113.1 billion (14.7%). GSE and insurance portfolios are longer dated, which explains why the bulk of imminent maturities are with banks and securitizations. The rapid increase in interest rates creates the possibility of unwelcome increases in non performing loans on bank balance sheets. As lenders seek ways to lower the risk of single asset lending, the CMBS market is evolving. SASB CMBS (Single Asset, Single Borrower CMBS) is a capital markets structure for one large loan—usually $300M to $2B+—secured by a single property or portfolio, with one borrower, one mortgage, and one set of deal documents. It is the CMBS market’s solution for financing Class A, institutionally owned assets that are too large for conduit pools. In this structure, investors with different risk tolerances can buy tranches of the loan with varying risk return profiles. For example, insurance companies that traditionally would have held a whole loan for a Class A office asset on their balance sheet may now purchase the top rated tranche of the specific property CMBS loan, lowering capital charges and freeing capital for other loans in different sectors or geographies. In summary, Southern Westchester’s commercial real estate fundamentals across office, retail, multifamily, and industrial in 2026 show relative stability in addition to bifurcating fundamentals that favor quality: Stable, service oriented strength characterizes retail and multifamily; industrial is structurally in shortage; and flat, low momentum office describes office performance where Class A recovery steps coexist with further fundamental declines in Class C stock. Multifamily Assets – Pricing Power Returns to Landlords Multifamily fundamentals in Southern Westchester remain strong and resilient, with investor appetite concentrated in free market, transit accessible assets. Occupancy is improving, new supply is declining, and overall fundamentals are firming across the submarket. The number of units offering concessions continues to fall. Concessions peaked roughly a year ago and have declined in every consecutive quarter since. At the core, this is a market that offers an attractive price point for households relative to Manhattan, while still providing easy commuting access. During Q3, only one new building was delivered to the market, adding a modest 0.2% increase to total inventory — reinforcing the submarket’s limited pipeline at the present time. H O U L I H A N L AW R E N C E CO M M E R C I A L | 8 0 0 W E S TC H E S T E R AV E . , S U I T E 5 1 7 N , RY E B R O O K , N Y 1 0 5 7 3
Executive Summary
THIRD QUARTER 2026
Retail Assets – Occupancy Gains Continue as Affluent Households Support Retailers’ Health Supply-demand has been favorable for retail assets for the last several quarters. Q3 2026 was particularly strong. Vacancy has fallen to the lowest level in more than three years. Activity is good in direct and sub-let retail real estate. Pricing has been strong in the sub-let market and stable on average, indicating that some larger deals, with lower PSF pricing, may have had an impact on the averages. Overall, it is a healthy market with very limited supply and growing demand. Office Assets – Performance Bifurcation Accelerates Westchester – South of 287- office supply-demand continues to be unfavorable. In fact, supply has exceeded demand in four out of the last five quarters. Q3 was weak in the direct and sublet markets. However, pricing has been relatively stable, supported by healthy tenant improvement concessions and inflation. There is muted tenant activity and limited Class A inventory. Most leasing momentum was captured by White Plains CBD, East I 287, and West I 287. Overall, medical offices are one of the few bright spots in this market Industrial Assets – Last Mile Warehousing in Structural Shortage Industrial is the tightest and highest performing CRE sector in Westchester. Supply-demand fundamentals were positive during Q3. Pricing is recovering after a short-lived setback during Q1 and Q2. Vacancy remains structurally low; rents continue to rise due to severe land constraints, and no meaningful new development is on the pipeline. Southern Westchester benefits from proximity to the Bronx, major highways, and last mile logistics corridors. Investment Transactions – Higher Interest Rates Negatively Impact Transactions The number of transactions has fallen to the lowest level over the last three years. The dollar value of transaction has held up due to mix as larger building sales (with typically higher PSF prices) representing interesting value, are dominating the mix. Commercial real estate transactions and refinancing activity are greatly impacted by the long end of the interest rate curve. Through the second quarter of 2026, the buoyant economy supported real estate cash flows, allowing refinancing and modifications to continue. However, the rapid rise in interest rates during the recently ended quarter has forced industry to accept that deals that worked a few months ago may no longer make sense today. About This Commercial Real Estate Report This report was researched and written by Teresa Marziano. Please contact Teresa at (914 441 2254) or TMarziano@ HoulihanLawrence.com for questions, comments, or feedback regarding the contents of this report. Houlihan Lawrence Commercial Team Commercial real estate has entered a challenging period as interest rates continue to rise and low interest rate maturities come due. Attractive investment opportunities are likely to emerge. Liquidity is available only for strong sponsors, and poorly capitalized owners will seek to sell. However, numerous market and economic risks will add complexity to CRE acquisitions. Understanding the market forces shaping fundamentals for each property requires deep knowledge of the asset, local and regional insights, and strong relationships with 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 an in depth perspective on the ever changing Westchester commercial real estate market.
