WHITE PLAINS, NY—The adaptive reuse of aging former office buildings into healthcare facilities, laboratories and research centers has stimulated activity in what has otherwise been a lackluster, but slightly improving office market in Westchester County, according to research from Colliers International obtained exclusively by GlobeSt.com.

The brokerage firm notes that even with office rents essentially flat, the Westchester County office market did see positive absorption for the first time in a year in the third quarter, and while current job growth is not strong enough to spark a full-fledged office market rebound, the outlook for leasing velocity is “cautiously positive.”

“There is real strength in the local Westchester economy, fueled in particular by the healthcare sector, but also with improved activity in energy, high tech, and education,” says Al Gutierrez, executive managing director of Colliers International in Stamford, CT. “The overall job growth is positive for the county, and there has been increased leasing velocity in the office market. But competition from Fairfield County and New Jersey and densification by occupiers are keeping office activity in check.”

After four consecutive quarters of negative absorption, Westchester County delivered 204,506 square feet of leasing in the third quarter, with four of the five submarkets showing positive activity. Northern Westchester was the strongest submarket, with an 8.9% availability rate, above the 10.7% both in the second quarter and a year ago. Westchester's overall availability rate was 18.4% at the end of the third quarter, down from 18.9% in the second quarter, but up from the 17.7% rate a year ago.

Overall Westchester County asking rents averaged $26.12 per-square-foot at the end of the third quarter, up marginally from $25.99-per-square-foot in the second quarter and $25.35-per-square-foot a year ago.

The surging healthcare sector in Westchester is buoying the office market, adding approximately $1 billion in capital investment in the county's healthcare infrastructure of late. Healthcare is now the county's second largest employer, accounting for 17% of its workforce, according to the Westchester County Association.

Colliers officials note that while the conversion of outdated office stock to healthcare uses did not have a statistically significant impact on fundamentals in the third quarter, the long-term trend continues to reshape the overall Westchester business sector.

Most recently, Arizona-based REIT Healthcare Trust of America Inc. purchased five buildings comprising the Westchester Medical Campus at 220-244 Westchester Ave. in Harrison, gaining 188,500 square feet on 14 acres with pre-approval for an additional 71,700-square-foot building to be constructed on the site. Also, Harrison Executive Medical Park's owners are adding a fourth building to house the growing Westmed Medical Group in 85,000 square feet of new space.

Other evidence of a burgeoning healthcare sector is the recent opening of Memorial Sloan Kettering's $128.8-million conversion of the 500 Westchester Ave. office building in West Harrison into a cancer center facility for outpatient treatment. Eastview Holdings L.L.C. is currently requesting a zone change for approximately 100 acres at the Landmark at Eastview complex in Greenburgh to be developed in two phases. This project would bring a 110-room hotel, bank, retail stores, and a four-story, 128,000-square-foot medical research and development office linking it into the existing biotech office campus that houses Regeneron Pharmaceuticals Inc.