Westchester Office Market Rebounds in Second Quarter

The uncharacteristic sluggishness of the first quarter was dramatically reversed, as renewed activity produced positive absorption and lower office availability, company officials say. The report noted that year-to-date, however, the Altria Group's first quarter decision to vacate more than 600,000 sf of space at its Rye Brook complex continued to drag on the county's six-month performance. Earlier this month, the RPW Group announced it had signed a contract to acquire the property.

The availability of the Altria Group property was offset somewhat by second quarter leasing activity that was 88% higher than the first quarter. That combined with few space returns helped produce approximately 230,180 sf of positive absorption from April to June. Available space, subsequently, decreased 4% from the first to the second quarter of this year, and remained basically stable compared to June 2003 at 13.9%.

Dean Shapiro, senior managing director of CB Richard Ellis' Westchester/Fairfield office, says the rapid reversal of the first quarter's discouraging performance was predictable given the fundamental change in the nature of the Westchester office market from past years.

"Westchester has evolved into one of the most desirable and necessary business locations in the New York Tri-State region, resulting in consistently strong leasing and lower availability. It is no longer dominated by large blocks of hard-to-lease space. In fact, in just the last year, space available in blocks of 50,000 to 100,000 sf dropped another 31% and units of 100,000 to 250,000 sf fell by 35%--a significant, and exciting, development given the smaller size of most tenants," he says.

"These parallels between user-requirements and market availabilities, when added to the diversity of the tenant population, ensure that space will be absorbed and the market will move forward regardless of the actions of one company, or, as we saw during the recent downturn, the state of the economy," Shapiro continues.

CBRE officials note that the turnaround in the second quarter was due in large part to the significant leasing activity in Downtown White Plains. In the city's Central Business District, leasing, driven by aggressive deal making at 44 South Broadway and 445 Hamilton Ave., grew 475% from the first quarter to 298,030 sf. Year-to-date, the city's leasing velocity, at 349,850 sf, has exceeded the first six months of 2003 by 44%.

Competition between direct and sublease office space bumped up the price per sf 37 cents from last June to $25.86 per sf countywide, CBRE officials say. Space in Downtown White Plains surpassed the eastern section of the county for the first time in more than a year, becoming the most expensive in the county with an asking rent of $27.19 per sf.

The only real negative comment CBRE had on the overall Westchester market was that corporate relocations into Westchester in the first half of this year were down 65% from last year, which may indicate that the post-Sept. 11 trend toward corporate operation decentralization and redundancy may be over.