H O U L I H A N L AW R E N C E CO M M E R C I A L | 8 0 0 W E S TC H E S T E R AV E . , S U I T E 5 1 7 N , RY E B R O O K , N Y 1 0 5 7 3
Unemployment Rate in Westchester – At a Low Level but Some Deterioration
Unemployment rate in Westchester still reflects healthy labor markets. However, headwinds from interest rate increases continue. Medical services, logistics and transportation are among the fastest growing sectors.
Westchester County Unemployment Statistics - Not Seasonally Adjusted
5.5 5.0
PERCENT
4.5 4.0 3.5 3.0 2.5 2.0
Jan 2022
Jul 2022
Jan 2023
Jul 2023
Jan 2024
Jul 2024
Jan 2025
Jul 2025
Jan 2026
Jul 2026
YEAR
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; October 2026
HOULIH A NLAW RENCE .COM /COMMERCI A L
5
Multifamily Projects: Deliveries at Low Levels and Pricing Power Returns to Landlords WESTCHESTER, SOUTH OF I-���
Multifamily deliveries have declined in 2026, and the construction pipeline is at a low level. Asking rents are rising again. Shrinking new supply is supportive of pricing.
VACANCY DECLINES AND RENT EXCEEDS INFLATION Y- O -Y
Asking Rent Per Unit
Vacancy Percent
7% 6%
$2,750
5%
$2,700
4% $2,650 3% $2,600
2%
$2,550
1%
VACANCY PERCENT
ASKING RENT PER UNIT
$2,800
0
$2,500 Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
LIMITED NEW UNIT DELIVERIES SUPPORT PRICE STRENGTH
Q4 2025
Q1 2026
Q2 2026
Under Cosnstruction Units
Q2 2026
Deliveries Units
1,400
6,000
1,200
5,000
1,000
4,000
800
3,000
600
2,000
400
1,000
200
0 Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Q3 2026
DELIVERIES UNITS
UNDER CONSTRUCTION UNIS
1,600 7,000
0
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; October 2026
HOULIH A NLAW RENCE .COM /COMMERCI A L
6
Westchester Office and Retail – Retail in a Healthy Position, Office Struggles WESTCHESTER, SOUTH OF I-���
Office occupancy and pricing are relatively stable. The office market is still trying to find a bottom. Class A offices are plowing ahead whereas Class C offices are losing tenants and cash flow. Retail rental prices are reflecting Landlord’s desire to have fully occupied, productive space.
Vacancy Percentage total
OFFICE VACANCY CREEPS UPWARDS BUT LEASE RATES REMAIN STABLE
Office Gross Rent Overall
$30
12.0%
$25
11.5%
$20 $15
11.0%
$10 10.5%
$5
10.0%
0 Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
IMPROVED OCCUPANCY DRIVEN BY RENT CONCESSIONS
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Vacancy Percentage total
Q3 2026
All service type rent overall $35.5
8.8
$35.0
8.6
$34.5
8.4
$34.0
8.2 8.0
$33.5
7.8
$33.0
7.6
$32.5
7.4
$32.0
7.2
$31.5
7.0 6.8
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Q3 2026
$31.0
ALL SERVICE TYPE RENT OVERALL
VACANCY PERCET TOTAL
$35
12.5%
Q1 2023
VACANCY PERCENTAGE
OFFICE GROSS RENT OVERALL
$40
13.0%
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; October 2026
HOULIH A NLAW RENCE .COM /COMMERCI A L
7
Industrial Properties – Back to Very Supportive Fundamentals SOUTH OF I-���
Industrial fundamentals have stabilized and favorable supply-demand fundamentals are driving pricing.
INDUSTRIAL FUNDAMENTALS REFLECT RESILIENCE AND STABILITY
Vacancy Percentage
All Service Type Rent Overall
VACANCY PERCENTAGE
7%
$18.0
6%
$17.5
5%
$17.0 $16.5
4%
$16.0
3%
$15.5
2%
$15.0
1% 0
ALL SERVICE TYPE RENT OVERALL
$18.5
$14.5 Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Q3 2026
$14.0
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; October 2026
HOULIH A NLAW RENCE .COM /COMMERCI A L
8
Investment Activity Remains Weak as High Interest Rates Weighs on Investors SOUTH OF I-���
The interest rate environment is weighing on investment decisions. Capital markets continue to reflect tighter underwriting and scrutiny of deals.
Number of transactions
160
SALES VOLUME IN THOUSANDS
$600,000
180
$500,000
140 $400,000
120 100
$300,000
80 60
$200,000
40 $100,000
20 0
Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Sales Volume (in Thousands)
MORE VALUABLE BUILDINGS SELL AT A HIGH CAP RATE
SALES VOLUME IN THOUSANDS
Sales Volume (in Thousands)
Q3 2026
0
Median Price Per Building SF
12%
$350
MEDIAN PRICE PER BLDG SF
NUMBER OF TRANSACTIONS
TRANSACTIONS ARE VERY DEPRESSED AS FINANCING COSTS RISE
10%
$300 $250
8%
$200 6%
$150
4%
$100 $50
2% 0
Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Q1 2025
Q2 2025
Q3 2025
Q4 2025
Q1 2026
Q2 2026
Q3 2026
0
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; October 2026
HOULIH A NLAW RENCE .COM /COMMERCI A L
9